Jan 25, 2023

Photonics & Optics M&A Update – January 2023

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Photonics MarketProduct and Technology Diversification Spurs Elevated Merger and Acquisition Activity in Photonics Market

Capstone Partners released its January 2023 Photonics & Optics Market Update, reporting that the maturity of the Photonics & Optics sector has encouraged market participants to differentiate their services through automation, artificial intelligence (AI), and machine vision solutions. Business models have also shifted to incorporate a direct sales approach and bolster end market exposure, creating a strong backdrop for sector revenue growth in the long term. Strong U.S. manufacturing reshoring trends have supported sector growth as manufacturers look to reduce lead times, limit supply chain disruptions, and protect against future intellectual property loss. Leading sector players have developed high-powered lasers with sensing capabilities to be paired with robotics and process automation, driving further adoption of direct sales strategies.

Merger and acquisition (M&A) activity across all industries has softened through Q3 2022, falling 14.1% year-over-year (YOY), according to Capstone Partners. However, global M&A volume in the Photonics & Optics space has kept an expeditious pace through year-to-date (YTD), rising 30% compared to YTD 2021. Armed with healthy balance sheets, public strategic acquirers have continued to lead sector deal activity, targeting Photonics & Optics sector participants to pair offerings and vertically integrate laser, optic, and subsystem technologies. Private equity has also increased its presence in the space, engaging in add-on deals to drive vertical integration for portfolio companies. Public strategic buyers have demonstrated a willingness to pay premium valuations for sector participants with advanced technologies serving key end markets. Recent notable transaction activity includes the Capstone-advised sale of Telesis Technologies to Hitachi’s (TSE:6501) subsidiary Hitachi Industrial Equipment Systems in July 2022. Telesis Technologies operates as a global industrial technology leader of AI vision system-based laser and dot peen automation systems for permanent marking applications and solidifies Hitachi’s leadership in the Industrial Marking and Coding segments.

Also included in this report:

  • How research and development in the sector has enhanced laser technologies for industrial applications with sensing capabilities.
  • A breakdown of marquee transactions in the space, demonstrating public buyers’ willingness to pay premium valuations.
  • How Photonics & Optics sector public companies have demonstrated significant margin strength throughout the economic turmoil following the height of COVID-19.

Related Transactions

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