The survival and growth of businesses bear striking similarities to the growth patterns of cells, both evolving continuously in the process of adapting to environmental changes. Mergers and acquisitions between companies share commonalities with cell fusion, aiming to achieve broader integration for better survival and development.

In the growth trajectory of most large enterprises, mergers and acquisitions are indispensable components. What new trends have emerged in mergers and acquisitions within the lighting industry since 2023? This article will take a closer look at the acquisitions and mergers in the lighting industry since 2023, delving into the underlying industrial development characteristics of these cases.

Amid intensifying competition within the LED lighting industry, corporate M&A is both an expansion and survival strategy

In recent years, the lighting industry has undergone significant transformations, with a continual acceleration in industry reshuffling, a gradual reduction in effective demand, and a further escalation of market competition. Despite the intensifying competition, the rise of new LED lighting applications injects vitality and growth opportunities into the entire industry. Manufacturers are boldly exploring segmented markets, steering clear of the monotony of fierce competition. They seek to stand out by offering unique products, discovering new avenues for profit and achieving long-term growth in the highly competitive lighting industry.

In the realm of smart lighting, driven by continuous technological upgrades and people’s persistent pursuit of convenience and intelligent experiences, the demand for smart lighting continues to expand. The market research consulting firm TrendForce estimates rapid growth of the market size of global LED smart lighting to $2.4 billion in 2023. With an increase in health awareness and increasing demand for quality living, businesses are increasingly recognizing the growing embrace of human-centric lighting, considering it a new avenue for industry evolution.

Compared to other segmented markets in the lighting sector, marine lighting is still in early development, with relatively lower maturity. However, this market is highly promising. For example, Foshan Lighting has already begun positioning itself in this market. Despite a slight decline in the demand for horticulture lighting in recent years, the industry remains confident in its long-term prospects and continues to seek new growth opportunities by optimizing product performance. TrendForce estimates the LED horticulture lighting market to reach $1.44 billion in 2023 and rise to $2.44 billion by 2027.

In the highly competitive lighting industry, specialized niches have emerged as fresh opportunities for growth, becoming key battlegrounds for manufacturers. Through mergers and acquisitions, enterprises can rapidly acquire technological resources and expertise in the target market, seize opportunities in different lighting segments and achieve early positioning in niche markets. Therefore, M&A activities are not only an expansion strategy for companies but an effective means to address competitive pressure for survival.

Moreover, compared to internal development, mergers and acquisitions hold an absolute advantage in terms of time and efficiency. By integrating the resources and technologies of the target companies, enterprises can more swiftly complete their expansion journey, better cope with homogeneous competition, enhance brand influence, achieve economies of scale and secure a larger market share.

Numerous lighting manufacturers begin acquiring other businesses, attracting attention to segmented markets

According to a brief survey from LEDinside, the optoelectronics research arm under TrendForce, the lighting industry saw 14 mergers and acquisitions in 2023. These cases covered various fields such as smart lighting, marine lighting, horticulture lighting, specialty UV/IR light sources and more.

Data source: LEDinside

Table compiled by LEDinside

In recent years, Signify has actively acquired multiple businesses including Klite, Cooper Lighting and Wiz Connected, rapidly enhancing its smart lighting capabilities. Despite the sluggish demand in the LED lighting market in recent years, Signify has continued to broaden its business scope, and its LED lighting business focusing on smart internet technology has become a significant revenue source.

Unilumin aims to boost its competitiveness in the consumer product sector by acquiring Cecoceco, accelerating the development of new smart entertainment lighting products. With the completion of this acquisition, Unilumin’s lighting business will further extend from the commercial and professional fields into the consumer domain.

The acquisition done by FSG, a leading US-based lighting distributor, is also somewhat linked with smart lighting. LMI specializes in providing lighting products and solutions. This acquisition provided FSG with LMI’s expertise in lighting services, design, and control, helping FSG expand its smart internet lighting business.

In addition to smart lighting, profitable segments, such as horticulture lighting, specialty UV/IR light sources and marine lighting, have become crucial targets for corporate acquisitions.

Acuity Brands entered the horticulture lighting market in 2022, and while it is relatively new, Current has extensive experience in this sector. On November 27, 2023, Acuity Brands announced the acquisition of Current’s Arize® product series, which is expected to accelerate the growth of the group’s horticulture lighting business.

On September 15, Heraeus sold 100% of its specialty light source business to the US-based Excelitas Technologies. Heraeus’ specialty light sources focus on providing high-quality photon solutions, covering UV to IR wavelengths. After the transaction, Excelitas will expand its product range and leverage Heraeus' market influence to accelerate business growth.

On October 31, Foshan Lighting’s wholly-owned subsidiary Hainan Technology announced its intention to acquire Shanghai Liangzhou. After the acquisition, Hainan Technology will rapidly enter and expand into the sectors of vessels, marine platforms and related special lighting businesses based on its existing ones such as fishery lighting, aquaculture lighting and deep-sea lighting, thereby accelerating the development of marine lighting business.

To adapt to rapid changes in the lighting industry, companies are implementing acquisitions and mergers to achieve advantages in integration, market expansion, product matrix upgrades and overall competitiveness boost.

Yankon Group plans to acquire Zhiyi IoT Technology to expand its sales market. Tons Lightology, through the acquisition of Strong LED, comprehensively integrated resources to improve operational performance. Luoman Lighting Technologies acquired the equity of the UK-based PREDAPTIVE, accelerating development in the sectors of cultural tourism involving digital technology and AR/VR. Xiaosong Co., Ltd. acquired SIMPLE and successfully entered the heat pump business. French company Ragni Group acquired Hess GmbH Licht + Form, consolidating its position in the European public lighting market. Inventronics acquired the Digital System business from ams OSRAM, further enhancing its business layout in the LED driver IC sector.

In summary, mergers and acquisitions in the lighting industry are increasingly leaning towards technology and market segmentation. These acquisition cases reflect the flexibility and foresight of companies in catering to market demand, integrating resources and expanding business boundaries. Companies tend to choose different M&A approaches to better adapt to the diversity of industry development.

Notably, in merger and acquisition activities, the acquiring company is usually considered the leader. Nevertheless, for the target company, through wise decision-making and favorable deal conditions, it can also achieve positive transformation in terms of finance, strategy and competiveness.

Through transactions, the seller can divest non-core assets, release resources, focus on core business and enhance competitiveness. For example, ams OSRAM, through divesting non-core operations such as the Digital Systems business, can focus more on light sources, visualization, sensing and other technical domains. The company had previously sold businesses such as LED driver, smart lighting, horticulture lighting, automotive lighting and architectural lighting.

Renowned company Hubbell, by reducing and selling businesses with insufficient short-term growth momentum, such as residential, commercial and industrial lighting, is concentrating resources on the energy infrastructure sector, where it is the leader. This strategic adjustment not only helps maintain the company’s current profitability but also explores new development directions for the company.

Additionally, through merging with large companies, the selling party can create synergy and improve overall business efficiency, thereby creating a larger market share. For example, through the merger, Heraeus’ specialty light source expertise can be combined with US-based Excelitas’ extensive offering in plasma and LED products to expand the product range, forming a synergistic effect.

Through merger transactions, the selling party can make a capital return. For some companies facing market risks or intense competition, selling some of its business to a more stable and powerful counterpart can also reduce operational risks.

As Integration Becomes a Major Trend in Lighting Industry, Brand and Business Size Matter

Enterprise mergers and acquisitions, as acts of survival of the fittest and resource complementarity in market competition, play a crucial role in improving resource utilization efficiency and achieving economies of scale. Currently, the LED lighting industry is undergoing a phase of integration and reshuffling, operating within an intense competitive environment. Under such circumstances, enterprises with brand and scale advantages find it easier to concentrate superior resources, extend the industrial chain, expand market share and solidify/enhance their market positions.

Moreover, the fierce competition and rapid technological progress in the lighting industry drive companies to actively engage in technological innovation, explore blue oceans and discover new application scenarios. Therefore, companies are strategically venturing into segments such as smart lighting, human-centric lighting and horticulture lighting to diversify revenue streams and strengthen profitability.

In particular, the development of brand and business size has become the core driving force of integration in the lighting industry, with M&A activities serving as an effective means for companies to achieve this goal. The lighting industry is at a crucial juncture of industrial restructuring, where adaptability to market changes, continuous innovation and securing more shares in segmented markets are key factors for gaining a competitive edge.

For example, after splitting from the century-old brand Koninklijke Philips N.V. in 2016, Philips Lighting was officially renamed as Signify in 2018. Leveraging the strong brand advantage of Philips, Signify expanded its scale through a series of acquisitions following its IPO, focusing mainly on smart internet lighting, animal-centric lighting, horticulture lighting and architectural lighting. Despite the lackluster performance of the LED lighting market overall, Signify remains optimistic and has actively positioned itself in relevant segments through acquisitions to enhance its capabilities in digital, technological and smart lighting, maintaining a competitive edge in the market.

For Chinese enterprises, building brand awareness and scale is a crucial step toward international markets. By enhancing brand awareness, companies can establish their presence globally and expand their size, attracting more consumers and partners, and ultimately aiding in the formation of their international image.

In the domestic market, where production supply chains are highly transparent, competition is more intense. Therefore, the key to enterprise development lies in comprehensive thinking and overall planning. From product cost-effectiveness to channel coverage, from offline to new retail, and from marketing strategies to brand and scale upgrades, companies need to consider various aspects comprehensively to find the most suitable strategies for long-term development.

In recent years, Foshan Lighting has gradually enhanced its brand influence and size by expanding its business vertically and horizontally. Yankon Group expanded its ownership of Zhiyi IoT Technology through a capital increase to expand independent branding, establish sales channels in China and enhance brand influence. Pak mentioned in response to investor queries that the company will, if possible, consider M&A to enhance overall competitiveness, further solidifying its position in the lighting industry.

In summary, mergers and acquisitions are a key strategy for driving enterprise development. By integrating resources and expanding the industrial chain, companies can better adapt to market changes, achieve sustainable innovation and gain a competitive advantage. Considering the reshuffling of the lighting industry, companies with strong brands and scales are more likely to stand out in the fiercely competitive market.

However, it is essential to note that finding the "thoroughbred" is only the first step in corporate M&A strategies. In subsequent operational management, companies need meticulous planning to ensure smooth integration. This involves various aspects of synergy, including technology research and development, market promotion, talent management, etc. Companies should maintain a keen insight and be ready to adjust their strategies at any time.
(Author: Mia; Translator: Jane)
 

TrendForce 2023 Global LED Lighting Market Analysis
Publication dates: February 10, 2023; July 31, 2023
Language: Traditional Chinese/English
File format: PDF and EXCEL
Number of pages: 100 (in each publication)

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