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Businesses with distinctive data banks may attract suitors, says expert as Google buys smart energy company Nest Labs

More companies could follow Google's example by buying businesses that have access to new caches of consumer data, an expert has predicted.14 Jan 2014

Technology law specialist Luke Scanlon of Pinsent Masons, the law firm behind Out-Law.com, said that gathering and harnessing data on consumer habits has become a major goal for innovative businesses. He said that large companies may be attracted to buying smaller firms that have access to new types of data in the hope of combining that information with their own sources, gleaning better consumer insights and offering improved services as a result.

Scanlon was commenting after Google announced that it had agreed a deal to purchase Nest Labs (Nest), a business that manufacturers smart products for the home environment, for €3.2 billion.

"It goes without saying that more and more businesses are feeling the pressure to gain a competitive advantage by going beyond the assumptions that can be made about their customers based only on an analysis of data associated with the products or services which they traditionally supply," Scanlon said.

"Many of these businesses are looking to overcome this knowledge gap by moving forward with, and implementing data strategies that encompass cross-organisational data sharing arrangements. But there are associated legal and compliance risks with increased data sharing, particularly in relation to competition, intellectual property and data protection concerns," he said.

"The 'internet of things', as the media has labelled it, provides a new opportunity for many businesses to benefit from data to which traditionally they may not have had access to. Rather than navigating through the challenges that access to third party data can often present, it may be that more businesses see the value in acquiring technologies and businesses predominantly in order to enable access and act upon to a greater variety of data," Scanlon added.

In an announcement, Google said that it expects its acquisition of Nest to complete "in the next few months". The deal still requires formal regulatory approvals in the US.

Nest's signature product is the Nest Thermostat which regulates the temperature of users' homes in accordance with preferences previously selected by the user of the device. The company claims that users can save 20% on their heating bills by using the product.

"Nest’s founders, Tony Fadell and Matt Rogers, have built a tremendous team that we are excited to welcome into the Google family," Google chief executive Larry Page said in a statement. "They’re already delivering amazing products you can buy right now – thermostats that save energy and smoke/CO alarms that can help keep your family safe. We are excited to bring great experiences to more homes in more countries and fulfill their dreams!"

Nest is to continue to be run under the leadership of current chief executive Tony Fadell and will retain its own brand identity under the deal.

In a company blog, Fadell said that forming part of Google will allow Nest to develop its business faster than it could do alone.

"Google has the business resources, global scale and platform reach to accelerate Nest growth across hardware, software and services for the home globally," Fadell said. "And our company visions are well aligned – we both believe in letting technology do the hard work behind the scenes so people can get on with the things that matter in life. Google is committed to helping Nest make a difference and together, we can help save more energy and keep people safe in their homes."

"We will continue to reimagine and reinvent the unloved products that proliferate in our homes, just as we have since we started. We are simply going to get our products into the hands of people around the world – faster," he added.

In a statement provided to the Financial Times, Nest said that its privacy policy "clearly limits the use of customer information to providing and improving Nest’s products and services".

Google has fallen subject to regulatory action in Europe after introducing a single privacy policy across its service portfolio that allows it to combine data about individuals who use more than one of those services.