Fig 4: Comparative example of P&L with and without breakdowns.
The reason multinationals do not accept a breakdown index greater than
10% in their portfolio is because of the lack of profitability. It must
also be considered that when the integration phase is completed, the
hourly labor cost of a multinational company is higher than that of a
local company. In an M&A process, the impact of potential incoming
orders of repairs, not included in the above calculations, is also very
important for decision-making.
During the DD process there is a very high percentage of elevators that
are not audited, and therefore their operating status is not really
known, except for the information on breakdowns that the seller may
provide. These elevators can represent an uncontrolled cost during the
negotiation process and can damage the P&L after integration, and even,
most importantly, lead to an accident that destroys lives and company
value.
CONCLUSIONS
The real operational variables could be obtained in real time with an
IoT connection, through an interface device connected with the
electronic board of the elevator, which incorporates a SIM card. This
SIM card provides an internet connection to the interface, so that
through the elevator’s IoT connection, all the elevator’s operational
variables would be recorded for a certain period of time. This would
allow proper analysis in order to take the correct decisions. It would
also provide historical statistics that anticipate the present and
future behavior of each elevator. These operational variables, together
with the data of each maintenance contract extracted from the database,
and the financial variables that would also be collected through the
connection to the enterprise resource planning (ERPs), would form a pool
of data that would subsequently be processed by big data tools,
providing the buyer with accurate information.
The digital strategy applied by big multinational companies currently
consists of a digital platform that can connect the elevator or
escalator with technicians, passengers, and customers. The information
obtained from the elevator or escalator’s IoT device is used to predict
preventive maintenance in order to reduce corrective maintenance. Each
multinational company uses its own devices compatible with its own
elevator and escalator brand to reduce its costs by predicting
preventive maintenance. But when its products are maintained by local
and regional companies, this digital strategy is not applied. There are
universal IoT devices already on the market that can be connected to
different brands. They can be used to record operational variables over
a defined period of time in order to gauge the technical status of
different brands of elevators.
With this information, the operational ambiguity of M&A processes
between elevator maintenance companies of different sizes and with
different digital strategies would be resolved. Currently, a visual and
technical check is carried out on a small sample (about 10% of the
seller’s portfolio) in the DD phase due to a lack of time and the high
cost of resources. However, the use of this technology would make it
possible to avoid using human resources, to steer clear of unprofitable
large investments, and to create a 100% sample in some cases or a
relevant portion in others, eliminating the risk of asymmetric
information.
IoT devices will be the norm in the future and will assist humans in
their daily routines. Souza, Carlson, Ramos, Loureiro, and Oliveira, in
their article “Internet of Things Device Authentication via
Electromagnetic Fingerprints” (2020), describe several scenarios where
IoT devices can communicate and interoperate with any other
interlocutor. One of these scenarios is that of vehicle-to-everything.
Indeed, we can consider an elevator a vehicle.
What cannot be measured cannot be managed.