Taking Ramirent to UK
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Taking Ramirent to UK

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Taking Ramirent to UK Presentation Transcript

  • 1. The Team  Adi Sandler  Harshit Krishna  Ida Lovis  Irene Mathisen  Nina Elvested  Shani Belisha  Tine Wyller TAKING RAMIRENT PLC TO UK Global Marketing
  • 2. What’s in store? 2 Mode of Entry Marketing and Finance Analysis of UK market Ramirent Group Global Marketing | Ramirent
  • 3. Ramirent Group Global Marketing | Ramirent
  • 4. Ramirent Group 4    Ramirent is a Finnish equipment-leasing company founded in 1955 Providing products and services relating to leasing of machinery and equipment for B2B and B2C customers Europe’s leading equipment leasing companies, marketing leaders Global Marketing | Ramirent
  • 5. Ramirent Group cont. 5    Visible in 13 European and Nordic countries Total revenues of EUR 649.9 million in FY 2012 In Financial Year 2011 there was an increase in revenues of 22.3% over 2010. Global Marketing | Ramirent
  • 6. Product Groups 6      Light machinery (26%) Lifts (19%) Modules (17%) Safefolding (11%) Power and heating (10%) Global Marketing | Ramirent
  • 7. Expansion Process 7 Global Marketing | Ramirent
  • 8. Segments 8 Global Marketing | Ramirent
  • 9. Analysis of the UK market Global Marketing | Ramirent
  • 10. Why UK? 10  • • • • Construction industry in the UK house Prices UK is one of the top five with the highest market shares in Europe Equipment leasing industry has one of the highest rental penetration levels in Europe Strong competition - enables Ramirent to compete with the biggest equipment leasing companies Positive attitude towards FDI this graph shows potential in constructions A step towards entering the in the UK [home prices go up => important Anglo-Saxon market construction companies have more demand] Global Marketing | Ramirent
  • 11. Problem Statement 11 How should Ramirent enter UK in order to proceed a profitable and sustainable business? Global Marketing | Ramirent
  • 12. PEST 12 Political Economic Socio-cultural • Member of EU, NATO, G8, and the UN Security Council • Stable politics with low risk • Global ranking: #5 ease of doing business • 6th largest economy in the World • Good transportation infrastructure • Falling currency • The single European Market • Obtained most FDI projects in 2009 • UK market between Scandinavia and central Europe in terms of quality and cost factors • UK population: 60.2 million • UK Labour force: 30 million, 2nd largest in EU • Unemployment rate 7.9% Global Marketing Technology • 2nd strongest research base in the world • EU invests 3% of GDP in R&D support programmes by 2020 • Strong ICT infrastructure • Secures companies’ IPR through the UK Intellectual Property Office Global Marketing | Ramirent 12
  • 13. Porter’s Five Forces 13 The bargaining power of suppliers: • The number of suppliers are high • Few substitutes • Integrate the value-added Competitive process Rivalry • Highly fragmanted • 14 000 rental companies • UK: 80% rental penetration • High costs related to storage • Difficult to differentiate products and Threat of new entrants: • High capital requirements due to technology investments • High switching costs related to the buyers • Difficult to differentiate The Extent of Competiti ve Rivalry: The bargaining power of buyers: • Easily take over the role of Ramirent • Undifferentiated products • Customer base range from the construction sector to private households Threat of substitutes: • Buy equipment Global Marketing | Ramirent
  • 14. 14 International Competitors in the U.K Global Marketing | Ramirent
  • 15. STRENGTH 15 WEAKNESSES • Strong position in most of Europe • One of Europe's largest equipment fleets • Stable economies • Profitable growth • Sets the industry benchmark • High quality-safety standards • Weak position in Western Europe OPPORTUNITIES THREATS • Potential growth in the overall European market • UK as a pogressive economy with a favourable investment climate • Positive economic progression • Suppliers can sell their product straight to construction companies • The construction companies can buy their own products • High competitive rivalry Global Marketing | Ramirent
  • 16. Mode of Entry Global Marketing | Ramirent
  • 17. Mode of Entry 17  Acquisition  Need high degree of control (quality consideration)  Market expansion (industry saturating fast in Europe)  Firm expertise and resources (can’t venture into Asia)  Four factors:  Compatible target (similar industry, firm values)  Potential target’s existing products, services and sales Global Marketing | Ramirent
  • 18. Mode of Entry 18   Ideally the business location should be in or around those major centres where construction industry was found to have the highest demand Location  London  Birmingham  Leeds  Glasgow Global Marketing | Ramirent
  • 19. Mode of Entry 19  Target company features  Equipment leasing company  Experienced in UK  Not very large in size (≈10% of our assets and revenues)  Complementar y skillset Guidance for our expansion Only a gateway to the market Combine their local know-how and connections and our international expertise and resources Global Marketing | Ramirent
  • 20. Mode of Entry 20  Ideal choice of target company  Small size  Senior and well experienced  Good knowledge and understanding of the market  Equipment rental industry  Moderately successful  Relatively small share market  Honest and reliable  High standards in quality and safety  JG Martin Plant Hire, TP Hire Co. Global Marketing | Ramirent
  • 21. Marketing and Finance Global Marketing | Ramirent
  • 22. Products: 22 Price • Same products as in the other countries. • High technology products and better quality service gives us an competitor advantage • Expand to value added services like equipment training • The prices for the products will be approximately the same as in other markets, but we need to do some local adaptions Placement Promotions • London, Birmingham, Leeds and Glasgow • Main competition and most demand localized here • Use knowledge from the acquired company • Use the popular Ramirent brand name • Position: quality leader • Aggressive advertising to our B2B customers • Local and national advertisement Global Marketing | Ramirent
  • 23. Financial Scenario 23     Closely linked to state of UK economy / industry Unprecedented downturn - fallout of recession Ramirent geographically diversified; resilient Slow consolidation underway in industry in UK  Rutland    bought Brandon Hire, HSS Hire’s mgmt buyout Market size projection £1.9bn in UK 53% share - top 10 players, highly fragmented thereafter Tough competition expected from leading players Global Marketing | Ramirent
  • 24. Financial Justification 24 300    Revenues / Profits follow investments in capacity (assets) with a 1 year lag Investments important for growth in sector Cash flows from operations and efficiency gains can offset cash flows into investing 250 200 150 100 50 0 2004 2005 2006 2007 2008 2009 2010 2011 Gross investments in non-current assets Gross investments, % of net sales 300 000 200 000 100 000 0 -100 000 2004 2005 2006 2007 2008 2009 2010 2011 -200 000 -300 000 Net cash generated from operating activities Net cash flow of investing activities Net cash flow of financing activities Global Marketing | Ramirent
  • 25. Capability to Acquire 25    Debt Capacity Speedy Hire 33.25% HSS Hire 36.04% Brandon Hire 42.53% Hewden Hire 51.22% Ashtead Group 157.85% Cargotec Group 140.38% Industry Average 76.88% Ramirent Group 40.70% Debt Position (mn EUR) 262.8 Debt capacity (mn EUR) 233.6 Shares overvalued, can use in acquisition Debt levels much lower than peers, can deploy for expansion purposes Cash position not Total Assets very strong due to Equity Valuation 801.11 (Ramirent) DCF recent acquisitions valuation 4.8 EUR Approx Assets 80.11 Current Price 6.2 EUR (Target) and investing Overvalued Cash Balance 2. 431 Global Marketing | Ramirent (mn EUR) activities
  • 26. Benefits from Acquisition 26  Case in Point: Central Europe (Poland, Hungary, Czech Republic, Slovakia)  12380 equipment leasing firms (near saturated, fragmented market, like that in UK)  Greenfield and Brownfield expansion (mostly the latter)  Ramirent average net sales growth y-o-y (19972011) = 11.9% (at constant currency)  Market share (2011) = 3.8% (No1; No2 in entire Europe)  Current Net Sales = 88.7 mn EUR Global Marketing | Ramirent
  • 27. Benefits from Acquisition 27  Conservative projected average sales growth  1st five years = 8% (low base effect)  2nd five years = 6% (half of the central Europe rate)  Terminal period = 4% (stagnant; long term industry growth rate)  Past 10 year average sales growth for Ramirent PLC = 7.78% (at constant currency)  At 10% of Ramirent’s sales revenue (44.73 mn EUR)  Starting Point = 4.47 mn EUR Global Marketing | Ramirent
  • 28. Expected Results 28 Sales Growth 160 140 120 100 Ramirent UK 80 Ramirent PLC 60 40 20 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Slow but significant addition to company revenues Additional consideration: UK opens up new markets Global Marketing | Ramirent
  • 29. Break-even Analysis 29   Ramirent PLC’s historical gross margin = 69.2% Ramirent UK’s estimation of gross margin = 34.6%      Hidden costs of acquisition and management change Higher initial investment expenses Promotion expenses Cost of acquisition = EUR 80.11 mn In terms of operating profit, break even in year 12 Sales (EUR mn) 4.47 9.30 14.51 20.14 26.22 32.79 39.75 47.13 54.96 63.25 72.04 81.18 90.68 100.57 110.85 121.55 Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Global Marketing | Ramirent
  • 30. Assumptions 30      Ramirent finds an acquisition target that fits the bill Ramirent’s reputation for above standard quality earns it the brand image it requires Ramirent’s high quality service is not compromised by local cost pressures and is successfully adapted No crisis on parent company’s end The conservative estimates materialize (we expect the company is capable ofGlobal Marketing | Ramirent exceeding them by local adaptation)
  • 31. Thank You 31 Data Sources: • MarketLine • Ramirent Website • Vault company guides • Euromonitor GMID • EBSCO host database • www.telegraph.co.uk • www.duedil.com • Datamonitor 360 • www.equipmenthirenews.com Global Marketing | Ramirent