For the purposes of this report, the following guidelines are used for determining company size based on sales:
- Greater than $3 billion – Large (Tier I)
- $300 million to $3 billion – Mid (Tier II)
- $150 million to $300 million – Small (Tier III)
- Less than $150 million – Micro (Tier IV)
There were 48 completed electronics manufacturing services (EMS) transactions in 2008, three less than the 51 recorded in 2007. EMS consolidations were once again the most common type of transaction in 2008 with 19 transactions in 2008, or 40% of total activity, compared to 19 transactions in 2007 which represented 38% of activity last year.
Completed EMS Transactions
In 2008, there were 17 vertical / horizontal convergence transactions. This was up significantly from the ten in 2007. The 17 transactions in 2008 represented 35% of the total, compared to ten transactions representing 20% of the total last year.
Year Comparison: EMS M&A by Deal Type
OEM divestitures accounted for four transactions in 2008 compared to ten in 2007. As a percentage of total transactions, OEM divestitures went from 20% in 2007 to 8% in 2008. EMS divestitures remained stable with five transactions each in 2008 and 2007, representing approximately 10% of total transactions in both years.
In 2008, private equity investments tallied three transactions, or 6% of the total. For 2007, private equity investments totaled seven transactions, or 14% of the total. Lincoln International expects that this decrease was due in part to the market conditions and the lack of financing availability for the latter part of 2008.
As illustrated below, four of the deals completed in 2008 were cross border. Within this category, three transactions were between low-cost regions and high-cost regions, and one was between two different high-cost regions. For the same period, 20 transactions occurred within the U.S. and Canada (42% of total), 20 occurred within Europe (42%) and four occurred within Asia (8%).
EMS Merger / Acquisition Year Comparison
Note: For the above, High / ‘High’ indicates cross-border transactions between Japan, Taiwan, Western Europe and U.S./ Canada; High / ‘Low’ indicates cross-border transactions between high-cost regions and low-cost regions.
Transactions for all of 2008 were again led by the Micro Tier, totaling 34, or approximately 71% of all transactions. Large Tier and Small Tier EMS providers closed three transactions each, representing approximately 6% of the total, respectively. There were eight Mid Tier transactions, representing approximately 17% of the total.
2008 Mergers / Acquisitions by Size
Source: Lincoln International, VentureOutsource.com, January 2009
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