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Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
Japan M&A Apr 09
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Japan M&A Apr 09

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A brief look at trends in m&a activity in the automotive supplier industry - Asian outbound and internal

A brief look at trends in m&a activity in the automotive supplier industry - Asian outbound and internal

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  • 1. Asian Auto Supplier Consolidation David Syrad Managing Director A.K.I. Limited Director Asia Change Masters International April 2009
  • 2. Outline <ul><li>A despatch from the region on current </li></ul><ul><li>activity, trends, drivers and obstacles. </li></ul>
  • 3. A.K.I. Japan On Demand Expert Resources <ul><li>Automotive </li></ul><ul><li>Manufacturing </li></ul><ul><li>Medical Equipment </li></ul><ul><li>ICT </li></ul><ul><li>Neutraceuticals </li></ul><ul><li>Trading </li></ul><ul><li>Japan </li></ul><ul><li>Korea </li></ul><ul><li>Research </li></ul><ul><li>Strategy </li></ul><ul><li>FS </li></ul><ul><li>M&A Targets </li></ul><ul><li>Negotiation </li></ul><ul><li>Business Development </li></ul><ul><li>Management Support – Interim </li></ul>
  • 4. Change Masters International <ul><li>Strategy Implementation </li></ul><ul><li>M&A pre/post deal support </li></ul><ul><li>Project Effectiveness Evaluation </li></ul><ul><li>Practical not theoretical – experienced managers as consultants </li></ul><ul><li>Established Asian network </li></ul><ul><li>Deliver in multiple languages </li></ul>
  • 5. Overview <ul><li>Global shift in balance of purchasing power and market significance </li></ul><ul><li>Pioneers have shown the way – Bharat Forge, NSG, Denso </li></ul><ul><li>Continued activity – Geely, Beijing West, Motherson Sumi </li></ul><ul><li>Opportunities abound for Asian companies – how to take them and make them work – too much too soon? </li></ul><ul><li>Does it make sense to follow in the footsteps of the failed PE investors? </li></ul>
  • 6. Overview <ul><li>Domestic consolidation in China is proceeding, encouraged by the government </li></ul><ul><li>Asian suppliers will participate in global consolidation but will not drive it </li></ul><ul><li>Attempts by PE funds to consolidate in other areas have not been entirely successful (this may be partly because of unreasonable leveraging post-merger) </li></ul><ul><li>Although the industry is in trouble, a lot of money has been made in the sector in times of growth </li></ul>
  • 7. View of M&A Activity <ul><li>Japan started, Korea, China and India increasingly key players </li></ul><ul><li>M&A seen as common and indispensable tool for management </li></ul><ul><li>Core of growth strategy </li></ul>
  • 8. Reduced Enthusiasm <ul><li>Asian Supplier Intra/Extra-Regional M&A </li></ul><ul><li>2007: 90 Deals </li></ul><ul><li>2008: 30 Deals (KPMG) </li></ul>
  • 9. Not Simple Even Internally <ul><li>1 st tier Japanese auto components supplier consolidation   In-In – achieved world No. 2 position </li></ul><ul><li>Acquirer too arrogant and insensitive – failed to use experienced talent </li></ul><ul><li>Lost large numbers of key personnel </li></ul><ul><li>Still losing share and failing to make profit </li></ul>
  • 10. Japan <ul><li>JOEMs have established manufacturing & market bases in Asia, NA and Europe </li></ul><ul><li>Suppliers have followed, but level of internationally-experienced management resources varies </li></ul><ul><li>Shift to overseas markets or die </li></ul><ul><li>Consolidation via bankruptcy less likely – OEMs are supporting with cash </li></ul><ul><li>Consolidation in Japan more difficult due to remaining OEM links and independence of smaller suppliers </li></ul><ul><li>Out-In interest remains </li></ul>
  • 11. Japan <ul><li>Demographics (decrease and ageing) and disenchantment – shrinking home market even before the crisis </li></ul><ul><li>Need overseas organisations to provide staff </li></ul><ul><li>Following OEMs still a factor </li></ul><ul><li>Have the ability to manage overseas in some cases </li></ul><ul><li>How to manage acquisitions: NSG or Denso approach – can be a source of fresh management </li></ul><ul><li>Consolidation not part of the plan – company driven not fund driven – except in the case of foreign investment funds </li></ul><ul><li>Many deals failing before due diligence – risk averse </li></ul><ul><li>Many companies still looking </li></ul>
  • 12. Korea <ul><li>KOEMs have also established manufacturing & market bases in Asia, NA and Europe </li></ul><ul><li>Suppliers have followed, but lack the management experience of the large Japanese suppliers </li></ul><ul><li>Many have used temporary foreign managers to supplement skills and absorb know-how </li></ul><ul><li>Shift to overseas markets or be overwhelmed by China </li></ul><ul><li>How to manage acquisitions - can these become a source of management talent? </li></ul>
  • 13. Korea <ul><li>Consolidation via bankruptcy more likely, but strong tendency to government intervention (e.g. forcing suppliers to sell stakes to foreign companies previously) </li></ul><ul><li>KDB and other investors now have a war chest for the purchase of overseas suppliers – expect to see some activity </li></ul>
  • 14. China <ul><li>COEMs have established manufacturing overseas with some setbacks </li></ul><ul><li>Many suppliers are not at a global quality level and have not followed </li></ul><ul><li>Have used foreign managers to fill gaps and acquire know how – difficulty in managing them </li></ul><ul><li>Government pressing for consolidation and holding back some of the small aggressive players </li></ul><ul><li>Consolidation by bankruptcy acceptable </li></ul><ul><li>OEMs integrating vertically </li></ul><ul><li>How to manage acquisitions – domestic businesses suffer from lack of managerial skills </li></ul>
  • 15. China <ul><li>Accelerate acquisition of technology and know-how </li></ul><ul><li>Domestic competition </li></ul><ul><li>Government policy </li></ul><ul><li>Government/regional participation (BeijingWest – Delphi) </li></ul><ul><li>Vertical integration (Geely) </li></ul><ul><li>Reminiscent of growth in Korea – overstretching overseas? </li></ul>
  • 16. India <ul><li>IOEMs have purchased some manufacturing overseas but supplier expansion is self-driven </li></ul><ul><li>AIFTA a factor in future consolidation Thailand vs India </li></ul><ul><li>How to manage acquisitions </li></ul><ul><li>Expect to see more activity from the established players (M&M, possibly Taco)as opportunities present themselves </li></ul><ul><li>Domestic consolidation via bankruptcy is likely </li></ul><ul><li>Nepotism and succession planning problems </li></ul><ul><li>Overseas activity continuing – Motherson Sumi Visiocorp </li></ul>
  • 17. India <ul><li>Bharat Forge has initiated cross-border consolidation (NA, EU) – the challenge now is to complete the process successfully </li></ul>
  • 18. Drivers <ul><li>Affordability (EU – In, JP – US out) </li></ul><ul><li>Need to globalise In-Out (NSG) </li></ul><ul><li>Response to globalisation and shift in balance of power Out-In – Toyota effect </li></ul><ul><li>Breakdown of old keiretsu relationships Out-In, In-In </li></ul><ul><li>Significant management difficulties remain (software SEC, attracting talent) which favour M&A </li></ul>
  • 19. Showstoppers <ul><li>In-Out – can’t find partner </li></ul><ul><li>In-Out - Lack of faith in own cross-border management ability, no experienced staff </li></ul><ul><li>Out-In – uncertainty re: profitability/ROI – very demanding market </li></ul><ul><li>Direct subsidiary establishment becoming attractive option </li></ul><ul><li>Out-In - Three way share deal problem Citi Nikko </li></ul>
  • 20. Showstoppers <ul><li>Old guard resistance – Murakami investigation over Livedoor connection (Hankyu-Hanshin) </li></ul><ul><li>Vulture fund image Out-In </li></ul><ul><li>Entrenched management Out-In </li></ul><ul><li>Family sense of responsibility outweighs business logic </li></ul><ul><li>Aggressive approach from one side Out-In, In-Out </li></ul>

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