Big technology companies are at war. Products are the weapons and patents are the ammunition. Securing patents is crucial for firms looking to gain an edge over their competitors, and Samsung demonstrated just how to go about getting the advantage earlier this week by working with university spin-outs.
The South Korea-based conglomerate capitalised on its relationship with Technical University Dresden (Tudag) spin-out Novaled earlier this week when it acquired the Germany-based organic light-emitting diode (OLED) manufacturer for an enterprise value of €260m ($345m), including €30m of performance fees.
The two have been working together for some time, with the majority of Novaled’s OLED sales going to Samsung. In return, Samsung took a 10% stake in the firm through Samsung Ventures Europe (SVE) in 2011.
SVE was understood to be the sole investor in the €8.25m ($11m) round for Novaled, a Germany-based organic light-emitting diode (OLED) maker.
As part of the acquisition, SVE will sell its 10%, with Samsung Electronics acquiring 40% and Samsung affiliate Cheil Industries, which manufactures OLED displays, picking up the remainder.
Novaled’s other selling shareholders are a group of financial investors and individuals, including ECapital Entrepreneurial Partners, Zweite TechnoStart Ventures Fonds, Omnes Capital, TechFund Europe Management, Innovation Capital, KfW, Dresden Fonds and Tudag TU Dresden, the university’s foundation, among others.
Investment bank Goldman Sachs, law firm Sullivan & Cromwell and boutique Fox Corporate Finance acted as advisers to Novaled and its shareholders; Arqis Rechtsanwaelte advised Novaled Management; and investment bank Citi and law firm Skadden Arps Slate Meagher & Flom advised Cheil Industries and Samsung Electronics.
It’s a relationship that demonstrates the value of corporates working with university spin-outs. Samsung’s involvement with Novaled has shown a strong strategy for how a company can safely hedge its bets around next-generation technology spinning out of university research and then capitalise when it finds it’s onto a winning streak.
From SVE’s point of view, the first true exit for the venture unit, the deal is significant. Michael Jeon, head of SVE, said the deal was “Samsung Ventures’ first exit whereby a portfolio company of ours became acquired by Samsung as Samsung became more acquisitive,”
He added by email said: “Our investment in Novaled is a huge success both strategically and financially given that the ultimate acquirer is none other than Samsung Cheil, and SVE is generating an impressive financial return from [the] investment in Novaled as well. Much to celebrate!”
When Novaled was originally founded in 2001 through a spin-off of the Dresden University of Technology and the Fraunhofer Institute of Dresden, OLED was ahead of its time and was a technology floundering without purpose. However, it wouldn’t take long before the rest of the world caught up with the Dresden spin-out. The advent of the smartphone, tablets, and the continual evolution of television from the boxes from the turn of the millennium to the sleek, high-definition-ready designs of today meant OLED would quickly find a role to play.
During that time, while plasma and liquid crystal displays (LCD) became the dominant techs in the visual display markets, Novaled amassed over 500 patents related to OLED technology. It developed several partnerships with players other than Samsung in the OLED market as use of the technology caught on in the burgeoning smartphone market. Now, as more companies move away from current displays, OLED tech is poised to have its time in the spotlight.
Rival smartphone and television manufacturer LG, which has been losing ground on the television market lately, are putting the tech to use in another way, and are planning on releasing a flexible OLED smartphone later this year, according to the Wall Street Journal (WSJ). While the idea of a flexible phone may seem superficial to some, it does fall neatly into the idea of wearable tech, such as Google Glass, which looks to accelerate over the next few years.
Also, while OLED already accounts for 71% of the smartphone market in 2012, the WSJ reports that analysts believe that TVs will surpass them by 2015. This belief is also held by Samsung. Along with the Novaled acquisition, Samsung also unveiled its curved 55” OLED KN55S9C television, which editor and long-time TV reviewer for tech website CNET David Katzmaier described as “the best picture I’ve seen on any TV, ever”.
This positive outlook and uptake on OLED recent led analysts from Transparency Market Research to forecast a surge in revenues for the technology from 2012’s $4.8bn, when Novaled posted revenues of €26m, to $25.9bn by 2018. Given Samsung’s leading position in the world’s television manufacturing business – around a third of global sales – the future looks crystal clear for the tech giant.
At the crux of it, that future is all based on Samsung’s ability to hoover up innovation in the form of patents and put them to work on a global scale, which it has been more than happy to do. Along with securing media companies Boxee and mSpot in recent months, the pocketing of Novaled’s patents is sure to lead to high definition smiles all round in Seoul, Dresden and universities hoping for their own spin-out success stories and able to remain investors for such a lengthy period of time.
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