The DAK Group – Middle Market Investment Bankers
201.712.9555

Surprise Ending For GE’s Lighting Businesses?

Surprise Ending For GE’s Lighting Businesses?

With GE’s ‘Current, powered by GE’ business now on the selling block, an industry M&A expert suggests that the potential buyer could be an out-of-the-box candidate.

By Susan Bloom

Earlier this month, The Boston Business Journal reported GE’s decision to put its ‘Current, powered by GE’ entity up for sale as part of the company’s reorganization; following its restructuring and divestiture of $20 million in assets, GE will focus solely on the areas of power, aviation, and healthcare.

The news follows the June 2017 placement of GE’s Lighting division up for sale with the exclusion of Current, powered by GE, an entity established in October 2015 which “blends LED lighting and solar solutions with networked sensors and software to make cities and buildings energy-efficient and smart.”

Ari Fuchs, Director at The DAK Group
In light of this milestone announcement and what it represents – GE’s over century-old lineage traces back to Thomas Edison’s groundbreaking innovations in the field of lighting — lightED asked M&A expert Ari Fuchs, Director at The DAK Group (www.dakgroup.com), a Rochelle Park, NJ-based investment bank that focuses on business sales, mergers, and acquisitions exclusively with middle market companies, for insights on GE’s decision to exit the lighting business, the profile of a potential buyer for Current, and how distributors should approach this new day in the field of connected lighting.

lightED: Why do you feel that GE is exiting the lighting business entirely?
Fuchs: GE is a huge industrial conglomerate with many different businesses of varying shapes and sizes. Under their new CEO, John Flannery, and as laid out in their strategic vision, GE intends to restructure its organization and refocus on its core businesses in order to streamline operations and boost performance.

lightED: Do you feel that Current, powered by GE is an attractive business?
Fuchs: It’s a lucrative business to be in and automation optimization and sustainability represent the cornerstone of the lighting industry, but Current is far more than that – by providing energy optimization, sustainability, and automation solutions, it’s really a data and analytics company using connected lighting to enhance productivity. A recent project of theirs in the city of San Diego involved installation of their intelligent sensor nodes on 3,200 streetlights to collect real-time sensor data to help optimize traffic, improve safety, etc.; when you layer on sensors to either new or existing infrastructure, you begin to build a treasure trove of data analytics that can be extremely valuable based on its ability to optimize revenue in any kind of setting, be it municipal, retail, or industrial.

lightED: Who do you think could potentially buy Current, powered by GE?
Fuchs: Current might hold appeal for companies like Honeywell or Emerson, which are in the automation space, or Mitsubishi or Siemens, which are in the commercial/industrial power generation market – e.g., Current could be attractive to companies who want to build out their platform with the LEDs, automation, controls, and sensors that they don’t currently have. The buyer could also be an out-of-the-box player and I wouldn’t be surprised if a company like Google stepped up to buy Current. At its core, Google is a disruptive data and analytics company — they just got into driverless vehicles and already sell items like their Nest family of smart home products, so Google is all about disruptive thinking. The type of data that Current has started accumulating and the way they approach automation, sensors, and controls is ripe for a buyer like that. Google could easily synthesize these old- and new-economy elements into something truly earth-moving.

lightED: Current has already invested hundreds of millions of dollars in connected/smart lighting research. Could that cost alone push potential buyers away?
Fuchs: From a top-line perspective and given that Current, powered by GE could realistically be priced north of $1 billion, this sale will require a buyer who has the financial wherewithal to develop these opportunities, which will eliminate many of the smaller players who can’t properly leverage the Current technology and platform. In terms of the hundreds of millions of dollars that GE has already invested, that incremental cost would be a drop in the bucket relative to the ultimate opportunity the company could represent for the right buyer.

lightED: How might a potential buyer change the LED market?
Fuchs: The LED market is already beginning to transcend just light bulbs, forcing the industry to think about what they do and how they can add value. The ability to take a product or service and create actionable data from it is definitely where the industry is headed; whoever prevails in the purchase of Current will see that opportunity and leverage the R&D Current has already invested.

lightED: Do you think Current has a bright future?
Fuchs: I do think that with the right nurturing, Current will survive and thrive. Energy management systems are increasingly vital to the nation’s cities, businesses, and 5 million commercial buildings, because all of the intelligence you can glean from management systems enables greater productivity, efficiency, and decision-making. So the business is very much here to stay because it’s all about harnessing and recognizing the value of data, which is where the industry is moving.

lightED: Any thoughts for distributors on how to approach the changing industry?
Fuchs: It’s important for distributors to embrace the transition. The revenue model has changed for distributors such that today it’s about delivering solutions as opposed to just products. As the industry innovates, they must innovate alongside it, developing the capabilities and resources that will position them to deliver the lighting solutions being demanded. If they can do that and capture even a slice of the commercial building upgrade opportunity, the outlook is bright.

For more information, contact Ari Fuchs at afuchs@dakgroup.com.

CLICK BELOW FOR:
Is Debt or Equity Better for Your Business? PRINTABLE VERSION
Is Debt or Equity Better for Your Business? READ ORIGINAL