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The Business of LED Lighting in Buildings in 2013

June 26, 2013 By Jim McHale

Jim McHale

The revenue from the global LED lighting market for buildings will rise from $9.46 billion in 2013 to a total of $25.4 billion by 2017. This represents a compound annual growth rate (CAGR) in the overall market of 22%, over the 5 year period.

The global shape of the LED lighting market will stay broadly the same over the 5 years, with the EU, North America, Japan and China still taking up the largest proportion of LED revenues. Growth in India will be the highest at approximately 31% CAGR, but from a very low base, and penetration rates there are likely to remain relative low. The rest of Asia (with the exception of Japan) will experience growth of around 24% CAGR due to positive legislation, new construction, and government incentives.

Many global lighting product sectors remain highly fragmented. This is likely to change over the next few years. Memoori predicts that 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 eyeing the market, and acquisitions of lighting controls companies by LED lamp and luminaire manufacturers likely to continue.

lighting revenue by sector

 

 

 

M&A and Investment Performance in the LED Lighting Industry

Over the course of the last 5 years we’ve been closely monitoring developments in the LED market and have tracked a total of 238 significant deals.  Although we cannot claim that this list of deals is exhaustive, it certainly paints a picture of the mood in the market and the strategies of its respective major players.

The total value of deals where disclosure was made during this period was nearly $8 billion, peaking in 2008 at over $4 billion. 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.

Our analysis also shows that the strategy for growth through acquisition has cooled off since 2011.  We believe there are 3 reasons for this;

  • A decline in the average spend on acquisitions is not surprising given the impact of the sovereign debt crisis in Europe and its impacts on financial markets, liquidity and market growth.
  • The industry has already undergone major consolidation and restructuring from 2006 to 2011 and is now catching breath to monitor the progress of LED adoption in major markets. Many significant strategic, geographic and vertical integration moves particularly by the likes of Osram and Philips had already occurred prior to 2011.
  • 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.

Our analysis shows that in the LED Lighting market, M&A drivers vary widely depending on the strategy of the investing parties. We categorized the main drivers for deals into 8 distinct areas. Fig 6.2 from our report The Business of LED Lighting in Buildings 2013 to 2017 shows the number of deals completed in each category.

LED deals by primary driver

 

 

 

 

Cautious investor sentiments and the emerging effects of oversupply are likely to create downward pressures on M&A activity at the upstream end of the supply chain over the coming year.

We see the trend of vertical integration, particularly downstream in the value chain set rise, with more building controls companies eying the market, and acquisitions of lighting controls companies by LED lamp and luminaire manufacturers likely to continue.

To conclude, the medium to long-term growth potential of the LED lighting market still carries considerable promise. Economic factors might suggest that total M&A activity will remain flat, but we believe the underlying trends highlighted above indicate that LED acquisitions will grow from 2012 figures.

 

Jim founded Memoori in 2008, a consultancy company based in London that provides market research, business intelligence and financial deal tracking services to clients across several industries. Prior to Memoori, Jim worked as a business analyst for i&i Proplan researching international building controls markets. He has several years experience researching and analysing b2b industrial markets, providing assistance to client’s strategic marketing and acquisition decisions. He has managed and delivered research projects to numerous blue chip clients including Siemens, Honeywell, 3i and Morgan Stanley..

At 186 pages with 53 charts and tables, “The Business of LED Lighting in Buildings 2013 to 2017” report filters out important conclusions, supported with facts, as to what is shaping the future of the LED lighting industry. You can learn more at the report’s website, http://www.memoori.com/portfolio/led-lighting-in-buildings-2013-to-2017/



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