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Electronic Manufacturing
Services (EMS)
NEWS
Q2 2016
Executive summary of the EMS industry
European EMS revenues in 2015 reached over €25bn
and are expected to grow to almost €28bn by 2018.
The resulting uncertainty following the recent Brexit vote
could have a slightly negative effect on the European
EMS industry in the short term.
Analysts see large market potential in the industrial
electronics segment and its numerous sub-segments as
well as in medical technology, aviation, electro mobility
and defence markets.
The Internet of Things is also a major growth factor for
the electronics and EMS sector.
The industry is experiencing a high consolidation trend
due to price pressure and slow economic growth.
M&A activity in the EMS industry
The number of corporate transactions in Q1 2016
increased compared with the same period in 2015, with
more than half occurring within Europe. During this
period Clearwater International advised the
shareholders of Seidel on its sale to SVI Public
Company Limited (see right).
Valuation level of EMS players worldwide
At the end of Q1 2016 multiples paid increased but the
H1 2016 average ended slightly below the previous
year's level.
Small EMS companies showed a higher valuation level
compared to medium sized and large EMS service
providers. This development can be attributed to the
niche focus of EMS companies combining the ‘high-mix/
low-volume’ trend of the last year.
Transaction highlights
SEIDEL Electronics Group is a leading international
manufacturer and outsourcing partner for custom-made
electronic and mechatronic solutions. As an integrated
system service provider the group offers full range services
from prototyping to series production for small and medium
series with high complexity. With 700 employees the
company generates revenues of €90m at its locations in
Austria, Hungary, Slovakia and Slovenia.
SVI Public Company Limited, headquartered in Thailand,
is a provider of turnkey box-build assembly and electronic
manufacturing services for original equipment
manufacturers and design houses. The stock-listed
company operates in Thailand, Hong Kong, Cambodia,
Scandinavia and the United States. In 2014 SVI Public
Company Limited generated revenues of €230m with
2,400 employees.
The transaction represents a clear win-win situation for
SEIDEL and SVI. While the integration of SEIDEL in the
global SVI group offers attractive international growth
opportunities, it allows SVI to expand its manufacturing
footprint to Europe, where the group is already generating
more than 80% of its revenues.
Clearwater International, led by Partner Markus Otto,
advised SEIDEL Holding.
Clearwater International
acted as sole financial
adviser to SEIDEL
Holding GmbH on the sale
of 100% of the share
capital of SEIDEL
Electronics Group to SVI
Public Company Limited.
Manufacturer of electronic
and mechatronic solutions
Clearwater International advised
SEIDEL Holding on the sale of
SEIDEL Electronics Group to SVI
Public Company Limited
SEIDEL HOLDING
Introduction
Electronic Manufacturing
Services (EMS)
NEWS
Q2 2016
Total European EMS revenues in 2015 reached
€25.6bn and are expected to grow to almost €28bn by
2018. The total turnover throughout Western Europe is
expected to increase to €11.5bn. However, following
the recent Brexit vote, demand for electronic goods
may slow down over the next few years.
Nonetheless, due to an increasing portion of electronic
parts in all product segments and the trend towards
outsourcing of the EMS competencies, it is expected
that revenues in the European market will continue to
grow in the medium-term.
Analysts see large market potential in the industrial
electronics segment and its numerous sub-segments
as well as in medical technology, aviation, electro
mobility and defence markets.
As the demographic shifts and the population is
ageing, the development of more technologically
advanced medical devices is expected to lead to
increased outsourcing of components to contract
manufacturers.
The global personal robot segment (cleaning robot,
robotic vacuum cleaners, “care-bot”, etc.) is
estimated to grow at 38% CAGR between 2016
and 2022. The growth in demand for “care-bots” is
also driven by an ageing population.
In 2015 electric vehicle sales grew by 60% and the
automotive electronics market is expected to grow
with a CAGR of approx. 8% until 2023. By the end
of 2016 connected car services are expected to
account for approx. €13bn in annual revenue and
the market is estimated to grow at 31% CAGR.
Another major factor that will impact the electronic
component supply and the electronics industry as a
whole is the growing area of the Internet of Things.
The growth in connected devices is observed and
provides a major opportunity for the electronics
industry and hence for the EMS industry. The Internet
of Things market is estimated to grow at 33% CAGR
until 2021.
The “book-to-bill” ratio, a ratio of orders received to the
amount billed for a specific period, is an indicator of
mid-term development. In the printed circuit board
segment, the ratio increased from 0.96 at the end of
December 2015 to 1.09 by the end of June 2016.
The cash cycle is a measurement of how quickly a
company can turn sales into cash. The large-tier group
improved from a median of 34.2 days in Q1 2015 to
33.5 days in Q1 2016. The median cash cycle of the
mid-tier group improved to 80.8 days from 84.4 days.
The small-tier group improved to 83.5 days in Q1 2016
from 89.3 days in Q1 2015.
A continuous production transfer of “high-mix / low-
volume”1 from “HCCs” (high cost countries) to “LCCs”
(low cost countries) can be stated.
The main strategic goals of EMS companies in
connection with organic and/or acquisition
growth include the expansion into new geographic
markets (“follow the customer”) as well as the
amendment and completion of own service portfolios.
The production will remain “local for local”.
The European EMS market is highly fragmented, which
will cause mid- and long-term consolidation activities.
Medium sized EMS market participants show a
proactive approach in the M&A environment regarding
potential acquisitions, as they actively search for
outsourcing projects.
As a consequence of the mid cap sized EMS market
and a lot of privately owned companies, succession
issues will be an additional driver for M&A activities.
1. Current trends in the EMS industry
Source: Zentralverband Elektrotechnik- und Elektronikindustrie, Reed Electronic Research, Clearwater Research
Notes: Large-tier group consists of Celestica, Flex, Jabil and Sanmina; Mid-tier group consists of Benchmark, Keytronic, Kimball,
Plexus and Sparton Small-tier group consists of IEC, Nortech, SigmaTron and SMTC
1: High mix refers to the complexity of assembly, while generating low-volume products
Electronic Manufacturing
Services (EMS)
NEWS
Q2 2016
During 2015 M&A activity in the EMS industry was highest in Q3 with 10 completed transactions. This fell to 7 completed
transactions in Q4 2015. In total, 27 M&A transactions were completed in 2015 with consolidations being the most common
type (44% of all transactions). 11 transactions (41% of all transactions) occurred in Europe.
In Q1 2016, M&A activity rose to 9 completed transactions, of which 4 transactions were EMS consolidations and 5
transactions (56%) were in Europe.
Selected EMS transactions worldwide
Date Target Bidder Description
07/2016 Aircom Manufacturing, Inc.Kimball Electronics,
Inc.
Aircom Manufacturing, a US-based provider of contract
manufacturing services, was acquired by Kimball Electronics
05/2016 Periscope GmbH Cemtrex Inc.Periscope, a German-based company engaging in the
electronics manufacturing services, was acquired by Cemtrex
04/2016Cal Quality
Electronics, Inc.PARPRO Corporation
Cal Quality Electronics, a US-based provider engaging in
electronics manufacturing services, was acquired by PARPRO
for €20.6m
03/2016 Miltec Corporation General Atomics
Miltec Corporation, a US-based company engaging in design,
development, integration and testing of missile and aerospace
systems, was acquired by General Atomics for €13.3m
02/2016 Manz AG (29.9% stake)Shanghai Electric
Group Company Ltd.
The 29.9% stake of the Germany-based Manz AG, a listed
company engaging in manufacturing technology products for
use in automation, was acquired by Shanghai Electric Group
for €355.6m
02/2016 Baltic ElektronikPrettl Electronics
Luebeck GmbH
Baltic Elektronik, a Germany-based company engaging in
manufacturing electronic printed circuit boards and devices,
was acquired by Prettl Electronics
02/2016
RoyoTech Digitalelektronik
GmbH (75%) and Kognitec
Vertrieb and Service GmbH
Mycronic AB
RoyoTech and Kognitec, Germany-based companies engaging
in developing, manufacturing and distributing SMD-towers,
were acquired by Mycronic
02/2016 BB Electronics A/S Skovbit Holding (Private Individual)
BB Electronics, a Denmark-based provider of electronic
manufacturing services, was acquired via a management
buyout
02/2016 New Age EMS Inc. PPI-Time Zero Inc.New Age EMS, a US-based company engaging in contract
manufacturing, was acquired by PPI-Time Zero
01/2016 GPV International A/S Schouw &Co A/S
GPV International, a Denmark-based provider of electronic
manufacturing services, was acquired by Schouw & Co A/S for
€53.6m
01/2016 SEIDEL Holding GmbHSVI Public
Company Limited
SEIDEL Holding, an Austria-based company engaging in
manufacturing of electronic and mechatronic products, was
acquired by SVI
01/2016 IKORebm-papst Mulfingen
GmbH & Co. KG
IKOR, a Spain-based company engaging in designing and
manufacturing of electronic circuits, was acquired by ebm-
papst
01/2016 CRS Electronics Ltd. ChemigraphicCRS Electronics, a UK-based company providing EMS-
services, was acquired by Chemigraphic
Source: MergerMarket, SMT Online, ZVEI, Clearwater Research
2. M&A activity in the EMS industry
Electronic Manufacturing
Services (EMS)
NEWS
Q2 2016
EV/EBITDA by Size
Size by market cap: Large-tier > €1.5bn
Medium-tier €300m - €1.5bn
Small-tier < €300m
EV/EBITDA Development
Source: S&P Capital IQ 25 August 2016, Clearwater Research
Median EV/EBITDA Median EV/EBITDA
Comparable company valuation – EMS industry (categorised by market cap)
3. Valuation of EMS companies worldwide
Company Market cap Net Debt EV Share Revenue-CAGR EBITDA Margin EBIT Margin EV / Revenue EV / EBITDA EV / EBIT
Price 2013-15 2015-16 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017
Large Tier EMS Provider
Hon Hai Precision Industry38,720.3 (12,208.0) 26,512.4 2.5 6.5% (2.5%) 5.2% 5.3% 5.4% 3.7% 3.7% 3.7% 0.2x 0.2x 0.2x 4.0x 4.0x 3.9x 5.7x 5.8x 5.6x
Quanta Computer 7,047.3 (1,396.0) 5,651.3 1.8 7.0% (3.8%) 2.5% 2.7% 2.7% 1.8% 1.9% 2.0% 0.2x 0.2x 0.2x 7.9x 7.8x 7.3x 11.0x 10.6x 9.7x
Flextronics 6,227.8 1,060.7 7,288.5 11.4 (1.2%) (3.1%) 4.5% 5.1% n/a 2.4% 3.1% n/a 0.3x 0.3x n/a 7.2x 6.6x n/a 13.3x 10.8x n/a
Pegatron 5,682.3 (1,265.6) 4,416.7 2.2 13.0% (5.6%) 4.4% 4.2% 4.3% 3.3% 3.1% 3.2% 0.1x 0.1x 0.1x 2.9x 3.2x 3.0x 4.0x 4.5x 4.1x
Jabil Circuit 3,529.3 1,139.9 4,669.2 18.5 3.6% 1.2% 6.5% 7.3% n/a 3.3% 3.5% n/a 0.3x 0.3x n/a 4.4x 3.9x n/a 8.6x 8.1x n/a
Foxconn 3,037.9 (2,092.6) 945.2 2.2 2.5% (13.5%) 15.6% 16.6% 16.8% 12.2% 13.5% 12.8% 0.3x 0.4x 0.4x 2.2x 2.4x 2.3x 2.8x 2.9x 3.0x
Compal Electronics 2,467.3 116.9 2,584.2 0.6 10.6% (6.8%) 2.0% 2.3% 2.2% 1.3% 1.5% 1.5% 0.1x 0.1x 0.1x 5.3x 5.1x 5.1x 8.1x 7.7x 7.5x
Wistron 1,714.8 547.9 2,262.6 0.7 (0.1%) 1.7% 1.7% 2.2% 2.1% 0.4% 0.9% 0.9% 0.1x 0.1x 0.1x 7.8x 5.8x 5.8x 33.6x 13.9x 12.8x
Sanmina 1,700.6 97.3 1,798.0 23.1 3.6% 2.5% 5.0% 5.5% n/a 3.4% 3.9% n/a 0.3x 0.3x n/a 6.3x 5.5x n/a 9.2x 7.8x n/a
Median 3.6% (3.1%) 4.5% 5.1% 3.5% 3.3% 3.1% 2.6% 0.2x 0.2x 0.2x 5.3x 5.1x 4.5x 8.6x 7.8x 6.6x
Mean 5.1% (3.3%) 5.3% 5.7% 5.6% 3.5% 3.9% 4.0% 0.2x 0.2x 0.2x 5.3x 4.9x 4.6x 10.7x 8.0x 7.1x
Medium Tier EMS Provider
Celestica 1,418.6 (159.7) 1,258.9 10.1 (1.4%) 4.5% 3.8% 4.7% 4.8% 2.7% 3.6% 3.6% 0.2x 0.2x 0.2x 6.4x 5.0x 4.8x 9.2x 6.7x 6.3x
Plexus Corp. 1,375.6 (153.9) 1,221.7 41.2 8.3% (1.1%) 6.3% 6.4% n/a 4.4% 4.5% n/a 0.5x 0.5x n/a 8.2x 8.1x n/a 11.6x 11.5x n/a
Fabrinet 1,204.9 (201.6) 1,003.4 33.4 14.7% 20.9% 9.2% 10.4% n/a 7.4% 8.7% n/a 1.3x 1.1x n/a 14.0x 10.2x n/a 17.4x 12.2x n/a
Benchmark Electronics 1,050.4 (310.1) 740.3 21.3 0.7% (8.5%) 6.2% 6.1% 6.5% 4.2% 3.8% 4.3% 0.3x 0.4x 0.3x 5.2x 5.8x 5.2x 7.7x 9.4x 7.9x
Hana Microelectronics 603.6 (238.9) 364.7 0.7 7.3% (0.8%) 16.0% 14.4% 14.8% 10.4% 8.4% 8.8% 0.7x 0.7x 0.6x 4.3x 4.8x 4.4x 6.6x 8.1x 7.3x
CTS Corp. 578.5 (8.2) 570.2 17.7 (3.4%) 4.8% 16.8% 17.5% 18.4% 12.5% 13.1% 13.9% 1.7x 1.6x 1.5x 9.9x 9.0x 8.1x 13.2x 12.1x 10.7x
VS Industry Berhad 343.9 31.0 374.9 0.3 20.6% 15.3% 12.3% 12.1% n/a 9.2% 9.1% n/a 0.8x 0.7x n/a 6.8x 6.0x n/a 9.0x 7.9x n/a
Median 7.3% 4.5% 9.2% 10.4% 10.6% 7.4% 8.4% 6.6% 0.7x 0.7x 0.5x 6.8x 6.0x 5.0x 9.2x 9.4x 7.6x
Mean 6.7% 5.0% 10.1% 10.2% 11.1% 7.3% 7.3% 7.7% 0.8x 0.7x 0.7x 7.8x 7.0x 5.6x 10.7x 9.7x 8.1x
Small Tier EMS Provider
SVI 288.3 (53.9) 234.4 0.1 0.9% 49.8% 10.5% 9.1% 9.2% 8.4% 5.7% 6.3% 1.1x 0.7x 0.6x 10.5x 8.1x 7.0x 13.2x 12.9x 10.2x
Sparton 187.5 110.3 297.8 19.2 15.1% 6.1% 8.1% 7.7% n/a 4.1% 3.5% n/a 0.8x 0.8x n/a 10.2x 10.2x n/a 20.2x 22.6x n/a
Neways Electronics International 87.3 31.5 118.8 7.7 18.8% 5.2% 4.2% 5.8% 6.6% 2.2% 4.1% 5.0% 0.3x 0.3x 0.3x 7.5x 5.2x 4.3x 14.6x 7.3x 5.7x
Key Tronic Corp. 74.7 39.1 113.7 7.0 16.1% 6.7% 3.2% 4.2% n/a 1.9% 2.5% n/a 0.3x 0.3x n/a 8.6x 6.2x n/a 14.5x 10.5x n/a
IEC Electronics Corp 47.9 19.1 67.0 4.7 (2.8%) 4.5% 4.6% 7.6% n/a 1.7% 5.4% n/a 0.6x 0.6x n/a 12.6x 7.3x n/a 34.2x 10.2x n/a
Median 15.1% 6.1% 4.6% 7.6% 7.9% 2.2% 4.1% 5.7% 0.6x 0.6x 0.5x 10.2x 7.3x 5.7x 14.6x 10.5x 7.9x
Mean 9.6% 14.5% 6.1% 6.9% 7.9% 3.6% 4.2% 5.7% 0.6x 0.5x 0.5x 9.9x 7.4x 5.7x 19.4x 12.7x 7.9x
Total EMS Providers
75- Percentile 13.0% 5.2% 9.2% 9.1% 10.6% 7.4% 5.7% 7.0% 0.7x 0.7x 0.5x 8.6x 7.8x 6.1x 14.5x 11.5x 9.8x
Median 6.5% 1.7% 5.2% 6.1% 5.9% 3.4% 3.8% 4.0% 0.3x 0.3x 0.3x 7.2x 5.8x 5.0x 11.0x 9.4x 7.4x
Mean 6.7% 3.7% 7.1% 7.5% 7.8% 4.8% 5.1% 5.5% 0.5x 0.5x 0.4x 7.2x 6.2x 5.1x 12.7x 9.7x 7.6x
25- Percentile 0.7% (3.1%) 4.2% 4.7% 3.9% 2.2% 3.1% 2.9% 0.2x 0.2x 0.2x 5.2x 5.0x 4.2x 8.1x 7.7x 5.7x
5.3x 5.1x4.5x
6.8x
6.0x
5.0x
10.2x
7.3x
5.7x
7.2x
5.8x
5.0x
2015 2016 2017
Large-tier Medium-tier Small-tier Total
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
Jul 2011 Jun 2012 May 2013 Apr 2014 Mar 2015 Feb 2016
Electronic Manufacturing
Services (EMS)
NEWS
Q2 2016
Contact
Shanghai
Beijing
Mumbai
LisbonPorto
BarcelonaMadrid
Frankfurt
Copenhagen
Aarhus
UK &
Ireland (5)*
Milan
New YorkChicago
Tokyo
BostonSan
Francisco
Tampa
ParisDetroit
Private equity firm
Clearwater International advised
S.I. Finance (a subsidiary of
SUEZ) on the sale of its 49.6%
limited partnership interest in BuS
Elektronik to the management
SUEZ (S.I. FINANCE)
Manufacturer of electronic and
mechatronic solutions
Clearwater International advised
SEIDEL Holding on the sale of
SEIDEL Electronics Group to SVI
Public Company Limited
SEIDEL HOLDING
World leading manufacturer of
avalanche transceivers
Clearwater International advised
SEIDEL Privatstiftung on the sale
of PIEPS to Black Diamond
PIEPS
Coordinating as a single team, our 200 experienced professionals have been responsible for the successful
completion of over 1,250 deals worth in excess of €46bn. Working alongside directors, shareholders and
investors we advise on all aspects of corporate finance from mergers and acquisitions (M&A) through to
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Our independence from any larger financial institution or consulting firm ensures that we can give truly
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groundwork for lasting relationships. Many of our clients return to us for advice on multiple occasions.
With 15 offices in 9 countries around the world and deals completed in 31 countries, our team makes us a
natural choice for transactions requiring knowledge of, and access to, global markets. We have longstanding
relationships around the globe, all over Europe, in the US, China, India and Japan, helping us to provide clients
with a unique insight into international opportunities.
Partner Office
Clearwater International Offices
Electronic Manufacturing
Services (EMS)
NEWS
Q2 2016
Contact
W W W . C L E A R W A T E R I N T E R N A T I O N A L . C O M
CHINA • DENMARK • FRANCE • GERMANY • IRELAND • PORTUGAL • SPAIN • UK • US
Jon Hustler
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Francisco Gómez
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Markus Otto
DD: +49 (172) 61 34 128
Email: [email protected]
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DD: +45 27 62 03 73
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DD: +86 6341 0699 x813
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Philippe Croppi
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Rui Miranda
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DD: +353 1 517 58 41
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