lighting industry - moore stephens belgium · business opportunities for lighting companies. ......

IMAP CONSUMER PRODUCTS AND SERVICES 2017

LIGHTING INDUSTRY NORTH EUROPEAN M&A REPORT

IMAP CONSUMER PRODUCTS AND SERVICES

2Intro

>

<

v

><

v

1IMAP

transactions

3A changing market

9Major companies

13M&A activity

17Case studies

19AboutIMAP

CON

TEN

TS

Over 300 deals within Consumer Products and Services

26 transactions within Home Furnishings

For references visitwww.imap.com

TABLE OF CONTENTS


LED is an interesting and relatively new lighting technology, which offers great opportunities for completely different solutions than before.

LED is not a new invention - most of us are used to LEDs being red or green signal mar-kets on your Hi-Fi or televi-sion set. These are so called - low-power LEDs. During the last couple of years “high power” LEDs, i.e. LEDs opera-ting at powers of around 1 W, have reached a level of cost and performance that make them attractive to the general lighting industry.

Market studies forecast that in 2020, over 60 % of all new and replacement light source unit sales will be based on LEDs2. Since LEDs are more expensive than conventional lighting, the value of the LED sales will be even higher.

Global marketThe global lighting market is expected to have revenues of over EUR 130 billion in 2020 with an expected 3 % annual growth from 2016 to 20202. The developed markets of North America and Europe account for approximately 45 % of the global lighting market. The professional segment is the largest with a market share of nearly 40 % of the global market.

- 3 - - 4 -

Factors for growthThe market for lighting is affected and impacted by multiple factors, with three in particular being the most im-portant for development and growth3. The first is the macroeconomic situa-tion, which influences new constructions and there of the number of new lighting installations. The second, energy efficiency regulations and greater awa-reness, is redefining future lighting product portfolios.The third is government action limiting certain energy sources which will result in additional demand for energy efficient products, such as LED.

Changing marketThe lighting market is on a clear transition path from traditional lighting technologies to LED and the adoption of connected lighting systems. These trends, which reinforce one another, are fundamentally altering the underlying economics and dynamics of the market. Existing players are scrambling to adapt while new players – such as manufacturers in Asia and companies that market private-label products – are entering the fray.Attractive new product markets are emerging such as the outdoor market. The advantages conferred by scale are withering in some segments but growing in others.

As a result of the ongoing trends, companies across the complex lighting ecosystem must evaluate where they can compete effectively amid the changes and adopt new strategies to win in the future.

Regulations across the globe have become more stringent, fueling the penetration of more energy-efficient light sources which is expected to boost the uptake of low-energy light sources that will help to close the looming energy gap. LED prices have eroded more aggressively, pulling forward the pack time of LED lighting.

Expected further growthThe general lighting sector (including residential, office, shop, hospitality, industrial, outdoor and architectural lighting) is the largest sector in the global lighting market. The general lighting sector is expected to reach EUR 83 billion in 2020 and 80 % share of the total market3. The fast LED price erosion has raised forecasts for LED penetration in many of the segments – office, shop for example – while decreasing the size of the lighting market overall by value. Forecasts for LED uptake in the residential segment remain high and is expected to reach over 70 % in 2020.

1 www.glamox.com.2 Boston Consulting Group. How to win in a transforming lighting industry. (2015).3 McKinsey&Company Lighting the way: Perspectives on the global lighting market. (2013).

Architectural lighting remains the early adopter and it´s LED market share is expected to reach close to 90 % by 20203. While LED lighting is expected to penetrate faster due to greater LED price erosion, the faster drop in the price of LED lighting is likely to slow down overall growth in the general lighting market. This adds to the impact of slower GDP and construction investment growth being forecast.

Unique featuresLED technology has several unique and exciting features. The lighting source is extremely small which open up possibilities that have never been explored. It allows a completely new design of lighting fixtures.

For example we can very precisely control the light by using LED technique. It also allow us to take control of the light, vary the light color and the technology also behaves differently than the conventional light sources.

Important benefits of LED relative to ordinary lighting sources are the long lifetime and the possibility to maximize the energy saving effect by optimizing the flow of light in a fixture to adapt to the recommended light levels for various lighting applications. This applies, however, to choose the right products when the lifetime of the LED does not automatically reach 50 000 hours4. Future of LEDToday, LED technology is well established in the lighting field and a competitive alternative to conventional solutions for most applications. In the upcoming years the shift toward LED tech-nology will continue to accelerate for one major reasons. LED technology is still more expensive than conventional lights, the price falling pre-cipitously, owing to technological advances in manufacturing and increasing LED efficiency. The average price for a LED point is expected to decrease from over six dollars in 2014 to less than three dollars in 20202.

4 Ljuskultur. LED för belysning inom och utomhus. (2013).

TREN

DS

A CHANGING MARKET


- 5 - - 6 -

TREN

DS

According to Philips (2016), one of the largest companies within the lighting industry, a signi-ficant trend in the lighting market is the technological transition from conventional lighting

technologies to LED lighting technologies. In addition, the general lighting market is currently undergoing a rapid transformation, mainly driven by three underlying trends:

The increasing need for light; Theincreasingdemandformoreefficientlight; The increasing demand for digital lighting


Total cost of ownershipThere is an increasing focus on the total cost of ownership (TCO) of lighting. TCO includes not only the initial cost of lamps and luminaries but also the expense of replacing lamps and cost of energy1. As buyers pay greater atten-tion to this measure and as manufacturers market their products by pushing the message about LED´s lower total costs, LED technology will gain additional traction. And as LED prices continue to fall that TCO calculation will become an even stronger selling point.

In the professional segment, the TCO is central to purchase decisions and as a result of that professional customers have already moved to more-efficient conventional technologies and are now shifting to LED. This has ked to an almost complete transition to LED solutions approach for all new installations. The GBA (Global Lighting Association) predicts that LED luminaires will account for more than 95% of the luminaire market in Europe in 20201. Increasing the energy ef-ficiency of LED armatures reduces the use of electricity, clearly benefiting the environ-ment.

- 7 -

Smart HomesThe demand for smart home products and lighting control systems is still in its infancy but the market is expected to increase in the upcoming years. The increasing popula-rity of LED gives momentum to another significant shift to the adoption of connecting lighting systems. The growing global energy efficiency movement adds to the importance of lighting control systems in the general lighting sector year by year.

Regardless of the efficiency of the light source, over 40 % of lighting energy consumption is still wasted on average when spaces and rooms are not in use1. This means there is a strong incentive to reduce energy consumption via dynamic lighting controls especially where electrical usage is high. The shift to connecting lighting will be most swift in the professional segment given that these professional systems typically control a large network of lights, the savings based on TCO are usually more significant.

Beyond saving energy, lighting control systems have several benefits when combined with LEDs. LEDs with a lighting control system can increase the lifetime, which improves the investment economics even further.

Growing value chainThese benefits of lighting control systems are expected to translate readily into new business opportunities for lighting companies. The market for lighting system control components is the fastest growing value chain element in general lighting with an expected growth rate of almost 20 % up to 20201. Home systems with connected lighting for the consumer market generally deliver less cost savings for the end user than to the professional segment due to the smaller number of lights in households and the lower frequency with which lights are used.

1 Boston Consulting Group. How to win in a transforming Lighting Industry. (2015).2 Ljuskultur. LED för belysning inom och utomhus. (2013).

OLED - future?Organic Lighting Emitting Diodes (OLED) can create flat surfaces that emit a diffuse light by electricity is sent through one or more layers of extremely thin semiconductor materials. Today there are no other suitable carrier material than glass for the construction of the OLED, and it gives limits of both thickness - about 2 mm - and mold ability2. Scientists have already found material that is thinner and more flexible, but it requires a few years of research and development to manufacture these OLED panels industrially.

IMAP's conclusion, in terms of LED and OLED is that LED, long-term will be the solution for general lighting applications and that OLED will probably be usefull in niche areas, but not as a replacement of LED solutions, but more as a parallel solution.

ConclusionsCompanies in the lighting industry who want to be successful in the next phase of mass penetration of LED technology should make sure they have a suitable strategy in place. They will certainly have to adapt their internal processes and systems to reflect the speed and flexibility needed for LED market introductions.

They will also need to place a much larger focus on continuous professional development, education and keeping up to date with the latest technological advances. Communication lines will need to be slick and targeted to the right audience at the right time.

The growth of LED will continue in the upcoming years until at least 2020.

LED systems are becoming “the standard” which leads to an increase in knowledge among installers and suppliers.

The increase in popularity is mainly attributable to the continuing price decline of LED lighting.

Focus will be on TCO by customers in their decision making process where in addition to the pur-chase price, the cost of replacement and energy consumption are considered.

LED lighting is today most used in offices and public lighting but is growing rapidly in the consumer market.

Connecting lighting systems “smart homes” and the outdoor segment of the lighting industry are expected to grow fast in upcoming years.

Production and assembly of LED lighting products is expected to be brought back to Europe in the future due to higher quality standards. Expectations are of a more favorable and financially production climate and capacity in Europe, with a lack of import regulations and environmental taxes.

Summary

- 8 -

TREN

DS

A GROWING SEGMENT CONCLUSION AND SUMMARY


"The lighting industry operates in a relatively mature market, even if it is divided between various types of companies with large local differences in terms of com-

petition. A relatively high level of acquisitions is generally ongoing, in parallel with shifting industry boundaries in the form of new participants, such as electro-nics companies, establishing themselves as the business opportunities with LED

technology become apparent.”

Fagerhult annual report 2015

"We are at the beginning of a lighting revolution! In September 2015, we achieved our goal to convert our entire lighting range to LED – it is one of the ways we are going all-in to tackle climate change. LED lights are the biggest thing to hit ligh-

ting since the electric light was invented!"

IKEA sustainability report 2015

"LED prices are continuing to fall very quickly especially in general lighting. Some products’ average selling prices (ASPs) were cut in half in 2015."

IHS, Lighting the Way – Trends for 2016

- 9 -

Germany Belgium Czech Republic Croatia Sweden Netherlands

MA

JOR

COM

PAN

IES

SELECTION OF MAJOR COMPANIES


- 11 - - 12 -


- 13 -

19

10

7

4 4 43 3

2 2

02468

101214161820

0

2

4

6

8

10

12

14

16

18

2010 2011 2012 2013 2014 2015 2016

8

2 2 2 2

0123456789

AB Fagerhult(Sweden)

Nordeon GMBH(Germany)

LagercrantzGroup (Sweden)

Royal PhilipsN.V

(Netherlands)

WuenscheGroup

(Germany)

- 14 -

TRA

NSA

CTI

ON

S

FagerhultThe Swedish group Fagerhult is one of the Northern Europe's largest producer of professional lighting solutions for public environments such as offices, schools, retail areas, industries and hospitals, indoor and outdoor. The company recorded revenues of €400 mn in 2015. The company has been very acquisitive in recent years and in 2016 bought WE-EF Group from Germany and Flux-Eclairage S.A.S from France.

Other recent acquisitions include: Lighting Innocations, South Africa, Airlight, Turkey, I-Valo Oy, Finland, Designplan Lighting Ltd, United Kingdom and LTS Lich &

Germany has been the largest market for closed acquisitions,both from a sell- and buyside perspective

Active purchasers in Northern Europe between 2010-2016

Most active countries with transactions in Northern Europe 2010-2016

A trend of increasing number of transactions

Positive climate for acquisitionsThe North European lighting industry is highly fragmented and made up of a few large companies (global players), many 'mid-sized' ones, and thousands of Small and Medium-sized Enterprise. The ligh-ting industry in Europe is a sector that is SME driven when it comes to the production of luminaires and of high value products. This SME culture within the industry is the most crucial precondition to provide the market with highly decorative, innovative, and sustainable products. The positive trends for acqusitions is expected to continue during 2017.

GERMANY 37 %SWEDEN 10 %BELGIUM 10 %DENMARK 10 %NETHERLANDS 8 %NORWAY 8 %FINLAND 3 %CHINA 2 %CZECH REPUBLIC 2 %FRANCE 2 %SAUDI ARABIA 2 %SOUTH AFRICA 2 %TURKEY 2 %UNITED KINGDOM 2 %

M&A ACTIVITIES IN NORTHERN EUROPE M&A ACTIVITIES IN NORTHERN EUROPE


- 15 - - 16 -

2016Target Country Purchaser Country Deal value M€&tradition A/S Denmark Anders Holch Povlsen Denmark UndisclosedNordesign AS Norway Lifco AB Sweden UndisclosedGavita AS Norway The Hawthorne Gardening Company UK UndisclosedEl-Björn AB Sweden Connecting Capital Sweden UndisclosedWE-EF Group Germany AB Fagerhult Sweden UndisclosedFlux-Eclairage S.A.S. France AB Fagerhult Sweden UndisclosedNXP Semiconductors N.V. Netherlands Silergy Corporation USA UndisclosedLedvance GmbH Germany IDG Capital Partners China UndisclosedGLP German Light Products Limited Germany Fujian Jiaipu Lighting Technology Co., Ltd. China UndisclosedLINKSrechts Ingenieurgesellschaft mbH Germany Glamox ASA Norway UndisclosedLED Linear GmbH Germany AB Fagerhult Sweden UndisclosedHELLA (street and industrial lighting) Germany Wuensche Gruppe Germany UndisclosedHELLA (airport lighting) Germany TKH Group NV Netherlands 18WILA Lichttechnik GmbH Germany Nordeon Group Netherlands UndisclosedSLV GmbH Germany Ardian France UndisclosedTE - Group NV Belgium Undisclosed Bidder Belgium UndisclosedCheyns NV Belgium Cebeo NV & Sonepar SA Belgium Undisclosed

2015Riegens A/S Denmark SG Armaturen AS Norway UndisclosedZobra AB Sweden Aura Light International AB Sweden UndisclosedFergin Sverige AB Sweden Indutrade AB Sweden UndisclosedLighting Innovations South Africa AB Fagerhult Sweden UndisclosedLightyears A/S Denmark Fritz Hansen A/S Denmark UndisclosedLUXeXcel Group B.V. Netherlands Patricipatiemaatschappij Vlaanderen NV Netherlands 8Zett Group (Zett Lite Lighting / Hellux) Germany Wuensche Group Germany UndisclosedKoninklijke Philips (assets in Aachen) Germany OLEDWorks LLC USA UndisclosedLotronic SA Belgium Re-Sources Capital Belgium Undisclosed

2014Louis Poulsen Lighting Denmark Polaris Private Equity Denmark UndisclosedElektroimportoren AS Norway Herkules Capital AS Norway UndisclosedLedil Oy Finland Ratos AB Sweden UndisclosedArlight Turkey AB Fagerhult Sweden UndisclosedLUXeXcel Group B.V. Netherlands Munich Venture Partners / Filsa B.V. Germany UndisclosedGeneral Lighting Company Saudi Arabia Royal Philips N.V Netherlands 169LemTec Innova GmbH & Co. KG Germany Ilan GmbH Germany Undisclosed

2013Target Country Purchaser Country Deal value M€Aurora Group Denmark Deltaco AB Sweden Undisclosed

El-produkter AS Norway Lagercrantz Group Sweden Undisclosed

I-Valo Oy Finland AB Fagerhult Sweden Undisclosed

eldoLED Europe B.V. Netherlands Acuity Brands Lighting, Inc. USA Undisclosed

Hoffmeister Leuchten GmbH Germany Alpina Capital Partners LLP UK Undisclosed

Hess GmbH Licht + Form Germany NORDEON GmbH Germany Undisclosed

ADB BVBA Belgium PAI Partner SAS France Undisclosed

2012IQ SensorTech Sweden Aura Light Sweden Undisclosed

Vanpee AB/AS Norway / Sweden Lagercrantz Group Sweden Undisclosed

Martin Professional A/S Denmark HARMAN International Industries USA Undisclosed

NORDEON (Philips' assets in Springe) Germany Varova BV Netherlands Undisclosed

Hellux GmbH Germany Zett Optics GmbH Germany Undisclosed

OLIGO Lichttechnik GmbH Germany Uwe Braun GmbH Germany Undisclosed

Osram GmbH (spin-off 80.5% stake) Germany Siemens AG (Shareholders) Germany Undisclosed

La Grange NV Family Belgium Rexel SA Belgium Undisclosed

TopCom Europe NV Belgium Tristar Europe BV Netherlands Undisclosed

2011El-Björn Sweden Priveq Sweden Undisclosed

Nordic Light Group AB Sweden ITAB Sweden Undisclosed

Designplan Lighting Ltd UK AB Fagerhult Sweden Undisclosed

Lumoluce B.V Netherlands Nualight Limited UK 11

Siteco Beleuchtungstechnik GmbH Germany Osram GmbH Germany Undisclosed

SLV GmbH Germany Cinven Partners LLP UK Undisclosed

2010LTS Lich & Leuchten GmbH Germany AB Fagerhult Sweden Undisclosed

NCW Holding Limited China Royal Philips N.V. Netherlands Undisclosed

SEB Technology GmbH Germany Management Germany Undisclosed

TRA

NSA

CTI

ON

S

RECENT DEALS RECENT DEALS


IMAP Germany advised ILAN Holding on the acquisition of the LED specialist LemTec.

Client Background & ObjectiveILAN was founded in 2013 as an Investment Holding focused on the LED industry, mechanical engineering, metal processing and renewable energies. The Holding typically makes investments in well-established family owned and managed companies in West Germany that have further development potential. The Holding is owned by two German entrepreneurial families.The shareholders of ILAN were interested in finding a target in the LED industry that could enhance the Holding’s strategic portfolio in this sector.

IMAP Advantage & ApproachAs a leading and highly regarded advisor in the mid-sized market in Germany, IMAP was a natural partner for ILAN. IMAP's proven track record in the region, both in number of deals and positive references inspired confidence. In addition, IMAP displayed sector expertise due to previous transaction advisory in the industry (for example the sale of OLIGO Lichttechnik to a German private investor in 2012) and demonstrated the ability to act fast.Michael Rieder, partner at IMAP in Germany, led the search and negotiation process for ILAN. IMAP identified more than 30 companies within the industry as potential targets. The first contact with LemTec was established in March 2014. The Company is a well-established LED specialist, focused on the development and manufacturing of COB-LED-industrial lighting. The strategic fit between the Company and the Holding’s management was evaluated during two pre-process meetings. IMAP's experience and conceptual support was crucial for both parties in negotiating and finding the right transaction structure. With IMAP's guidance, ILAN selected the most suitable target.

Outcome & ImpactIMAP succeeded in finding the most compatible target for ILAN’s criteria. With this completed acquisition of a specialist in the field of industrial LED-Modules, the Holding could expand its portfolio in the lighting industry in Western Germany. IMAP negotiated a deal that met the expectations of both parties and completed the process from the initial contact with LemTec to the deal signing promptly in four months.Having further strengthened its track record in the lighting industry, IMAP is expecting future opportunities arising after the deal's closure.

- 17 - - 18 -

CASE

STU

DIE

S

IMAP CASE: LEMTEC


- 19 - - 20 -

IMAP is a global merger and acquisition advisory organization with a presence in 35 countries. IMAP closed over 2 100 transactions, valued at $90bn in the last 10 years and is consistently ranked among the world´s Top M&A advisors (Thomson Reuters) for mid-market transactions. www.imap.com

Argentina | Belgium| Bosnia and Herzegovina| Brazil | Canada | Chile | Colombia | Croatia | Czech Republic | Egypt | Finland | France | Germany | Hungary | India | Ireland | Italy | Ivory Coast | Japan | Mexico | Morocco | Netherlands | Norway | Peru | Poland | Russia | Senegal | Serbia | Slovenia | Spain | Sweden | Turkey | United Kingdom | United States

67 OFFICES

35 COUNTRIES

350ADVISORS

Global M&A activity slowed in 2016 compared to 2015, dueprimarily to uncertainty stemming from political developments inthe US and Europe. A number of blockbuster deals partially offsetthe slowdown. Cross-border interest from China and other Asianbuyers helped prop up deal volumes in North America and Europe.While mid-market M&A also slid in 2016, signs of a rebound beganto show in Q4.

In 2016 IMAP closed 165 M&A and financing deals worth overUS$4.8 billion in disclosed value. Average disclosed deal valuewas US$38 million. Consistent with IMAP’s track record, crossborderdeals comprised 34 % of yearly transactions. 31 dealsin 2016 involved Private Equity. While industrials remained theleading sector with 30% of transactions, IMAP continued toleverage its sector expertise in closing deals across a wide varietyof industries.

One of IMAP’s largest public M&A deals was closed by IMAPColombia who advised the Colombian government on the saleof energy generator ISAGEN to Canadian owned BrookfieldRenewable Energy Partners. In another notable transaction, IMAPGermany advised hand tool specialist Wera on its sale to BitburgerHolding.

IMAP continued to strengthen its international foothold in the last12 months, welcoming new partners in several strategic locations:Poland, India and Spain.

165 deals

US $4.8bndisclosed deal value

US $38mnavg. deal value

34%cross-border

31 dealsPE involvement

Retail Consumer Products & Services

Materials Real Estate Consumer Staples

TMT Industrials Healthcare Energy & Power

Financials

ABO

UT

IMA

P

IMAP 2016 REVIEW IMAP GLOBAL

IMAP BELGIUM +32 15 29 33 90 [email protected] www.imap.be

MECHELEN

lighting industry - moore stephens belgium · business opportunities for lighting companies. ......

Documents