II-VI’s Acquisition of Photop

LOCATION OF TARGET

Fujian, China (Cayman Islands holding company)

DRP ROLE

Advisor to the buyer

STAKE ACQUIRED

100%

II-VI’s Acquisition of Photop

LOCATION OF TARGET

Fujian, China (Cayman Islands holding company)

DRP ROLE

Advisor to the buyer

STAKE ACQUIRED

100%

II-VI’s Acquisition of Photop

LOCATION OF TARGET

Fujian, China (Cayman Islands holding company)

DRP ROLE

Advisor to the buyer

STAKE ACQUIRED

100%

About the parties

II-VI Incorporated (“II-VI”) is a NASDAQ-listed US company founded in 1971 and headquartered in Saxonburg, PA. II-VI produces engineered materials and optical components for manufacturing, military and telecommunications industries and is the global leader in crystal growth and optics for the laser industry. II-VI is an active acquirer of businesses around the world and operates with a holding company structure, which supports a portfolio of related companies within the II-VI group.

Photop Technologies Inc. (“Photop”) was created through the merger of four companies in 2004 and is headquartered in Fuzhou, China. Photop is a vertically-integrated manufacturer of fibre optic modules, microchip lasers, crystals and optical components. Key customers include Huawei and Corning.

Background

Photop was preparing for an IPO in the US in late 2007 and approached II-VI as a potential strategic investor in the IPO. Due to weakness in the IPO market, Photop suspended its IPO plans and II-VI began discussions with Photop regarding a 100% acquisition of the company in 2008-2009. With the support of non-management shareholders, the management shareholders of Photop negotiated the transaction with II-VI.

Deal highlights

  • This was the largest acquisition to-date by II-VI and the largest acquisition in China’s laser and optics sector by a foreign company.
  • Considering the deal’s importance and complexity, execution was swift; it took just 6 months from signing of LOI to closing.
  • The financial benefits to II-VI from the acquisition were immediate and significant. In the first half year following the acquisition, it contributed 58% of II-VI’s 62% year-on-year revenue growth and was accretive to earnings.
  • The transaction was also highly strategic to II-VI, giving it a strong local team and platform in China. Prior to the acquisition, II-VI had approximately 2,000 employees and a relatively small presence in China with 250 staff; post-acquisition, II-VI grew to 5,000 employees including 3,000 in China.

How did DRP add value?

  • DRP assisted on all aspects of the transaction, including valuation, due diligence, and the resolution of various transaction issues.
  • DRP played a leading role in price negotiations and helped II-VI develop valuation arguments and execute a negotiating strategy to close the very large initial valuation gap between the parties.
  • DRP helped II-VI negotiate an acquisition structure including earn-out and management incentives to incentivize the management of Photop and to assure its continued success as a wholly-owned subsidiary of II-VI.
  • DRP’s views, insights and recommendations were highly regarded by the management and Board of Directors of II-VI.

About the parties

II-VI Incorporated (“II-VI”) is a NASDAQ-listed US company founded in 1971 and headquartered in Saxonburg, PA. II-VI produces engineered materials and optical components for manufacturing, military and telecommunications industries and is the global leader in crystal growth and optics for the laser industry. II-VI is an active acquirer of businesses around the world and operates with a holding company structure, which supports a portfolio of related companies within the II-VI group.

Photop Technologies Inc. (“Photop”) was created through the merger of four companies in 2004 and is headquartered in Fuzhou, China. Photop is a vertically-integrated manufacturer of fibre optic modules, microchip lasers, crystals and optical components. Key customers include Huawei and Corning.

Background

Photop was preparing for an IPO in the US in late 2007 and approached II-VI as a potential strategic investor in the IPO. Due to weakness in the IPO market, Photop suspended its IPO plans and II-VI began discussions with Photop regarding a 100% acquisition of the company in 2008-2009. With the support of non-management shareholders, the management shareholders of Photop negotiated the transaction with II-VI.

Deal highlights

  • This was the largest acquisition to-date by II-VI and the largest acquisition in China’s laser and optics sector by a foreign company.
  • Considering the deal’s importance and complexity, execution was swift; it took just 6 months from signing of LOI to closing.
  • The financial benefits to II-VI from the acquisition were immediate and significant. In the first half year following the acquisition, it contributed 58% of II-VI’s 62% year-on-year revenue growth and was accretive to earnings.
  • The transaction was also highly strategic to II-VI, giving it a strong local team and platform in China. Prior to the acquisition, II-VI had approximately 2,000 employees and a relatively small presence in China with 250 staff; post-acquisition, II-VI grew to 5,000 employees including 3,000 in China.

How did DRP add value?

  • DRP assisted on all aspects of the transaction, including valuation, due diligence, and the resolution of various transaction issues.
  • DRP played a leading role in price negotiations and helped II-VI develop valuation arguments and execute a negotiating strategy to close the very large initial valuation gap between the parties.
  • DRP helped II-VI negotiate an acquisition structure including earn-out and management incentives to incentivize the management of Photop and to assure its continued success as a wholly-owned subsidiary of II-VI.
  • DRP’s views, insights and recommendations were highly regarded by the management and Board of Directors of II-VI.

TESTIMONIALS

What our clients say about us

“We were very pleased to discover a high quality M&A advisor like DRP Capital operating in China, and were even more pleased with the results that DRP and Bob helped us achieve in our strategic acquisition of Photop.”
Fran Kramer, Chairman, II-VI
“Bob’s strong fluency in Chinese and his intimate experience in negotiating deals in China were tremendously valuable to II-VI. We would highly recommend DRP Capital to any company considering an acquisition or investment in China.”
Chuck Mattera, CEO, II-VI
“DRP Capital added tremendous value from their insights into China. We consider DRP Capital to be a valuable business partner in China and we have been working with Bob and his capable team on multiple projects.”
Craig Creaturo, Former CFO and Treasurer, II-VI

TESTIMONIALS

What our clients say about us

“We were very pleased to discover a high quality M&A advisor like DRP Capital operating in China, and were even more pleased with the results that DRP and Bob helped us achieve in our strategic acquisition of Photop.”
Fran Kramer, Chairman, II-VI
“Bob’s strong fluency in Chinese and his intimate experience in negotiating deals in China were tremendously valuable to II-VI. We would highly recommend DRP Capital to any company considering an acquisition or investment in China.”
Chuck Mattera, CEO, II-VI
“DRP Capital added tremendous value from their insights into China. We consider DRP Capital to be a valuable business partner in China and we have been working with Bob and his capable team on multiple projects.”
Craig Creaturo, Former CFO and Treasurer, II-VI

CASE STUDIES

Learn more about our work

CASE STUDIES

Learn more about our work