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.