December 22, 2021

Don’t Compare the Fluence Deal to the Hubbell Lighting Deal

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Armchair financiers evaluate winners and losers, but should they?

Whenever acquisitions occur, it’s common for industry observers to evaluate the deal from many angles – including the price tag of the transaction to determine whether the buyer or seller struck the better deal. With no visibility to earnings and assets, we find it impossible to declare either Signify or ams OSRAM as the winner based solely on a few facts that were shared in a press release. If the deal happened, both parties obviously agreed to it and may feel like it’s a win-win.

We’ve heard some industry observers compare the Signify – Fluence deal to the GE Current, a Daintree Company and Hubbell Lighting deal.

Hubbell Lighting has revenues of $515 million and is being sold to Current for $350 million.
Fluence has revenues of $141 million and is being sold to Signify for $272 million.

While the dollars and cents of those deals seem inconsistent, we contend that they should be. Yes, each acquisition is one lighting manufacturer buying another, but we imagine that there are some glaring differences behind how potential buyers evaluate Hubbell Lighting and Fluence.

It’s about earnings – not revenues:
It’s not how much you sell, it’s how much you keep. We suspect that Fluence has a higher (possibly much higher) net profit margin than Hubbell Lighting does.

Scarcity:
Both Fluence and Hubbell Lighting are generally well-respected brands, but in the comparatively young sector of horticultural lighting, Fluence has emerged as a category leader in a sector that isn’t yet flooded with hundreds of highly-capable competitors. It’s harder for any lighting and controls company to stand out in the commercial & industrial lighting space the way Fluence currently stands out in the horticultural category.

Other suitors:
We know that Signify struck the deal with ams OSRAM, but it’s possible that other companies were actively competing to purchase Fluence – thus driving up the buy price. The same could be true for the Current – Hubbell Lighting, deal too, of course.

Assets & Patents:
Acquiring companies put value on assets like intellectual property and real estate. Hubbell Lighting is older and larger than Fluence and likely comes with more hard assets, but Fluence’s patent portfolio might cause Signify’s well-oiled IP-licensing machine to drive a much higher future value of those patents in the growing horticultural sector.

Future growth potential:
By all accounts, the anticipated future growth rate of the horticultural lighting sector is set to far outpace the growth of the general and architectural lighting & controls markets. Consequently, buyers may believe that Fluence is able to scale more rapidly than a more established C&I lighting manufacturer.

Both deals are expected to close in the first half of 2022.