Despite the Pandemic, Frothy Public Markets and New Normals Refuel Photonics M&A and IPO Markets in 2020


The Photonics M&A (Mergers and Acquisitions) market stalled in Q2 2020, because of pandemic uncertainty. However, frothy public markets, access to low interest debt and fears of increasing US capital gains tax appear to be refueling a quick recovery as of year-end 2020.

Technology companies who address the new normals not only survive, but continue to grow at an expected faster pace. Further, private equity leveraged buy outs and venture capital backed emerging technology IPO’s (Initial Public Offerings) surge in 2020.

While shy of 2019, the value and volume of M&A transactions for pure-play photonics companies and companies with core photonics technology are on pace by year-end 2020.


In 2020, almost 95% of acquisitions of photonics enabled targets involve strategic buyers, compared to 80% in 2019. It may be strategic buyers are more capable in getting deals done remotely with more intimate knowledge of the sellers and their markets. Similar to previous years, most private equity buy-outs are smaller add-ons to larger platform companies.

So far in 2020*, Biophotonics, Diagnostics in particular, sees the most activity and highest total value of all photonics enabled sectors. Within Diagnostics, the largest transactions are Quebec B.V.’s acquisition of QIAGEN N.V. (NYSE:QGEN) for $13B; Illumina Inc.‘s (NasdaqGS:ILMN) acquisition of GRAIL, Inc. for $8B and Invitae Corporation’s (NISE:NVTA) acquisition of ArcherDx, Inc. for $1.4B. Acquired companies develop polymerase chain reaction (PCR) products that are detected and analyzed with fluorescence-based DNA sequencing, electrochemiluminescence or other fluorescence labeled methods. All are addressing cancer with QIAGEN’s COVID-19 diagnostic and research portfolio making headlines this year.

Consistent with the market as a whole, 2020 marks a resurgence of carve-outs and divestitures from companies seeking cash. Koninklijke DSM N.V. (ENXTAM:DSM) divested its optical fiber coatings manufacturing operations for $1.9B. Cree, Inc. (NasdaqGS:CREE) divested its LED chips and LED components manufacturing business for $300M. Saab AB (publ) (OM:SAAB B) divested its remaining 30% stake in Vticon, Inc., provider of 3D geodata and visualization solutions, for $140M. L3Harris Technologies, Inc. (NYSE:LHX) divested its holographic weapon sights and night vision product lines for $42M.

No single buyer was very acquisitive. The most active buyers in 2020 are: BOE Technology Group Company Limited (SZSE:000725), an Internet of Things company acquiring display businesses; Hexatronic Group AB (publ) (OM:HTRO) acquiring providers of fiber optic cables, training test equipment businesses and training; and Suzhou TFC Optical Communication Co., Ltd. (SZSE:300394) acquiring optical communications component companies, including coating supplier, Auxora Inc.’s Shenzhen operation for $14M (0.9x revenue).

Few transactions report financials, because regulations do not require when a transaction does not have material near term impact on financial statements. Of the researched transactions for majority stake, 28 buyers report IEV / EBITDA multiple greater than 1x. Values are in $US at historical rates of exchange. Companies employing core photonics technology and innovative business models across a wide breadth of vertical markets, continue to realize very high valuations.

Leading the pack on Implied Enterprise Value (IEV) / EBITDA for acquisitions of majority share are: Exalenz Bioscience Ltd. (188x), supplier of non-invasive breath diagnostic devices to detect gastrointestinal and liver conditions employing Molecular Correlation Spectroscopy (Israel) and Apteryx Imaging Inc. (TSXV:XRAY) (48x), dental imaging hardware and software provider (Canada). Following, Atlas Copco AB (OM:ATCO A) acquires both Perceptron, Inc. (NasdaqGM:PRCP) (34x), supplier of automated industrial metrology products (US) and Isra Vision AG (XTRA:ISR) (32x), provider of robotic vision systems.

Valuations of pure-play photonics companies, 5x to 12x IEV / EBITDA, continue to lag valuations of companies in the vertical markets they serve.

Despite the pandemic, 2020 marks a boom across the Initial Public Offering (IPO) market fueled by frothy public markets, a wave of Special Acquisition Companies (SPAC’s) and individual shareholders wanting to lock in lower capital gains rates.

A special purpose acquisition company (SPAC) is a company that is formed strictly to raise capital through an IPO for the purpose of acquiring an existing company. It is an attractive go-to-market strategy given the ability to quickly go to market at high valuations with lower levels of scrutiny relative to traditional IPOs.

LIDAR (Laser Imaging, Detection and Ranging) companies are in 2020’s wave of SPAC’s following OmniVision Technologies, Inc. (2016) and Terra Imaging, LLC (2014).

Velodyne Lidar, Inc. (NasdaqGS:VLDR) started publicly trading following the completion of its business combination with SPAC Graf Industrial Corp. At year-end 2020, its market capitalization is $3.9B. Luminar Technologies, Inc. (NasdaqGS:LAZR), with strategic investments from Volvo, Daimler, and MobileEye, entered the public markets via a combination with SPAC Gores Metropoulos, Inc. As of year-end 2020, its market capitalization is $11.0B. In November 2020, Porsche-backed lidar startup AEVA, INC. announced it would merge with SPAC InterPrivate Acquisition Corp. (NYSE:IPV) at a $2.1 billion post-deal market valuation.

LIDAR companies face a legacy auto industry that is historically slow to innovate and robust levels of competition. Start-ups compete with Alphabet Inc. (NasdaqGS:GOOG.L), Apple (NASDAQ: AAPL), Amazon.com, Inc. (NasdaqGS:AMZN), and Intel Corporation (NASDAQ: INTC) that have substantial strategic interests in the future of transportation.

Looking to 2021 and beyond, venture capital and private equity investments in photonics technology enabled sectors, such as Mobility Tech, Industrial Automation and Ag Tech are teeing-up the next waves of healthy exits in the private and public markets.

Advanced farm equipment, including drones and robotic smart field equipment is dependent on photonics. Investing in solutions addressing climate change and population growth, VC funding grew to $4.1B in 2019, a 32.7% 10-year CAGR. This activity could translate to future healthy exits for photonics enabled hardware companies.

In 2020, AgroFresh Solutions, Inc. (NasdaqGS:AGFS), PGS ASA (OB:PGS), GL Tech Co.,Ltd (SZSE:300480), SemiosBio Technologies Inc., Changsha Kaiyuan Instruments Co., Ltd (SZSE:300338), and Zero Mass Water, Inc. raised more than $50M.

Based on the financial markets, it appears that photonics technology companies did much more than survive the pandemic in 2020. They are continuing to revolutionize society through medicine, communications, transportation and information.


CERES sources transaction data from public sources. CERES analysis and data are subject to errors and omissions. Accuracy of information is responsibility of user.