Mergers and acquisitions continue to be carried out, and the "three highs" issue still needs to be vigilant

In the era of LED lighting, crazy mergers and acquisitions are still going on. In the first half of 2018, the wave of mergers and acquisitions in the LED industry did not stop, and foreign companies also participated in the M&A army to accelerate the layout in the field of professional lighting. According to the incomplete statistics of Gaogong LED, in the first half of this year, domestic and foreign companies such as Mingjiahui, Wanrun Technology, Philips Lighting, and Lutron successively opened capital mergers and acquisitions.

On March 9, Masco Corporation, the world's leading manufacturer of home improvement and construction products, announced that it has acquired LD Kichler Co. (Kichler), the world's leading lighting company, for approximately US$550 million (approximately RMB 3.47 billion).

On March 14, Wanrun Technology announced that it intends to acquire 51.0248% equity of Zhongzhu Tianyou in cash, with a consideration of 209 million yuan. On the same day, the company also announced that it intends to purchase a 51% stake in Langhui Optoelectronics held by Zhongjingrong in cash.

On March 27, Mingjiahui announced two announcements. First, it planned to acquire a 55% stake in Zhejiang Yongsheng Lighting Engineering Co., Ltd. with 250 million in cash. The second is to invest in Shenzhen Guangcai Mingzhou Lighting Technology Development Co., Ltd.

On April 18th, Lutron (Lutron), a leading manufacturer of lighting control, recently announced the acquisition of Ketra, a smart LED company. Ketra's range of quality light sources complements the Lutron range of lighting controls, enabling customers to create a more comfortable, efficient and comfortable environment at home and at work.

On April 26, LG Electronics announced that the company decided to sign a contract at the board meeting to hold 70% of ZKW's shares for 770 million euros (about 5.9 billion yuan). The company also plans to acquire the remaining 30% of ZKW's shares for 330 million euros (about 2.53 billion yuan). LG Electronics explained that the company decided to acquire ZKW because LG has chosen automotive lighting as a new growth engine for the auto parts business.

On May 1, General LED announced the acquisition of Acolyte, a manufacturer of LED strips in New York, USA. The acquisition of Acolyte adds General LED's key product line for linear LED and building products. In addition, the two companies have highly complementary geographic locations and supply chains that will provide additional synergies.

On May 1, US lighting manufacturer Acuity announced the acquisition of emergency lighting manufacturer IOTA. The company is a manufacturer of emergency lighting products and power equipment.

On May 14, Philips Lighting announced that it has signed an acquisition agreement with Shenzhen Leiming Technology to acquire the manufacturer of the lighting and control system for the Chinese urban landscape and building facade.

On May 25, the controlling shareholder of Changfang was officially changed to Nanchang Optics Valley, and Wang Min became the actual controller of the company.

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In the capital market, although a large number of mergers and acquisitions can bring economies of scale to relevant enterprises and improve the market's guiding role, it is also conducive to the optimal allocation of resources, improve the efficiency of resource use, reduce the operating costs of enterprises, and make enterprises diversified. Development is progressing, but if it is blind or for other unintended mergers and acquisitions, it will bring about the “three highs” problem of high valuation, high reputation and high performance commitment.

In recent years, the mergers and acquisitions of listed companies have emerged in an endless stream, and the phenomenon of “high valuation” and “high commitment” of the underlying assets is relatively common. Some companies promised a rapid decline in the performance of the target after the period, and some of the targets even in the commitment period, the performance has been unable to meet the commitment target, which also led to performance compensation disputes.

Therefore, how to effectively integrate the mergers and acquisitions and the merged parties after the merger and acquisition to achieve the benign development of both sides is a question worthy of consideration.

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