In a continuing trend of hardware/software consolidation within the smart grid market, Schneider Electric has agreed to acquire Telvent, the Spanish software and information services company, in a $2 billion deal. From a U.S. perspective, neither company may be a household name, but both are very significant players within smart energy circles.

France-based Schneider has a long history in energy infrastructure (electricity, oil and gas, water, etc.), building controls and automation, industrial controls and machines, and IT/data centers (strengthened with the acquisition of American Power Conversion), and even residential energy products. Last year, Schneider and Alstom split up Areva’s T&D businesses, with Alstom getting transmission and Schneider the Euro 1.8 billion distribution business, beating out GE and Toshiba in the process. When combined with the existing Medium Voltage business, this significantly strengthened Schneider’s competitive position versus Siemens and ABB. Until recently, Schneider marketed solutions under as many as 100 different brands. Today, they have convincingly positioned themselves as a broad leader in energy management across power, industry, IT, and buildings market segments, and have completed the difficult process of consolidating dozens of established niche brands.

Likewise, Telvent has a diversified business in energy, transportation, environment, agriculture, and services. While only about a third of their revenue comes from the energy sector, the smart grid portion of this sector is considered the driving factor behind the acquisition. However, the synergies between other parts of the businesses should not be ignored.

The Schneider-Telvent deal follows other smart grid-related software acquisitions by ABB (Ventyx, Obvient, Mincom), Alstom (UISOL), and GE (Opal Software). Schneider’s acquisition of Telvent is certainly the largest of these combinations, and propels Schneider from being perceived as a nuts-and-bolts hardware vendor into a strong solutions supplier in a number of key smart grid areas, including advanced distribution management systems and meter management.

What can we expect from this new combination? First, the combination of Schneider’s grid businesses, the Areva distribution business, and Telvent’s Advanced distribution management expertise presents interesting solution possibilities in one of most dynamic smart grid domains. Telvent is also likely to significantly strengthen Schneider’s effort to deliver on its new integrated “energy management” branding across their various markets, particularly between the grid and “smart buildings” and “smart homes”. While both companies are strongest in Europe, Schneider should be able to help Telvent’s business in other regions, especially in Asia, which represents about a quarter of Schneider’s business but only 2 percent for Telvent.

Of course, making acquisitions of this size work is not an easy task. Both companies will need to continue to work with and partner to some extent with each other’s competitors. However, this is an interesting combination, and one that provides another indication of a maturing smart grid solutions market. We’re likely to hear the Schneider name more often in the future.

Photo by Hikosaemon/flickr/Creative Commons

Bob Gohn is an analyst with Pike Research who specializes in the smart grid.