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ThingMagic acquired by Trimble; Deal could ignite M&A activity

When ThingMagic got its start in a garage in Somerville, Mass., 10 years ago, the firm’s co-founders probably never considered that the company would be scooped up a decade later by a billion-dollar buyer.

That’s exactly what happened yesterday when ThingMagic, in the midst of a year-long 10th anniversary celebration, was quietly acquired by Trimble, a California firm that specializes in making field and mobile workers more productive through wireless technologies like GPS, lasers and optics — and now — RFID technology.

No purchase price has been announced, but several sources indicate that ThingMagic is enjoying its best year, which could translate to a fair to high multiple. ThingMagic was not in the position of needing to sell, and CEO Tom Grant likely negotiated mostly out of a position of strength.

“Tom didn’t have to sell,” says an industry insider. “They were having a pretty good year, so I can imagine that the multiple was pretty good.”

Two circumstances could be behind the decision to sell. Company investors, some who have been invested in the firm for several years, may have started to grow anxious for an exit. ThingMagic’s last round of major financing came in 2008, when it raised $9.5 million from four venture firms.

Like OAT Systems, which was purchased by Checkpoint in 2008, ThingMagic was born out of the Auto-ID Lab at MIT. It’s also likely that the company required additional capital in order to scale. Now they have it in Trimble, which carries a $4.3 billion market cap and will likely look to ThingMagic’s line of fixed readers and its high quality module piece to extend its business proposition for its customers.

ThingMagic’s decision to move aggressively into modules several years ago while de-emphasizing a lackluster fixed reader business not only provided a high-quality module option for the industry, but likely saved the company’s business.

Although neither company commented on the value of the deal, the purchase price will eventually be revealed when Trimble, a public company, files its annual report. It intends to treat ThingMagic as a separate entity in its financials, which will provide previously unavailable visibility into ThingMagic’s financials.

The deal raises the question of who will be the next buyout target. With the economy continuing its slow recovery, and RFID gaining steam almost every day — primarily through the huge retail apparel deals in the works with Wal-Mart and other top retailers — the ThingMagic deal could represent just the tip of the iceberg when it comes to M&A activity.

“When you start to see companies turning away business [because they are too busy] and you start to see product shortages and high-multiple acquisitions, it’s a sign that the industry has crossed the chasm,” says Patrick Sweeney, founder and CEO of ODIN. Sweeney believes that merger activity will reach a fever pitch as companies like Trimble decide that they need a presence in the RFID market. “It looks like 2011 will be huge,” he says. “By the end of 2011, there will be one or two RFID pure plays left standing.”

Who are the possible targets? ODIN, for one, is likely on the list. While Sweeney won’t comment about any offers he has received, he has been positioning the company as more of a software firm than a services provider, which should make ODIN more valuable moving forward. In April, RFID 24-7 reported that there was likely more to the partnership ODIN signed with Savi that allowed the pair to offer the first software platform leveraging both passive and active RFID technologies. At the time, RFID 24-7 reported that the deal likely represented a second and less desired option for Savi, which may have preferred to purchase ODIN instead. If such an offer was made, Sweeney wisely declined, knowing the value of his company would only climb. Down the road, ODIN would be a good fit for IBM or Motorola moving forward.

A host of companies that have carved out niche markets could also be M&A candidates. WinWare, Inc., which produces the CribMaster, for example, could be a likely target for a larger material handling provider or system integrator looking for a presence in the MRO and manufacturing sector. CribMaster offers RFID-enhanced and automated tool cribs and vending machines. FileTrail, a provider of records management software and RFID tracking solutions, has also carved out an attractive niche that may attract suitors. Rush Tracking, which was acquired by venture firm Pharos Capital last year, could be put into play at some point. VC’s don’t typically buy companies with the goal of running them; they all have exit strategies in mind.

Seattle-based Impinj could also be a major acquisition candidate. The rapidly-growing Impinj has more than a dozen venture investors on the books, and expects to double sales next year, according to an article in Xconomy Seattle. Impinj has raised more than $100 million in venture funding, and those investors expect to be repaid at some point, either through a public stock offering or a buyout.

“We’ve seen pockets of consolidation occurring in RFID over the past few years,” says Michael Liard, RFID practice director for ABI Research. “Do I think it’s the start of a snowball effect? I’m not sure. Somebody else will be next, maybe a software player. I expect more in the future. It needs to happen and speaks to the fragmentation and the number of players in the value chain today.”

For more information: john@rfid24-7.com

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