"In the past, when people in the industry met, they would always ask each other, 'Have they made money?' But now, everyone asks, 'Have they made a profit?'" a CEO of an LED company said wittily. Most entrepreneurs believe that after two years of rapid development, the LED industry is about to say goodbye to the melee, and mergers and acquisitions will be the best way out for companies in the fierce market competition.
The CEOs of the above-mentioned companies believe that the current wave of mergers and acquisitions in the LED industry is in full swing, which is not only an opportunity for listed companies, but also an opportunity for non-listed companies. Although the ownership of the company is handed over, the shareholders of the acquired party obtain the listed shares of the acquiring party by reselling their equity, which is equivalent to the indirect listing of the company, and in most merger and acquisition cases, the original shareholders will not lose management rights as a result.
However, listed companies clearly have an advantage in M&A activities. Lianjian Optoelectronics announced on September 26 that it would acquire Shenzhen Easystar Electronics Co., Ltd. in a "stock + cash" manner. Easystar's main business is LED display screens. It has previously planned an IPO, and the company's profitability is not inferior to its peers.
In productionUpstream of the industry chain, LED chips benefit from the rapid development of the terminal LED lighting market. The popularity of LED chips continues in the first half of this year. In the middle reaches of the industry chain, domestic LED packaging companies have little difference in technology. The only difference is the production capacity scale of the companies. Some companies integrate the resources of other small businesses through mergers and acquisitions to expand production capacity. Gong Wen, general manager of Jingtai Co., Ltd., believes that the decisive factors in future competition among packaging companies will be management capabilities, cost control, scale and brand.
In the lower reaches of the industrial chain, the LED lighting market is generally improving in 2014. However, due to product homogeneity, competition in lighting products is often limited to the price level. Some companies develop differentiated competitive strategies by integrating with upstream players. For example, Hong Kong-listed Zhenmingli has recently completed its integration with Tongfang. According to Jiang Guangjun, deputy general manager of Zhenmingli's domestic center, "Judging from the development of the industry last year, LED lighting products will break away from pure price competition and shift to product value competition." He said that the smart building/home lighting solutions launched by Zhenmingli this year are just a move to adapt to the market development in response to the general trend of smart cities.
Of course, mergers and acquisitions are not a panacea. Industry insiders believe that mergers and acquisitions are not just the integration of capital markets, but also the integration of corporate cultures. If the merger and acquisition parties fail to achieve a unified goal, the merger and acquisition integration may bring negative effects, and they will face a situation like that between Dehao Runda and NVC Lighting.
ANNA