The business of LED lighting
The global shape of the LED market will stay broadly the same over this period with the E.U., North America, Japan and China still making up the largest portion of revenues. Growth in India will be the highest, at around 31 percent CAGR, but from a very low base. Penetration rates are likely to remain low there. The rest of Asia, excluding Japan, will experience growth of around 24 percent CAGR thanks to supportive legislation, government incentives and new construction.
Many global lighting product sectors remain fragmented, and this is likely to change over the next few years. The continued drive for improved lighting performance and lower costs should drive continued vertical integration in the market — particularly downstream in the value chain. With more building controls companies eying the market and acquisitions of lighting controls companies by LED lamp and lighting fixture manufacturers likely to continue.
The total value of deals (where disclosure was made) during this period was nearly $8 billion, peaking at $4 billion in 2008. The number of deals completed over the 5-year period remained fairly consistent. The median value of deals also fell slightly over the period of analysis, ranging between a maximum of $18.3 million in 2008 to a minimum of $11 million for 2013 data to May.
Acquisition as a growth strategy, though, seems to have cooled off since 2011. There are three primary reasons for this:
- A decline in average spending on acquisitions is not surprising given the impact of the debt crisis in Europe and its impacts on financial markets, liquidity and market growth.
- The industry has already undergone major contraction and restructuring from 2006 to 2011 and is now catching up.
- There is an element of unease in the market at the risks of oversupply, given that adoption rates have not been as rapid as many predicted.