In 2016, there have been many mergers and acquisitions in the lighting industry, the most notable of which is undoubtedly the Osram light source business acquisition that lasted more than a year. On July 26, the OSRAM Supervisory Board decided to sell Roundmans to a Chinese consortium consisting of strategic investment company IDG Capital ("IDG"), Chinese lighting company Mulinsen Co., Ltd. ("Mulinsen") and another A financial investor is composed of Yiwu State-owned Assets Operation Center. At this point, Mulinsen successfully acquired the Osram light source business with its strong capital and strong competitiveness.
As we all know, the quickest means of resource integration is the merger and acquisition of enterprises. Whether it is the annexation of large enterprises or the acquisition of equity, it directly promotes the integration of resources between the two parties. With the rapid increase in the demand for LED lighting, the LED industry is ushered in the peak period of development. All enterprises in the industry have begun to expand production and layout channels to seize more market share. As one of the most convenient and effective routes, M&A is favored by many LED companies.
Why LED companies are keen on mergers and acquisitions
With the development of the industry, a large influx of capital continues to flow, product profits are low, and the problem of homogenization is becoming more and more obvious. LED companies face the fate of the survival of the fittest. In 2015, the LED industry integrated M&A frequently, and began to choose a deep industrial chain to produce and sell high value-added products. According to the "2016-2021 China LED industry market prospects and investment strategic planning analysis report" incomplete statistics, in 2015, the whole industry chain mergers and acquisitions have more than 40 cases, the total amount of mergers and acquisitions has exceeded 30 billion yuan, including many Chinese capital acquisitions The case of foreign brand lighting companies.
On December 10, 2015, Feile Audio intends to acquire the special purpose carrier INESAUK Limited (tentative name) set up in the UK through its wholly-owned subsidiary Shanghai Feile Investment Co., Ltd. to acquire the Havells Group for a cash of 138.4 million euros. At the same time, it plans to acquire an 80% stake in Havells EximLimited ("Hong Kong Exim") through a wholly-owned subsidiary, Feile Investment, with an estimated cash of 10.4 million euros.
On March 11, 2016, Sanan Optoelectronics announced that the company's wholly-owned subsidiary, Xiamen Sanan IC Co., Ltd. intends to combine the total transaction price of US$226,000,000 (equivalent to RMB 1.47 billion) with its own monetary funds. It is a Cayman Islands business Huanyu Semiconductor Holdings Co., Ltd.
The emerging LED M&A event reflects that the industry is in the stage of accelerating integration and reshuffle, and the industry adjustment and transformation has gradually become the “new normal†of current development. Why have LED companies moved tens of millions, hundreds of millions, and billions of dollars in recent years? In fact, there are several advantages that are obvious.
First, resources complement each other to achieve resource integration
At the current stage, the domestic labor force is relatively cheap, and there is a high level of LED application machine production technology, which can complete product manufacturing in a short time. This is the advantage of domestic manufacturers. How to go out requires LED companies to open up some new ways. Whether it is from the development track of both parties, or from the support of national policies, or the current rising market environment, M&A seems to be the best way out for avoiding risks and gaining competitive advantage in the industry reshuffle.
The acquisition itself should be a good thing. Mergers and acquisitions will help enterprises to integrate resources, improve economies of scale, and allow enterprises to expand production and operation scales at a rapid rate, determine or consolidate the dominant position of enterprises in the industry; Excess production capacity, lower production costs, companies reduce capital costs, improve financial structure, and enhance corporate value; in addition, they can complement each other in terms of talent, technology, and finance, enhance R&D capabilities, and improve management and efficiency. To help achieve the company's strategic goals, and seek strategic value of mergers and acquisitions.
In fact, for some large companies with channels and brands, leading in the industry and relatively abundant funds, the moment when the industry is approaching explosive development is often a good time to choose to buy and sell, especially for the future market. It is expected that some large domestic and foreign companies have clearly expressed strong interest in mergers and acquisitions and industrial chain integration. Some powerful enterprises consolidate their market position through mergers and acquisitions, strong alliances, and vertically integrated industrial chains.
From the dynamics of international manufacturers, Philips has frequently acquired LED lighting manufacturers to consolidate the status of lighting brands in different fields. Osram has acquired professional LED lighting solutions by acquiring Traxon, which focuses on architectural, store and hotel professional lighting. Technology, actively attacking emerging markets. China's LED chip and package manufacturers have also launched a vertical integration of the supply chain through a huge resource advantage.
Second, accelerate the development of brand channels
In many corporate mergers and acquisitions, overseas mergers and acquisitions account for the vast majority. Along with the explosive development of the LED industry, a group of Chinese lighting companies have accumulated strong strengths in manufacturing, market development and capital accumulation. In addition to the layout of the domestic market, they also set their targets in overseas markets, and implemented overseas investment from many Chinese lighting companies. The acquisition plan shows that Chinese lighting companies are showing you a chance to catch up with the overseas market.
In general, overseas mergers and acquisitions are an effective means for some companies to quickly enter the international arena and expand overseas markets. In the past, due to the lack of capital talents, it is difficult for Chinese lighting companies to get involved in the international patent blockade market. For many domestic companies, the brand reputation is not loud enough, and there is a lack of certain overseas consumer groups. It is not so easy for local brands to stand in foreign markets. . However, with the help of foreign mature brands and existing market channels in foreign countries, the market development cycle can be greatly shortened and energy can be saved. By investing in and acquiring large foreign lighting companies, we can grasp the advantages of global advanced patent technology and market channels.
On February 26 this year, Toshiba Lighting Technology Co., Ltd. announced that it plans to sell its subsidiary in China for the manufacture and sale of light bulbs and lighting fixtures to the Chinese home appliance manufacturer Konka Group. The sales amount is estimated to reach more than one billion yen and will be withdrawn from China. In the consumer product market, we provide Toshiba brand to Konka.
On July 14, Cree announced that it had decided to sell the most profitable power and RF business unit of Career Electronics to German chip manufacturer Infineon Technologies AG. The acquisition will further enhance Infineon's leadership position as a power and radio frequency (RF) power solution provider in growth markets such as electric mobility, renewable energy and next-generation cellular infrastructure related to the Internet of Things (IOT). .
These acquisitions provide opportunities for lighting manufacturers to open up gaps and fully enter overseas markets, and are also an excellent way for companies to enter the global market.
LED companies need to pay attention to risks in overseas mergers and acquisitions
Enterprise M&A is the main means for enterprises to integrate resources and is a shortcut to achieve rapid development. For example, many companies have seized the opportunity of overseas mergers and acquisitions and benefited from it, but there are also a few frustrations. High returns are often accompanied by high risks. Mergers and acquisitions are double-edged swords, so the risks that LED companies must pay attention to when conducting overseas M&A activities are as follows:
1. Financing risks. Reasonable financing methods can make M&A companies achieve twice the result with half the effort. If the method is not properly selected, it may carry a heavy financial burden and may even affect the normal production and operation activities of the M&A enterprise. In order to raise funds for mergers and acquisitions as soon as possible, some enterprises neglect the development period of the enterprises themselves, and blindly seeking more leads to unnecessary waste, increasing the financing cost. If the company raises funds improperly, it will have an adverse impact on the capital structure and financial leverage of the company and increase the financial risk of the company. At the same time, only timely and sufficient funds can be raised to ensure the smooth progress of mergers and acquisitions.
2. The risk of assets in the target enterprise's value assessment is not real. One of the reasons for the failure of many M&A cases is that the risk assessment value in M&A has not been resolved, which has worsened the financial situation of M&A companies. Enterprise mergers and acquisitions are also a kind of commodity exchange relationship. For both parties to the transaction, they need to have well-informed information. Some people need to do promotion work, so it is necessary to establish an intermediary organization to serve mergers and acquisitions.
3. Disharmony between different cultural values. In mergers and acquisitions, companies must determine whether they have the ability to integrate the culture of this company. The company's research and development capabilities, channel capabilities, and brand capabilities can all be acquired through acquisition. However, if the company culture cannot be effectively integrated, there will be many problems after the merger and purchase, and resources cannot be maximized.
4. Loss of talents. As the most important production factor, talents are particularly important for human resources and talent issues. Domestic talents are relatively unfamiliar to the foreign business environment and legal environment. They cannot fully meet the requirements of participating in international market competition in terms of thinking mode, business ability and value concept. Therefore, how to minimize personnel friction, make full use of the talents of the acquired company to continue to carry out overseas business, and further build the core competence talent system of the global organization is also a problem that enterprises must face.
As the world's largest manufacturing country, China's mergers and acquisitions, characterized by industry consolidation and elimination of overcapacity, have continued to rise in recent years. M&A has become a powerful means for LED companies to integrate resources and is also an important factor for LED companies to enter the international market. way. It is a relatively large impact on China's lighting industry. It has a positive impact and has a negative impact. Enterprises should look at it calmly. The current industry consolidation has undoubtedly become an industry trend, and the stronger and stronger situation has been fully manifested. Whether for technology or channel integration, the industry is to meet a new era of lighting.
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