Language Arts

Imagine you're a fly on the wall of the Powerfleet boardroom. You might find some half-full glass of champagne to swim in while the directors pat themselves on the back after closing their deal for Mix Telematics earlier this year.

While you’re collecting a fanum tax on someone's drink, one director chips in "Team! We did it. Another banger M&A deal in the bag."

Mgmt: "No cap"

Director: "Now it's time to be very mindful, very demure and focus on integration."

Mgmt: "I dunno. The deal market is bussin. We need to flex."

Director: "How many deals can we do before one's Ohio?"

Mgmt: "At least one more. Here’s the pitch deck for Fleet Complete. So Sigma."

Director: "Bet…"

It can be hard to understand – from the outside – if Gen Z slang means good or bad. It can be hard to tell at the jump if M&A will work out. If you sort through the context, though, there can be clues for both.

Cultivating good habits

Some companies merge and acquire as part of their routine. It turns out that, when they do, they get better at it. Companies that only occasionally visit M&A markets tend to struggle to realize the returns they’d hoped for.

Here’s Powerfleet announcing its third deal in two years. In 2023, Swiss RE paid Powerfleet to take Moving Dots off their hands. Powerfleet quickly turned it around into something viable, then profitable, then promising. It followed-up by purchasing Mix Telematics at a sweetheart price. Two for two.

Its latest deal tucks Fleet Complete — a small and mid-size fleet management telematics company  — into Powerfleet. The combined company will save on the traditional overhead overlap — some management, accountants, some regional roles etc. It will also save on hardware as Powerfleet devices will support Fleet Complete’s solutions.

Its deals for MovingDots and Mix Telematics established Powerfleet’s M&A cred. It’s been able to bring those operations in and hit the marks to make them successful. Like those two others, though, this deal goes beyond simply cutting out some redundancy.

Bits and pieces

Fleet Complete brings in several strategic pieces that fit neatly into the Powerfleet Puzzle. It opens up new distribution channels for Powerfleet's analytics platform, Unity. The platform provides AI-driven analytics, some in real time, to improve safety and reduce costs for its enterprise clients like USPS and Walmart.

Fleet Complete reaches a lot of smaller-sized clients through resellers like AT&T and Telus, who have keen interest in the shiny new AI capabilities. Powerfleet called-out Unity as the reason for some of its recent customer wins. AI loves data. The deal brings in more data from more different domains from Fleet Complete’s diverse customer base. This will power a stronger, more versatile and more valuable analytics solution.

The deal is important for Powerfleet, but not transformative. It adds missing pieces to Powerfleet’s puzzle without taking it into uncharted territory. This is another box checked for good M&A. On average, opportunistic deals for adjacent businesses do better than transformative ones or ones based on building market share.

Where’s the money?

A final feature of good M&A is how its paid for. From the buyer’s standpoint, paying cash works out better than paying in shares. Powerfleet is paying mostly cash for Fleet Complete. Since its not paying all-cash, we won’t give it full marks. The non-cash part of the deal, though, brings technical talent, so has merit.

Get a clue

The clues around Powerfleet’s deal tip a happy outcome for investors. Powerfleet has racked up a tidy track record of successful M&A. Its latest affair with Fleet Complete complements its own capabilities and existing geography. The bigger size of the combined companies boosts the value of its analytics platform. The mostly cash-structure of the deal ties a bow around a neat M&A exercise.

There’s no certainty around M&A – whether it’ll be successful or Ohio. It could all go up in smoke, just like the fly slang of previously groovy generations. But Powerfleet has done its best to check the boxes and help the business glow-up.

Disclaimer: None of this is investment advice. It's meant to illustrate ways LCM thinks about investing. Things that LCM decides are good investments for LCM and its clients are based on many criteria, not all of which are covered here. Some or all of LCM's ideas may not be suitable for other investors. LCM does not recommend investing either long or short any position mentioned. LCM may own positions in some of the companies mentioned. Some of its ideas will lose money — investing entails risk. See full disclaimer here.