2007 EMS industry mergers and acquisitions

February 7, 2008

There were 51 completed EMS transactions in 2007, one less than the 52 recorded in 2006. EMS consolidations were once again the most common type of transaction in 2007 with 19 transactions in 2007, or 37% of total activity, compared to 22 transactions in 2006 which represented 42% of activity last year.

In 2007, there were ten vertical / horizontal convergence transactions. This was down significantly from 2006. The ten transactions in 2007 represented 20% of the total, compared to 18 transactions representing 35% of the total last year. (See Chart A)

Chart A: EMS M&A year comparison

OEM divestitures doubled from five transactions in 2006 to ten in 2007. As a percentage of total transactions, OEM divestitures went from 10% in 2006 to 20% in 2007.

EMS divestitures went from three transactions in 2006 to five transactions in 2007. As a percentage of total transactions, EMS divestitures rose from 6% to 10% for 2006 and 2007, respectively.

Lincoln International began tracking private equity activity in the EMS industry in the 2nd half of 2006. For the first full year of tracking, 2007, private equity Investments tallied seven transactions, or 14% of total transactions. For the half year of transactions in 2006, private equity Investments totaled four transactions. Lincoln expects this category to continue to grow in subsequent years as activity from private equity groups in the EMS industry continues to increase.

As illustrated in Chart B below, 15 of the deals completed in 2007 were cross border. Within this category, eight transactions were between low-cost regions and high-cost regions, and seven were between two different high-cost regions. For the same period, 16 transactions occurred within the U.S. and Canada (31% of total), 11 occurred within Western Europe (22%) and nine occurred within Asia (18%).

Chart B: EMS M&A by geography

Note: "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 2007 were once again led by the Micro Tier, totaling 22, or approximately 43% of all transactions.

EMS Size Guide

Tier 1 (Large): Greater than $3 billion
Tier 2 (Mid): $300 million to $3 billion
Tier 3 (Small): $150 million to $300 million
Tier 4 (Micro): <$150 million

Large Tier EMS providers closed nine transactions, representing approximately 18% of the total. There were ten Small Tier and ten Mid Tier transactions, each representing approximately 20% of the total. (see below for 2007 data).

(click image to enlarge)