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Merger and Acquisition Trends in the Solar Industry            Photovoltaics 2011 - January 20th, 2011                Pres...
Contents           Section 1   Introduction to Lincoln International                    1           Section 2   Merger and...
Section 1Introduction to Lincoln International
Lincoln InternationalInternational investment bank with focus on the middle market              North America             ...
Lincoln International’s Global Involvement in SolarGlobal coverage                                                        ...
Section 2Merger and Acquisition Activity in the Solar Industry
Global Solar IndustryDevelopment of global PV market                                                 Installed capacity by...
M&A Transaction Activity in the Solar IndustrySolar transactions by year                                          Solar tr...
Geographies of Solar TransactionsTransaction volume in the United States continues to growSolar transactions by quarter   ...
Solar Company Involvement in Transaction ActivityOver the last year Producers of Solar Energy and EPC Integrators/Develope...
Types of Solar TransactionsConsolidation continues to be a driving force of transaction volumeTransaction volume by quarte...
Section 3A Look Ahead
A Look Back at the Automotive IndustryMergers, acquisitions and industry “push outs” significantly consolidated the automo...
The PCB Industry – “A Case Study of Consolidation”PCB transaction activity by type                    • Consolidations mad...
The PCB Industry – “A Case Study of Consolidation” (continued)The first wave of consolidation activity in the PCB industry...
The PCB Industry – “A Case Study of Consolidation” (continued)The second wave of consolidation activity in the PCB industr...
Solar Industry ImplicationsA consolidation wave in the solar industry is beginning to gain momentumFinancial metrics      ...
Thoughts            Companies need to determine early whether they are a “buyer” or “seller”      The data shows that post...
AppendixBios
Jack Calderon                                              Advisory Expertise                                         Past...
Chaim Lubin                                             Advisory Expertise                                Past Affiliation...
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Merger and Acquistion Trends in the Solar Industry

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- A review of the historical growth in solar M&A
- Merger and acquisition activity by sector of the solar industry value chain
- Valuation metrics
- Using M&A to your advantage
Jack Calderon, Managing Director, Lincoln International

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Merger and Acquistion Trends in the Solar Industry

  1. 1. Merger and Acquisition Trends in the Solar Industry Photovoltaics 2011 - January 20th, 2011 Presented by Jack Calderon
  2. 2. Contents Section 1 Introduction to Lincoln International 1 Section 2 Merger and Acquisition Activity in the Solar Industry 4 Section 3 A Look Ahead 10 APPENDIX A Bios Section 1: Section Title 2
  3. 3. Section 1Introduction to Lincoln International
  4. 4. Lincoln InternationalInternational investment bank with focus on the middle market North America Europe Asia • Chicago, Los Angeles and • Amsterdam, Frankfurt, • Tokyo, Shanghai and New York London, Madrid, Paris and Mumbai • 80+ professionals Vienna • 6 professionals • 70+ professionals • Strategic Alliances (China and Korea) Ranked #20 globally among all investment banks based on number of transactions completed in 2010 - MergerMarket League Tables Independent firm owned and controlled by its global partners Specialize in providing advice on middle market transactions Global footprint with integrated operations across North America, Europe and Asia Experienced senior professionals operating through dedicated, global industry groups actively involved in all transaction processes Lincoln International is the only international, integrated, independent middle market advisor Section 1: Introduction to Lincoln International 2 4
  5. 5. Lincoln International’s Global Involvement in SolarGlobal coverage Industry activity Solar Energy Stock Index Amsterdam, Netherlands Frankfurt, Germany London, United Kingdom • Publication that tracks Eric Wijs, Managing Director Christoph Ulrich, Director Julian Tunnicliffe, Managing Director • Head of Lincoln International Benelux • Previously with Lazard, Frankfurt • Previously with Houlihan Lokey numerous performance • Previously with Lazard Amsterdam • Degree in Business Administration Howard & Zukin and Deutsche Bank • Degree in Business Administration from University of Passau • BS from Cambridge University metrics for companies from the Erasmus University Rotterdam across the major sectors of the solar industry on a Madrid, Spain Paris, France quarterly basis Iván Marina, Managing Director Géraud Estrangin, Director • Previously with Sabadell Corporate • Previously with Ernst & Young Finance and Fidelity Investment & Corporate Finance and HSBC Research Company Investment Banking • MBA from Instituto de Empresa • Graduate, Reims Management Solar Energy Deal Reader School • Publication that tracks deal activity within the solar energy industry on a quarterly basis Chicago, United States Tokyo, Japan “Solar Call" Jack Calderon, Managing Director Tetsuya Fujii, Managing Director • Head of Lincoln’s Renewable Energy and • Ongoing column in InterPV magazine released • Formerly with Lehman Brothers, Deutsche Electronics Groups Securities and Credit Suisse First Boston every other month • IPC Board of Directors • MBA from Northwestern University’s Kellogg • CEO of EFTC (NasdaqNM:EFTC),1996-2001 School of Management • JD from American University Law School Chaim Lubin, Associate • Member of Lincoln’s Renewable Energy and Electronics Groups Lincoln offices • CPA, previously with Feeley & Driscoll Strategic partners • MBA from Northwestern University’s Kellogg School of Management Section 1: Introduction to Lincoln International 3 5
  6. 6. Section 2Merger and Acquisition Activity in the Solar Industry
  7. 7. Global Solar IndustryDevelopment of global PV market Installed capacity by geography 2009 Cumulative Installations 2010F Cumulative InstallationsSource: European Photovoltaic Industry Association (EPIA), 2010 Source: European Photovoltaic Industry Association (EPIA), 2010Industry dynamics • Worldwide installations of PV cells and modules have had a CAGR of approximately 43% for the last decade • Global MW installations during 2010 are expected to be more than double the amount exhibited in 2009 reaching approximately 15GW installed during 2010 • U.S. grew in line with the global market in 2010 and is expected to grow faster than the global market in 2011 Section 2: Merger and Acquisition Activity in the Solar Industry 5 7
  8. 8. M&A Transaction Activity in the Solar IndustrySolar transactions by year Solar transactions by quarter • 38 completed solar energy transactions in Q3 2010 representing a 19% increase from the 32 recorded in Q3 2009 and a 138% increase from the 16 transactions recorded in Q3 2008 • 2010 transaction volume is on pace to be a record year from a transaction perspective and is expected to be almost 3x the volume exhibited in 2007 • Drivers include companies diversifying into solar, vertical integration, consolidations of fragmented sectors such as installation companies, and the acquisition of solar projects Section 2: Merger and Acquisition Activity in the Solar Industry 6 8
  9. 9. Geographies of Solar TransactionsTransaction volume in the United States continues to growSolar transactions by quarter Solar transactions by year • The European market still exhibits its maturity and leadership in the solar industry remaining the leader in transaction activity with over 60% of the transaction volume for Q3 2010 and 48% for 2009 • U.S./Canada transaction volume grew over 140% in 2009 as compared to 2008 • Geographies with favorable legislation attract capital and increase transaction volume Section 2: Merger and Acquisition Activity in the Solar Industry 7 9
  10. 10. Solar Company Involvement in Transaction ActivityOver the last year Producers of Solar Energy and EPC Integrators/Developers made up the largest portion oftransaction volumeTransaction volume by target company category • Acquisition of solar projects is driving transaction volume within the Producers of Solar Energy category as they seek to build up their portfolios • Transactions of EPC Integrators / Developers are being driven by companies looking to secure “pipelines” of projects and the consolidation of the highly fragmented EPC/Installer community Section 2: Merger and Acquisition Activity in the Solar Industry 10 8
  11. 11. Types of Solar TransactionsConsolidation continues to be a driving force of transaction volumeTransaction volume by quarter and type of transaction • Consolidation activity has picked up significantly and represented 58% of the total transaction volume exhibited in Q3 2010 • Entry into solar through acquisition, by private equity or other companies, represented 29% of the Q3 2010 transaction volume Section 2: Merger and Acquisition Activity in the Solar Industry 11 9
  12. 12. Section 3A Look Ahead
  13. 13. A Look Back at the Automotive IndustryMergers, acquisitions and industry “push outs” significantly consolidated the automotive industryTwo phases of consolidation in the U.S. automotive industry Decline of 89% Decline of 60% Number of U.S. automotive manufacturers • Almost the entire industry of U.S. automotive manufacturers that existed in the early 1900s had either been consolidated or had gone out of business by the mid 1950s • Over the latter half of this century the U.S. automotive industry has further consolidated with only 3 major manufacturers and several smaller companies remainingSource: The Beaulieu Encyclopedia of the Automobile, Standard Catalog of American Cars (Third and Fourth Editions), and World of Cars : Worldwide Car Catalogue Section 3: A Look Ahead 13 11
  14. 14. The PCB Industry – “A Case Study of Consolidation”PCB transaction activity by type • Consolidations made up 67% of transaction activity during the first wave of transactions from 1999 to 2001 as compared to only 53% during the second wave from 2006 to 2008Source: CapitalIQ Section 3: A Look Ahead 14 12
  15. 15. The PCB Industry – “A Case Study of Consolidation” (continued)The first wave of consolidation activity in the PCB industry took place between 1999 and 2001Consolidation activity EBITDA valuations 74% 24%Source: CapitalIQ Source: CapitalIQFinancial metrics Trends • Consolidations in the 1999 to 2001 time frame exceeded the surrounding years by more than 50% each year as the “tech bubble” was forming • Valuations declined 24% as “tech bubble” burst in 2002 • Valuations rose 74% from 2001 to 2003 due to the combination of having fewer suppliers, rebounding markets, and lagging EBITDAsSource: CapitalIQ Section 3: A Look Ahead 15 13
  16. 16. The PCB Industry – “A Case Study of Consolidation” (continued)The second wave of consolidation activity in the PCB industry took place between 2006 and 2008Consolidation activity EBITDA valuations 124% 63%Source: CapitalIQ Source: CapitalIQFinancial metrics Trends • Similar to the first consolidation wave, valuations fell in the second wave being impacted by pricing pressures, increased shift of production to Asia and finally the “credit bubble” • Similar to post the first wave, valuations are rebounding due to having fewer suppliers, rebounding markets, and lagging EBITDAs • Subsequent industry consolidations typically occur at lower multiplesSource: CapitalIQ, forecasts provided by Custer Consulting Group Section 3: A Look Ahead 16 14
  17. 17. Solar Industry ImplicationsA consolidation wave in the solar industry is beginning to gain momentumFinancial metrics EBITDA valuationsSource: CapitalIQ Source: CapitalIQConsolidation activity Trends • The solar industry has been impacted by the “Great Recession” but is recovering • The global economic difficulties distorted 2008 and 2009 valuations as stock prices have traded “out of sink” from earnings performance • Growth in the solar industry and normalized valuation metrics will continue to fuel consolidation activitySource: CapitalIQ Section 3: A Look Ahead 17 15
  18. 18. Thoughts Companies need to determine early whether they are a “buyer” or “seller” The data shows that post consolidation, the industry emerges stronger with fewer larger companies that can leverage scale, enhance technology, and invest in low cost manufacturing regions Sell early in an industry consolidation cycle to realize premium valuations In most industry consolidation waves, each subsequent wave typically has lower valuations as seller and buyer disparities are more acute and pricing pressure increases Section 3: A Look Ahead 18 16
  19. 19. AppendixBios
  20. 20. Jack Calderon Advisory Expertise Past Affiliations Jack has extensive experience in advising Prior to joining Lincoln International, Jack companies on merger and acquisitions, served as Chairman and Chief Executive restructuring, fairness opinions, and other strategic Officer of EFTC, a publicly traded matters. In addition to completing multiple electronics manufacturing service provider, transactions for public company, private equity, and which merged with K-Tec to create Suntron. private owner clients, he also has experience in EFTC specialized in manufacturing cross-border advisory work encompassing both complex electronics primarily for the Europe and Asia. Jack has led numerous sell-side aerospace industry. and buy-side transactions. His advisory work is exclusively focused on the electronics and solar Jack began his career in Honeywells energy industries. Aerospace and Defense Group in 1979. In his 20 year operating career, he held a Managing Director Industry Expertise variety of positions with several companies Jack is an expert in the electronics industry. He including Program Manager; Vice President spent 20 years in various operating management of Marketing and Contracts; Vice President positions in the industry, beginning with Honeywell of Corporate Development; Vice President and culminating as CEO of publicly traded EFTC Role at Lincoln International and General Manager of Latin American (now part of Suntron). Jack is a frequent speaker at Operations and Chief Executive Officer. industry events and oversees Lincoln’s publications Jack leads Lincoln Internationals global in the EMS, Power and Solar Energy industries. Jack Electronics and Solar Energy Group serves as a member of the Board of Directors of the Academic Credentials which includes Electronic IPC which is the global standards-setting Jack earned a Juris Doctor degree from Manufacturing Services (EMS), organization for the manufacture of electronic The American University, and a Bachelor of Controls, Interconnects, Power products. Jack is also active in the IPC’s initiative in Arts degree in economics, cum laude, from Electronics and Solar Energy. He has solar energy. Jack’s merger and acquisition practice Case Western Reserve University. extensive operating and transaction focuses on interconnects (circuit boards, flex circuits, experience in the electronics industry and connectors), EMS (electronic manufacturing having served as a CEO of a public services and repair/warranty services), control company. Jack leads deal teams, electronics (sensors, actuators, motion control and manages key client relationships and embedded computing), power electronics (supplies, markets the firms services. conditioners, inverters, batteries) and solar energy (wafers, photovoltaic cells, module assembly and system installers). Appendix A: Bios 18 20
  21. 21. Chaim Lubin Advisory Expertise Past Affiliations Chaim has experience in advising companies Prior to joining Lincoln International, on mergers and acquisitions, restructuring, Chaim worked in public accounting for fairness opinions, and other strategic matters. Feeley and Driscoll, P.C. in Boston. His experience includes transactions and Chaim advised and worked with advisory services for private equity, Fortune companies in the technology, 500, and private company clients. Chaim construction, healthcare, legal, and also has cross-border transaction experience, manufacturing & distribution industries. providing advisory services for transactions Chaim is a licensed CPA. involving companies in geographies across Asia and Europe. Academic Credentials Chaim earned a Master of Business Industry Expertise Administration degree from the Kellogg Chaim specializes in the electronics and School of Management at Northwestern Associate renewable energy industries, though he has University, a Master of Engineering also been actively involved with companies in Management from the McCormick the industrial technology, building products, School of Engineering and Applied chemicals, office products, and Science at Northwestern University, and manufacturing & distribution industries. He a Bachelor of Science degree from Role at Lincoln International has relationships with leaders in the Boston University with Honors. renewable energy industry and active Chaim leads or assists in leading deal acquirers in the electronics industry as well teams and is active in marketing the as with contacts throughout the private equity services of Lincoln International. community. Chaim has a strong understanding of the dynamics in the rapidly Chaim is a key member of the firms growing solar industry, and a keen sense of Electronics and Renewable Energy what makes companies and projects groups and is heavily involved in attractive and how best to position these to executing transactions in these potential partners. sectors. Appendix A: Bios 19 21

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