There are three underlying market trends impacting M&A deals in the solar space. First, due to governmental initiatives, the United States is being seen as a market of tremendous growth. In particular, European companies are looking at M&A as one method of entering the U.S. market. Second, M&A can also serve as an alternative to project financing by selling projects from smaller companies to larger companies. Finally, as with any new industry, numerous new entrants enter that industry and then consolidate to achieve scale.

2. Are you seeing more M&A activity on the buy-side or sell-side at this time? Why is this so?
Due to the increasing level of M&A transactions, we are seeing considerable activity on both the buy-side and the sell-side.

 

3. What advice are you giving buyers? Sellers?
In a new consolidating industry such as solar, it is very important for companies to develop strategies as to whether they plan to build a business for the purpose of an “exit,” or whether their intention is to become one of the lead consolidators in the industry. It is very important for companies to realistically assess these risks and opportunities, and we help companies make those assessments. Companies that fail to make this critical analysis could be left behind in a consolidating industry. Once this fundamental strategic decision is made, Lincoln works closely with clients to implement tactics that will help them achieve their strategic goals.

 

4. What’s happening within the solar industry’s installation and manufacturing markets and how are these trends positively/negatively impacting M&A activity?
Installers are highly fragmented and geographically dispersed. As the solar industry matures, larger, better branded and geographically diverse installers may gain market share. Therefore the installer base is ripe for consolidation. With respect to manufacturers we are seeing an increased amount of outsourcing of panel manufacturing and assembly. This could lead to solar companies deciding to sell manufacturing capabilities as part of an outsourcing strategy.

 

5. Do you feel the activity will continue to grow or will it level off or slow in the next few years?
The level of M&A activity is expected to continue to increase during the next year, and we expect to continue to see record numbers of transactions in the solar industry. Since 2005, the level of M&A activity has increased 8 fold.

 

6. What’s the most challenging aspect of creating and closing deals in the solar sector?
The solar space is truly a worldwide market, and therefore, deals in this space need to cover a global buyer universe. The challenge for any firm is having the appropriate access to overseas buyers and the ability to complete a cross border transaction. In the middle market, Lincoln International is the only globally integrated bank with locations in the U.S., U.K., Spain, France Germany, Austria, and Japan (with strategic relationships in India and China as well) making Lincoln uniquely positioned to complete deals in this space.

 

7. Are you seeing M&A activity growing in other Alternative Energy sectors? Which ones?
We have seen a significant amount of interest around the Smart Grid sector. Many companies are looking for ways to enter the broader arena of renewable energy by being a technology or systems provider within a Smart Grid system. This area is vast and includes everything from smart metering technology and hardware to software or consulting companies that deal with the concept of a Smart Grid. In addition, there is still interest in consolidating and purchasing wind projects. Although that area of renewable energy is more mature, there is still significant growth and acquisition potential.

 

8. If you look into your crystal ball how do you see the next 5-10 years unfolding?
The solar industry, particularly in the U.S. is an “emerging” industry. Looking back when other industries emerged, whether they be automotive, computers, or internet, in the early phases of an emerging market there are many new entrants and valuations are relatively high due to the potential growth ahead. Over time consolidation occurs, economies of scale take hold, well known brands become increasingly recognized, and valuations decrease. Therefore it is imperative that any participant in the industry establish a vision that either positions the company for a high valuation exit or, alternatively, a long-term consolidator

Jack Calderon, Managing Director of Lincoln International
Jack leads Lincoln International's global Electronics and Solar Energy Group which includes Electronic Manufacturing Services (EMS), Controls, Interconnects, Power Electronics and Solar En- ergy. He has extensive operating and transaction experience in the electronics industry having served as a CEO of a public company. Jack leads deal teams, manages key client relationships and mar- kets the firm's services.

Jack has extensive experience in advising companies on merger and acquisitions, restructuring, fairness opinions, and other strategic matters. In addition to completing multiple transactions for public company, private equity, and private owner clients, he also has experience in cross- border advisory work encompassing both Europe and Asia. Jack has led numerous sell- side and buy-side transactions. His advisory work is exclusively focused on the electronics and solar energy industries.

Jack is an expert in the electronics industry. He spent 20 years in various operating management positions in the industry, beginning with Honeywell and culminating as CEO of publicly traded EFTC (now part of Suntron). Jack is a frequent speaker at industry events and oversees Lincoln’s publications in the EMS, Power and Solar Energy industries. Jack serves as a member of the Board of Directors of the IPC which is the global standards-setting organization for the manufacture of electronic products. Jack is also active in the IPC’s initiative in solar energy. Jack’s merger and acquisition practice focuses on interconnects (circuit boards, flex circuits, and connectors), EMS (electronic manufacturing services and repair/warranty services), control electronics (sensors, actuators, motion control and embedded computing), power electronics (supplies, conditioners, inverters, batteries) and solar energy (wafers, photovoltaic cells, module assembly and system installers).