31 Oct 2019
Posted in Technology
GlobalData names the component making companies destined to become M&A targets
Sunny Optical, Aptiv and Nippon Ceramic are among the leading component making companies most likely to be acquired, according to the latest Thematic Scorecard for the component makers sector from GlobalData’s Thematic Team.
GlobalData has identified mergers and acquisitions (M&A) as one of the top themes driving the component makers sector.
Over the last five years, the value of M&A deals in the component maker sector reached $43bn. The key themes driving these deals included the Internet of Things (IoT), autonomous vehicles, data centers, silicon photonics, and computer vision.
2019 has already seen several bursts of M&A activity in the component makers sector. Amphenol completed its $400m acquisition of SSI Controls Technologies which was driven by the Industrial Internet theme, and MKS Instruments closed a $1bn deal to buy ESI, where the driving theme was advanced manufacturing and silicon photonics. Late in 2018, Celestica also completed a $329m deal to buy Organic Light Emitting Diode (OLED) specialist Impakt Holdings while Aptiv finalised its $650m acquisition of harsh environment connectivity provider Winchester Interconnect, another deal driven by the Internet of Things and Industrial Internet themes.
China’s Sunny Optical, Aptiv, from the US, and Japan’s Nippon Ceramic all gained the highest Thematic score (5 out of 5) for the M&A theme in GlobalData’s Thematic Scorecard for the component makers sector. A Thematic score of 5 out of 5 indicates that the company is likely to become a bid target in the next 3 to 5 years.
Other component making companies which also scored 5 and out of 5 for the M&A theme and are likely to become M&A targets include Cognex (US), Nabtesco and Harmonic Drive (Japan), Largan Precision (Taiwan) and Sweden’s Autoliv.
Cyrus Mewawalla, Head of Thematic Research said: “Any corporate executive that wants to grow their company needs to understand all the themes that impact their sector. Companies today are under tremendous pressure to invest in the disruptive tech themes that are shaping their industry, not merely to gain competitive advantage, but to survive.
“In component making, M&A is driving company valuations higher. When an acquisition is announced the target company’s share price typically rises by 30%. Big Tech is continuing its acquisition spree, with the aim of strengthening their skillsets in next generation technologies like AI, cloud computing, augmented reality, blockchain, autonomous vehicles and the Internet of Things.
“Component making will see extensive M&A activity across the board. Elements such as cameras and lenses, which are getting smaller and increasingly powerful, are essential enabling components in a broadening range of increasingly sentient devices, such as smartphones, drones, robots, self-driving vehicles, and other connected things. Potential buyers of optical lens specialists like Sunny Optical and Largan Precision would include companies such as Sony, Samsung, Nikon and Canon.”
Mewawalla added that robotics too will drive M&A interest in component makers.
“China’s goal is to achieve a robot density of 150 robots per 10,000 factory workers by 2020, compared to 101 less than five years ago. The outlook is promising for the specialist parts vendors of, for example, linear motors, reduction gears, and magnetic tracks. They are led by Japan’s Nabtesco, Harmonic Drive, and Nippon Ceramic, which control over 80% of the burgeoning Chinese parts market. Such automation component makers will appear attractive to the bigger industrial automation giants like Fanuc, Kawasaki and Keyence.”