OPINION: M&A
Mergers and acquisitions: good for photonics?
Several high profile acquisitions have been made in the last few months in the photonics sector. Thierry Robin and Jacques Cochard, from market research firm Tematys, discuss the impact of mergers and acquisitions on the photonics industry
W
ith the announcement of several major deals since the beginning of the year – for example, Coherent purchasing
Rofin, or Newport being bought by MKS Instruments – it appears that mergers and acquisitions (M&A) are increasing in photonics at a rapid rate. Is it really true? And what does it mean for the photonics industry? M&As are transactions in which the ownership of companies or their operating units are transferred or combined. Tech companies in general represent about one third of all publicly traded firms, but increasingly dominate M&A transactions, with tech acquisitions now representing more than 60 per cent of all deals. What about photonics?
Big deals in global markets like healthcare and diagnostics M&A transactions in photonics is not a recent issue. A company like Danaher (US) has already been engaged for 15 years in photonics-based diversification. Established in the 1980s as a major supplier in industry and transportation, the successive acquisitions in the last 10 years of Leica (microscopy), Beckmann-Coulter (cytometry), and Pall-ForteBio (biosensors), led to a multibillion dollar company, with about half of its revenues coming from photonics- based life sciences and diagnostics markets. Danaher competitors in life science and analytics like Thermo Fisher Scientific, GE Healthcare, and PerkinElmer, followed the same way by respective acquisition of Affymetrix (DNA sequencing), Biacore (SPR sensing), and Perten (infrared spectroscopy), all targets with strong revenues when M&A proceed.
Niche segment targeting in medium-size and emerging markets
The same analysis could be applied to the life sciences market, with the example of
12 ELECTRO OPTICS l JUNE 2016 Figure 1: Results of a study conducted by SPIE on 2,750 companies worldwide @electrooptics |
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Teledyne (US), building up its instrumentation business unit through various acquisitions of Optech (Lidar, 2011), Axiom IC (fabless semiconductor, 2013), Photon Machines (laser processing, 2014), and Bowtech (subsea imaging, 2015). Unlike life science markets, target turnovers remain lower than tens of millions of dollars. Market fragmentation, as well as cost of product validation and homologation, are two reasons for this price difference between life sciences and environmental monitoring and analysis. Last but not least, consolidation could occur to face an emerging market. Thorlabs (US) acquired various assets in the last four years in the infrared sensing market (infrared fibres from IR Photonics, materials and fibres processing from Vytran, quantum cascade lasers from Maxion and Corning) to propose a
large product portfolio as soon as this market will ramp up.
An increasing number of transactions with a higher average valuation than other sectors These are only examples. But according to figures published by Ceres Technology Advisors (Needham, USA), founded by Linda Smith and providing M&A advice and guidance in the photonics industry, the number of transactions almost doubled between 2012 and 2015. The photonics industry, and vertical markets employing photonics technologies as core differentiators, realise higher average valuation in M&A than all other sectors, according to Ceres Technology Advisors. In photonics deals, the average valuation multiple (TEV/EBITDA) was more than 12.6 in 2015, compared to
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