Small and Middle Market Consolidation

The whirlwind of Merger & Acquisition activity in the photonics industry continues with the volume of transactions in the first quarter of 2012 sustaining the pace of 2011.

The trend of small and middle market consolidation in the highly fragmented photonics industry as well as in the vertical market segments enabled by photonics technologies remains. Given uncertainly around the future role of government regulation and public policy, it is likely that organic growth will remain muted and opportunistic buyers will continue to absorb targets – sustaining a pattern of consolidation through 2012.

M&A transactions for target companies are researched with closing or announce dates from January 1 through April 20, 2012. Values are in $US. <2012 Jan to April Photonics M&A Transactions>


The highly fragmented Photonics segment that includes optical and optmechanical components, materials, lasers, sensors, cameras and services saw the most activity in terms of number of transactions. Medical Devices and Diagnostics followed – dominated by small market acquisitions of suppliers of in-vitro proteomics and cell based diagnostic instrumentation and consumables having proprietary technology. Industrial Manufacturing and its close cousin, Semiconductor Equipment, followed with small and middle market strategic buys.

Industrial Manufacturing includes process control, factory automation, and material processing equipment not addressing semiconductors. Energy includes solar cell photovoltaics, materials and subassemblies.  Aerospace, Defense and Security includes intelligent sensing, surveillance, personal identification, and trace detection.

Transaction Volume
Photonics & Vertical Markets Served
January – April 2012

The total reported transaction value by segment is skewed by a small number of large transactions in each segment. In Life Sciences, Illumina, supplier of genomic instrumentation is acquired by Roche Diagnostics for $7.4billion. In Photonics, Neo Material Technologies is acquired by Molycorp for its rare earth engineered materials for $1.6billion.

Transaction Value
Photonics & Vertical Markets Served
January – April 2012

Transaction by Size

Small and Middle Market Transactions

46% of researched transactions disclose the transaction value. Of those disclosed, more than 75% are small and lower middle market companies.

Unlike more mature industries, strategic buyers are acquiring orders of magnitude smaller businesses that are delivering highly differentiated products and enjoying very high barriers to competition via patents, intellectual property and proprietary know-how.

Transaction Size
Photonics & Vertical Markets Served
January – April 2012

Private Investments on the Buy and Sell Side

Although the vast majority of transactions by volume and value are strategic, private investment firms are active in the first quarter of 2012. In line with 2011, 10% of transactions disclosed involve private investment buyers and 22% involve private investment sellers.


The total and average value of 115 researched transactions are $13.7billion and $254 million. The simple average of reported Average Implied Enterprise Value to EBIT, EBITDA and Revenue multiples are healthy at 19.2, 30.4 and 5.1 respectively. Implied Enterprise Value includes implied equity value, earn-out and contingent payments, rights, warrants, options, and net assumed liabilities adjusted for size.

Comparing a simple average by market segment, Communications and Semiconductor Equipment realize the highest multiples of Implied Enterprise Value to EBITDA and EBIT. This is in line with 2011. While Communications is skewed high by individual investment (81x EBIT), targets in Semiconductor Equipment supplying laser based equipment for the manufacture and test of LEDs, displays, and photovoltaics consistently continue to realize high multiples.  Medical Devices and Diagnostics and Life Sciences realize the highest multiples of Implied Enterprise Value to Revenue and similarly healthy EBIT and EBITDA multiples.

The Transactions

Follow this link to a snapshot of these of transactions.
<2012 Jan to April Photonics M&A Transactions>