Global EngineeringSector Review 2011                     www.mergers-alliance.com
Sector Review 2011Contents              Report                  2              Introduction            3              Repo...
Sector Review 2011                                                                                                        ...
Sector Review 2011    Report Highlights    We at Mergers Alliance believe the main factors to shape M&A                   ...
Deal Focus                                                         Capital City: Brasília                                 ...
Deal Focus                                                         Capital City: Ottawa                                   ...
Deal Focus                                                         Capital City: Mexico City                              ...
Mergers alliance global engineering report 2011
Mergers alliance global engineering report 2011
Mergers alliance global engineering report 2011
Mergers alliance global engineering report 2011
Mergers alliance global engineering report 2011
Mergers alliance global engineering report 2011
Mergers alliance global engineering report 2011
Mergers alliance global engineering report 2011
Mergers alliance global engineering report 2011
Mergers alliance global engineering report 2011
Mergers alliance global engineering report 2011
Mergers alliance global engineering report 2011
Mergers alliance global engineering report 2011
Mergers alliance global engineering report 2011
Mergers alliance global engineering report 2011
Mergers alliance global engineering report 2011
Upcoming SlideShare
Loading in …5
×

Mergers alliance global engineering report 2011

1,551 views

Published on

Published in: Business, Economy & Finance
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,551
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
0
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Mergers alliance global engineering report 2011

  1. 1. Global EngineeringSector Review 2011 www.mergers-alliance.com
  2. 2. Sector Review 2011Contents Report 2 Introduction 3 Report Highlights 4 Deal Focus by Country Americas Brazil 6 Canada 8 Mexico 10 USA 12 Asia and Africa China 14 India 16 Japan 18 South Africa 20 Europe Germany 22 Italy 24 The Netherlands 26 Poland 28 Russia 30 Scandinavia 32 Spain 34 United Kingdom 36 Contacts 38 Transactions 40
  3. 3. Sector Review 2011 Sector Review 2011 Report Introduction About the report At the time of writing, economies around the world are emerging from the aftermath of the global recession and This sector report was coordinated by the We also surveyed owners and senior executives are on a fragile path to recovery. As you will see from the Catalyst Corporate Finance research team on within engineered product sector organisations behalf of the international Mergers Alliance and private equity investors worldwide. contributions by our sector experts across the world it is partnership. To compile our findings we clear that this year and next will bring both opportunities conducted interviews with our sector experts in each member firm within the Mergers Alliance and further challenges for those of us operating in the partnership. engineering sector. In our own specialism of corporate mergers and We also examine how the ownership structure Deal Focus acquisitions (M&A), engineering transaction levels of engineering firms in continental Europe will during the first half of 2010 are showing signs of provide ongoing M&A opportunities for Within each country’s Deal Focus we review Additionally, we provide an overview of recovery following a torrid 2009. As trading strategic and private equity acquirers. merger and acquisition (M&A) activity, focusing the engineered product sector as a whole, visibility improves for the larger engineering firms on key deals and trends within the engineering highlighting the market structure as well we expect buyer confidence and, in due course, As the global recovery takes hold, we at Mergers sector defined as including those businesses as commenting on the key trends and the transaction levels to rise. Alliance are ideally placed to help you. Whether with activities involved in the production of factors influencing M&A. We end by providing you seek growth through acquisition, wish to engineered products. Engineered products will predications for M&A in the sector over You will find in our report a great deal of market- restructure or realize value in your business, our typically require a high design input, ongoing the course of the next 18 months. leading insight into the key issues facing the international advisors are in a unique position product innovation and development and will be sector in 2010 and beyond including: how to help you – Local knowledge…Global reach. manufactured to a high level of precision. We engineering firms in developed economies have Our member firms have a prominent position in also include a table of recent transactions where created positions of clear leadership in key boardrooms across the world and are renowned the target company is located in the country sub-sectors, the demand challenges facing for delivering award winning partner-led advisory under review. engineering firms in emerging economies and the service with seamless international cooperation. wide ranging implications of recent government policy developments on the engineering sector. We hope you enjoy reading our report and welcome any thoughts or additions you might Our work also highlights the key role of the BRIC like to contribute. nations in the globalisation of the engineering sector and in the shaping of M&A strategies of Western buyers. Disclaimer Philipp von Hochberg This publication contains general information and is not intended reasonable effort has been made to ensure the accuracy of CH Reynolds Corporate Finance to be comprehensive nor to provide financial, investment, legal, the information contained in this publication, this cannot be +49 699 740 3060 tax or other professional advice or services. This publication is guaranteed and neither Mergers Alliance nor any of its member p.hochberg@chrcf.com not a substitute for such professional advice or services, and it firms or other related entity shall have any liability to any person should not be acted on or relied upon or used as a basis for any or entity which relies on the information contained in this investment or other decision or action that may affect you or publication, including incidental or consequential damages your business. Before taking any such decision you should arising from errors of omissions. Any such reliance is solely2 consult a suitably qualified professional adviser. Whilst at the user’s risk. 3
  4. 4. Sector Review 2011 Report Highlights We at Mergers Alliance believe the main factors to shape M&A Emerging economies Government policy in the engineering sector over the next five years will be: The growth in the emerging BRIC economies has created Following the recession, many countries have emerged a demand for engineering products which cannot be with new or chastened governments in office. New Engineering leadership Globalisation satisfied by local engineering companies alone. Massive policies have been developed to address budget deficits public infrastructure investment, growth in the natural and debt repayment plans, predominantly through Engineering firms, particularly those from developed The globalisation of the engineering sector has resulted in resources sector, rapid expansion in consumer spending austerity measures. Some governments are reverting to economies, have created positions of leadership in a significant increase in cross-border M&A volumes over and booming export markets are all driving demand. protectionist policy in order to defend key sectors, specific engineering sub-sectors. This advantage has the past 20 years. During this period, US companies have To fully capitalize on the opportunities, engineering firms including the use of subsidies, state sponsored been borne out of decades of innovation through R&D, been by far the most dominant acquirers of overseas are acquiring new technologies, establishing additional consolidation and currency controls to ensure their constant refinement of their global supply chains and engineering businesses. Acquisitions have been driven production capacity and partnering with global players. exporters remain competitive. Policy has also contributed robust trading track records. Countries which have by US buyers wishing to access new products and to supporting new markets, especially renewable energy, developed clear engineering leadership include; technologies, geographical markets and to gain and almost all governments now have a ‘green’ policy. Germany in industrial machinery, Japan and Spain in exposure to higher growth regions. Infrastructure development Whatever the policy direction taken, we see this having an automotive, the US in defence and the UK in aerospace. important effect on M&A within the engineering sector. The scale of global infrastructure investment is unprecedented and the engineering industry will be pivotal in the delivery of these projects. In emerging Ownership structure economies, new infrastructure is needed to support development and in developed economies countries Beyond the large engineering conglomerates which serve there is a pressing need to replace existing, obsolete a number of engineering sub-sectors, the market remains UK Russia infrastructure. Around the world engineering expertise fragmented with a large number of SMEs. These firms are is increasingly in demand and is stimulating global often family owned and focused on a specific engineering Over half of all engineering deals have State-owned engineering firms will be M&A across the industry. niche. This trend is particularly strong in continental been in sectors where the UK has important players in the M&A market as European countries such as Germany and Italy, where established significant comparative the government seeks further influence there are a number of highly attractive M&A targets advantage; aerospace, oil & gas and in strategically important sub-sectors for domestic and overseas acquirers as well as private automotive components China equity investors. Evolving government regulation of the M&A market in China will lead to increased inbound and outbound M&A activity Japan A contracting domestic market is forcing USA Japanese engineering firms to look overseas US buyers are a dominant force in and acquire exposure to growing international outbound M&A and are now focusing markets on emerging growth markets. However, Spain when acquisition rationale is primarily Spanish engineering firms are expanding IP driven, they still gravitate to overseas, particularly those involved in engineering-rich developed countries the traditionally strong power generation and automotive sectors Brazil Germany As the economic engine of Latin Italy German Mittlestand companies will America, Brazil is an attractive The medical equipment continue to be attractive mid-market M&A India emerging market. Engineering engineering sub-sector has seen targets to domestic and overseas trade Indian engineering firms will seek to M&A will be focused on those significant growth, attracting acquirers as well as private equity acquire technology and engineering businesses which support the some $2.5bn of M&A investment expertise to transfer into their home natural resources sector over the last five years market4 5
  5. 5. Deal Focus Capital City: Brasília Area: 8,511,965 sq km Population: 198,739,269 Time zone: GMT -3 Brazil “Leading Brazilian Bridgeport marque. Whilst the approach was rebuffed, Consumer inclusion driving growth Recent transactions Romi CEO dos Santos argued at the time “that a engineering companies combined company will have the scale to invest in Brazil is the economic engine of Latin America and Date Target Description Acquirer Deal Value (US$m) strategic opportunities to expand in emerging markets”. accounts for at least half of the M&A in the region. It has are seeking to expand been amongst the most resilient of global economies Jun-10 MWL Brasil Rodas & Eixos Wheels and axles Goergsmarienhuette (Germany) n/d Other buyers include Lupatech, a publically listed their global footprints, producer of industrial valves and micro casting parts for during the downturn as a result of lower levels of Jun-10 CanberaPumps do Brasil Pumps ITT Corp (USA) n/d corporate and consumer debt, which have allowed particularly in Latin American the oil & gas sector. The company has been seeking companies and individuals to deal better with the Apr-10 Eletrônica Selenium Loudspeakers Harman International (USA) n/d targets across Latin America to expand its product Dec-09 Hiter Industria Valves Tyco Flow n/d effects of the financial crisis. and emerging markets, so we portfolio. In late 2007, Lupatech, together with French e Comercio Control (USA) private equity firm Axxon Group, acquired Argentina Nov-09 Mueller Mineira Plastic Magneti Marelli n/d Brazil’s economy has continued to expand in 2010 and is expect to see an upward trend based Aspro, a supplier of equipment for compressing expected to grow by 7% this year. This growth is being components (Italy) Aug-09 Certain operations Steel wheels Iochpe-Maxion 180 in outbound M&A over the next natural gas for $85m. WEG, another listed Brazilian driven by domestic consumption and is benefiting from May-09 of ArvinMeritor Romicron Boring tools Kennametal (USA) n/d multinational, producer of electromechanical and millions of people emerging from poverty to join the few years” electronic systems, is currently looking for targets within consumer classes. Brazil’s process of consumer Apr-09 Products Meridian End modules and Citadel Plastics n/d the emerging markets and has acquired Instrutech inclusion means that more than 40m people are Automotive Brazil signal lighting Holdings (USA) (Brazil), Voltran (Mexico) and Zest Group (South Africa) Jan-09 Flywheel business Flywheels Brembo (Italy) 4 Leonardo Antunes, BroadSpan Capital either joining the consumer base or moving to of Sawem within the last three months. a higher level of consumption. Nov-08 Vanzin Industrial Automotive parts Tuper n/d Auto Peças This trend for Brazilian outbound acquisitions is likely M&A activity on the rise to continue due to the relative cash strength of Brazilian companies, a booming capital market and the relative Automotive and oil & gas M&A activity across the whole of the Brazilian economy strength of Brazilian banks which have opened credit sectors key is at record levels with over 350 deals announced up to lines for this type of deal. Economic development is forcing the country to Predictions September 2010. M&A activity in the engineering sector has however been modest and is unlikely to reach the expand its production capacity especially in sub-sectors The trend for foreign companies to acquire Brazilian peak of 2008 but nevertheless is rising. Despite this lower such as automotive manufacturing and oil & gas M&A activity extraction/processing. engineering firms is set to continue in parallel with activity level, valuations finally appear to be on the rise, growth of the wider economy which is a promising development and likely to impact Brazil has received substantial investment from positively on M&A in the sector over the next year. Overseas investment by Brazilian engineering firms automotive manufacturers, particularly from Asia, who 12 160 is driven by a desire for geographic expansion, have installed production plants to capitalize on the Average deal value $m Many Brazilian engineering companies have attracted 10 140 especially in Latin American and emerging markets Transaction volume interest from foreign buyers, especially from the US and 120 Government’s fiscal incentive schemes to increase car Western Europe, and as a result almost half of all 8 100 sales. This development has directly influenced the The oil & gas and autoparts segments will remain engineering deals over the last four years have involved 6 80 recent high growth rates in the autoparts segment. the most active engineering sub-sectors for M&A overseas acquirers. The acquired companies supply 4 60 in the next two years Growth in the oil & gas sector has been underpinned by products into a variety of end markets, often the 40 2 20 recent oil discoveries by Petrobras in the waters off the automotive sector but increasingly the oil & gas market. Brazilian coast. As the main player in the market, 0 0 Brazil is rich in resources such as iron ore, bauxite and 2007 2008 2009 H1 2010 Petrobras dictates the shape of growth in the sector and petroleum and is therefore particularly appealing to is planning investments of c.$174bn to 2013, representing international companies who are increasingly seeking an annual increase of 55% compared to their previous investments in resource-rich countries. Total deal volume Source: Mergermarket, five year plan. This commitment by Petrobras will result in Capital IQ Average deal value $m significant growth for suppliers of engineered products and should ultimately lead to increased M&A in the oil & Brazilian engineering expands its gas engineering sub-sector. geographic footprint There continues to be interest in outbound M&A with a number of active Brazilian acquirers looking to buy foreign businesses to expand their geographical footprint. This year Brazilian machine tool maker Industrias Romi offered $110m to acquire Hardinge Inc, a tool maker based in New York and owner of the renowned6 7
  6. 6. Deal Focus Capital City: Ottawa Area: 9,984,670 sq km Population: 33,487,208 Time zone: GMT -5 Canada “In the past, many that US buyers, despite having similar strategic M&A partners. However, the specialist equipment and Recent transactions rationales to domestic Canadian acquirers, are classed machinery used in these end markets is predominately Canadian engineering as overseas buyers. manufactured by overseas companies, with Italian and Date Target Description Acquirer Deal Value (US$m) German manufacturers monopolizing supply. firms were considered In the past, many Canadian engineering firms were Aug-10 Micro Thermo Technologies Refrigeration controls Parker Hannifin (USA) n/d considered as targets for large, international acquirers. The province of Ontario is Canadas leading only as targets for large, This trend is expected to reverse as the strength of the manufacturing region, accounting for approximately half Jul-10 G&B Specialities Rail signal products Wabtec (USA) 35 international buyers. This trend CDN$, robust corporate balance sheets and the health of of total national manufacturing shipments and is also a Jun-10 Macro Engineering Components for Dalian Rubber & plastic film industry Plastics (China) 9 the Canadian credit markets enables domestic acquirers major centre for the natural resources industry. In March May-10 Motor Business DC electric motors Bison Gear & n/d is expected to reverse as the to competitively engage in outbound M&A. 2010, The Government of Ontario proposed sweeping of Von Weise Engineering (USA) new legislation to attract investment in renewable energy Apr-10 NSE- Machinery and NSE Aero n/d strength of the CDN$, robust One such corporate is ATS Automation Tooling Systems, technology and create new ‘green economy’ jobs. The Apr-10 Automatech Routes equipment Aerospace North America COM DEV 1.5 a manufacturer of automation products. In March ATS corporate balance sheets and announced the proposed $62m acquisition of German proposed bill, the Green Energy Act (GEA), if passed, Mar-10 AstroEngineering Celco Controls instrumentation Automated control International High Road Capital n/d will provide significant revenue incentives for businesses the health of the Canadian group Sortimat. Based in Stuttgart, Sortimat is a establishing and growing renewable energy Feb-10 Arpeco systems Printing machines Partners (USA) Mark Andy (USA) n/d manufacturer of specialized assembly systems for manufacturing capabilities in the province. Firms such as Engineering credit markets enables domestic medical products and pharmaceutical dosing devices, Canadian Solar, Arise Technologies and of course ATS are Nov-09 Composotech Composite Oneworld Energy n/d achieving revenues of c.$80m in 2009. The acquisition Structures Inc structures acquirers to competitively engage supports ATS’ strategy to expand its position in the global likely to be major benefactors from this new legislation. Oct-09 Coretec Printed circuit boards DDI Corp (USA) 23.4 in outbound M&A” automation market and enhances growth opportunities in the key strategic segment of healthcare. Dominant global players Darren Williams, Solaris Capital Advisors Engineering sub-sectors in which Canada does possess M&A activity world leading capabilities include automotive (Magna Predictions Consistent transaction volumes International), aerospace (Bombardier) and The combination of strong balance sheets, communications (Research In Motion). functioning credit markets and a relatively M&A transaction volumes in the Canadian engineering 30 60 strong CDN$ will enable major corporates to Ontario based Magna International is one of the world’s Average deal value $m sector have remained resolutely flat over the last three 25 50 continue be competitive in acquiring overseas largest and most diversified Tier 1 automotive component Transaction volume years with 20 to 25 transactions per annum. The average 20 40 suppliers, generating $17bn revenues annually. Magna’s transaction value however has fallen significantly from Many larger, global players have M&A strategies 15 30 success has been built on the diversity of its product $50m to just $12m during the first half of 2010 as the targeting the emerging BRIC economies offering and the ability to serve OEM clients on sector saw only a handful of very small transactions 10 20 a global basis. This success has been supported by The US will continue to be a major inward investor completed. 5 10 strategic international M&A activity. Recent deals include in Canada across a broad range of engineering The sharp peak and trough in M&A volumes that has 0 0 the acquisition of Karmann of Japan (manufacturer of sub-sectors 2007 2008 2009 H1 2010 convertible roofs) and Cadence Innovation of the Czech characterized the sector in many countries did not occur in Canada. This is partly due to the sector being relatively Republic (automotive interior and exterior plastic small in comparison to Canada’s primary resources components and systems). With a net cash position of Total deal volume sectors but also due to Canadian corporate fiscal $1.5bn, Magna clearly has the fire power to continue conservatism, which prevented the M&A market over- Source: Capital IQ Average deal value $m making acquisitions and has stated its intention to pursue heating as it did so spectacularly in other economies deals in the emerging markets of India, Russia, South around the world. Canadas major banks emerged from America and China over the coming years. the financial crisis of 2008-09 among the strongest in the Economy tied to natural resources world, owing to the countrys tradition of conservative lending practices and strong capitalization. The majority of Canada’s GDP is tied to the resources sectors (oil & gas, mining, agriculture and forestry) as the country continues to exploit its enormous reserves of Rich target for US buyers natural resources. Canada is the USs largest foreign supplier of energy, including oil, gas, uranium, and electric The majority of transactions were cross-border with power. Given its great natural resources, skilled labour international buyers acquiring 43 Canadian engineering force, and modern capital plant, Canada enjoys a unique businesses in the last three years accounting for 53% of position as one of the US’s most important trading volume and 77% of value. This is explained by the fact8 9
  7. 7. Deal Focus Capital City: Mexico City Area: 1,972,550 sq km Population: 111,211,789 Time zone: GMT -6 Mexico “Although the Mexican US companies are also routine investors in the Mexican Auto industry relocating to Mexico Recent transactions market, both at a ‘greenfield’ level and through engineering market is acquisition. Thanks to Mexico’s membership of NAFTA it Despite the tough trading conditions within the worldwide Date Target Description Acquirer Deal Value is allowed to trade freely with the US and Canada and automotive industry, the sector remains attractive in (US$m) relatively small at the also has free-trade agreements with more than 30 other Mexico. A number of international OEMs continue to Jul-10 Eolis América Air treatment COMSA EMTE n/d Latinacontrols systems (Spain) moment, the development countries including members of the European Union and relocate production facilities to Mexico to benefit from May-10 Spirax-Sarco Steam products Spirax-Sarco 15 Japan. A key reason underlying much of the foreign a lower cost base. Exports of vehicles from Mexico Mexico and pumps (UK) of global industries such as investment within Mexico has to do with the country’s internationally have increased over the last five years May-10 Voltran Power transformers WEG (Brazil) n/d extensive network of these free trade agreements and and strategic and institutional investors continue to automotive and aerospace within double taxation treaties, with respect to corporation tax. invest incrementally. May-09 CIE DESC Automotive Automotive parts CIE Automotive (Spain) 90 May-09 CarMex Automotive parts HP Pelzer n/d the country will ensure the sector One of the most notable automotive deals was the $75m (Germany) Mar-09 Pintura y Automotive parts CIE Automotive 33 scales up by 2020” Latin American expansion acquisition of Nugar, a producer of autoparts, by a joint Ensamble (Spain) venture between DESC and Spanish firm CIE Automotive Sep-08 Alpe SA Electric heating NIBE Industrier 25 elements (Sweden) in 2007. The transaction allowed the DESC–CIE joint Luis Garcia, Sinergia Capital The MERCOSUR trade agreement also has a positive Jun-08 Clemex Mexico Engine bearings MAHLE GmbH n/d venture to strengthen its position within the industry and (Germany) bearing on Mexican interaction with Latin America. WEG, take advantage of the gradual relocation of automotive Apr-08 Damy Cambios Railroad VAE Nortrak (USA) n/d a Brazilian engineering multinational, recently invested in de Via components industry suppliers to Mexico. CIE Automotive then Deal volumes recover in 2010 Voltran, a Mexican transformer manufacturer, taking a Nov-07 Hermosillo Plant Interior auto IAC North America 17 acquired the 50% it did not already own from joint components (USA) controlling stake of 60% in the business. The partnership venture-partner Grupo Kuo SAB de CV (formerly DESC) As a result of the global crisis and shortage of credit, between the two companies began in 2006, when WEG for $90m in a deal which ultimately completed in early Mexico like most other countries around the world acquired a 30% stake in Voltran from the controlling 2009. In the meantime CIE Automotive made the suffered the effects of the global recession. Engineering shareholders, the Jimenez family. Voltran manufactures acquisition of Pintura y Ensamble for $33m, securing power and distribution transformers and recorded transactions remained at a relatively constant level during its two production plants based in Saltillo and de Predictions 2007 and 2008, dipped in 2009 and have recovered in the revenues of around $70m in 2009. WEG’s CEO claimed Ramos Arizpe. first half of 2010. With more deals completed in H1 2010 "the acquisition brings synergy gains which will allow our Given the low starting point, it is unlikely that than the whole of 2009, we are expecting a return to pre- progress in the local production of new lines, such as dry Many of the engineering sector’s M&A transactions the Mexican engineering sector will generate crisis levels for the full year. So far however average deal transformers and to supply more complex solutions, such involve companies supplying into the automotive substantially more M&A transactions in the values have remained fairly constant over the period. as power substations.” industry and we believe this will continue over the short term, however the trend is upwards next two years. We will continue to expect greater inbound M&A than outbound, especially by companies Clear interest from Europe and the US M&A activity located in the US, the European Union and Brazil Suppliers to aerospace OEMs Around three quarters of all deals done in the Mexican The growth in the Mexican aerospace and engineering sector typically involve foreign buyers. These 10 35 As a result of Mexico’s membership of NAFTA and its automotive industries will inevitably lead to increasing reputation for quality certified production and Average deal value $m acquirers have tended to come from developed countries, 30 increased investor interest in the sector, which Transaction volume 8 cost competitiveness, local aerospace manufactures are particularly Western Europe and Mexico’s neighbouring 25 will translate to some extent into M&A activity country the USA. 6 now suppliers to major OEMs including Boeing, Airbus 20 and Bombardier. This development means that Mexico EMTE, a Spanish engineering company specialising in 4 15 now ranks as one of the Top 10 largest suppliers of clean-room technology, acquired Eolis América Latina to 10 2 aerospace products to the US market, above many further consolidate its position in Latin America. With this 5 leading Asian suppliers such as China and South Korea. purchase, EMTE revenue base is now over $60m and 0 0 it employs a team of 300 people worldwide. Mexico, 2007 2008 2009 H1 2010 Whilst M&A activity in this sector is low at present, it is as well as other Spanish speaking countries in Latin inevitable that consolidation will occur at some point as America are clearly attractive markets to Spanish firms seek to grow through acquisition or look to Total deal volume companies like EMTE and hence the high level of Source: Mergermarket, eliminate competition. inbound M&A from Spain. Capital IQ Average deal value $m10 11

×