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The Year 2010 in Review

Snapshot of Photonics Industry M & A Activity

2010 began with Merger & Acquisition transactions closing at numbers consistent with the low levels of 2009. Activity was low in the first quarter given uncertainties about the economy, healthcare legislation, and weak pricing offered by buyers. Activity increased second quarter and now there is a whirlwind of activity taking place.

Follow this link to a snapshot of these of transactions.  <2010 Photonics M&A Transactions>

Activity

Biophotonics segments saw, by far, the most activity - followed by Optoelectronics and Optics and Defense and Security segments. 

Medical and Life Sciences saw the most activity and the greatest reported total value.  Segments include medical devices, medical imaging, diagnostics, environmental monitoring and life sciences instrumentation.  Optoelectronics and Optics, including optical components, materials, lasers, sensors, cameras and subassemblies, followed in terms of number of transactions. Display, including displays and back lights, followed in total reported transaction value.

Below is a snapshot of activity by market segment.  Industrial Manufacturing and Metrology includes semiconductor equipment, process control equipment, and industrial laser material processing.  Most of the target companies in this segment supplied equipment that supported the manufacture of LEDs and photovoltaics.  Lighting incudes LEDs and luminaires.  Communications include optical networking gear and test equipment.  Energy includes solar cell photovoltaics, materials and subassemblies.  Security includes intelligent sensing, surveillance, personal identification, and trace detection.

 

185 M&A transactions with target companies employing photonics technologies are researched.  58% of researched transactions disclose the transaction value.  Of those disclosed transactions, more than 75% are small and lower middle market companies.  This may indicate a trend of consolidation in highly fragmented vertical market segments, such as Medical and Life Sciences Instrumentation, Communications and Display, where photonics plays a differentiating role - as well as continued consolidation of the core Photonics market that includes manufacturers of lasers, sensors, optical components, and OEM subassemblies.

Private Investment Firms are active in 2010.  9% of transactions involved private investment firm buyers and 23% involved private investment firm sellers. 

Valuations

The total and average value of researched transactions are $65billion and $609million.  This is skewed high by Novartis' acquisition of Alcon for $29billion, Innolux Display's acquisition of Chi Mei Optoelectronics for $13billion, and Merck's acquisition of Millipore for $7billion.

The simple average of reported Average Total Enterprise Value to Revenue and EBITDA multiples are 2.6 and 26.8 respectively. 

Comparing a simple average with no adjustments for size, capital structure, or other dissimilarities by market segment - Medical Devices, Materials, and Energy realize the highest multiples of Total Enterprise Value to Revenue and Communications, Semiconductor Equipment, and Medical Imaging and Diagnostics realize the highest multiples of Total Enterprise Value to EBITDA.

Average Total Enterprise Value to EBITDA is skewed high by two lower middle market Korean transactions - Hitachi Kokusai Electric's control stake acquistion in Kook Je Electric Korea, a South Korean manufacturer of liquid crystal display equipment (270x) and EROOM G&G acquisition of Timo Technology, South Korean manufacturer of optical telecommunications equipment (110x).

The Transactions

Follow this link to a snapshot of these of transactions.  <2010 Photonics M&A Transactions>

 

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