The Vietnam Believer Newsletter_May 13th, 2024_ENVol. 007.pdf
Skyjack Proposal
1. Lifting Skyjack to New Heights
Team 43: Internal Board J
Sabith Azward - 110266260
Jourdan Bousfield - 110421750
Madeleine Coulter - 110639470
Ali Momin - 204367630
Daniel Nicholl - 110841690
Jash Patel - 204278540
2. 2
Table of Contents
Executive Summary......................................................................................................................................3
The Existing Opportunity .............................................................................................................................4
Recommendation ..........................................................................................................................................4
Growth Drivers In The Middle East And Asia .............................................................................................5
Sinoboom, An Accretive Acquisition...........................................................................................................5
Embracing Diversification............................................................................................................................6
Servicing As A Differentiator.......................................................................................................................6
Alignment In Organizational Values ............................................................................................................7
Integrating Operations And Planning ...........................................................................................................7
Implementation Timeline (Exhibit D)...........................................................................................................8
Stage 1: Present Acquisition Proposal To Sinoboom (Q3 2014)..........................................................8
Stage 2: Acquire Sinoboom (Q4 2014).................................................................................................8
Stage 3: Introduce Servicing Department (Q1 2015)............................................................................8
Stage 4: Co-Branding In Asia, The Middle East And Latin America (Q2 2015).................................9
Stage 5: Launch Sinoboom’s Spider Lift In Existing Markets: (Q3 2015)...........................................9
Stage 6: Product Line Collaboration Between R&D Departments (Q4 2015) .....................................9
Stage 7: Increase Presence In India And The Middle East (Q1 2017)................................................10
Contingency................................................................................................................................................10
Conclusion ..................................................................................................................................................10
Exhibits.......................................................................................................................................................11
Exhibit A: Decision Criteria ...............................................................................................................11
Exhibit B: Recommendation Decision Rational .................................................................................11
Exhibit C: Skyjacks And Sinobooms Markets....................................................................................12
Exhibit D: Implementation..................................................................................................................13
Exhibit E: Ebit As Percentage Of Revenue.........................................................................................13
Exhibit F: Acquisition Price Calculation ............................................................................................13
Exhibit G: Revised Organizational Chart ...........................................................................................14
Exhibit H: Service Department Structure ...........................................................................................14
Exhibit I: Spider Lift Product Catalogue Page....................................................................................15
Exhibit J: Financial Projections ..........................................................................................................16
End Notes....................................................................................................................................................18
3. 3
Executive Summary
Skyjack, one of North America’s leading Aerial Work Platform (AWP) manufacturers is
looking to pursue growth opportunities with a return of at least 20%. It is recommended that
Skyjack focus its resources towards global expansion in the Middle East and Asia. In order to
accelerate this process, Skyjack should pursue the potential acquisition of a company based in
Asia.
Sinoboom, a Chinese AWP manufacturer meets the required criteria for an ideal
acquisition target. Their product line is consistent with Skyjack’s, offering a variety of scissor
lifts, telescopic booms and articulating booms with a focus on safety and reliability. With a
strong presence in Asia and the Middle East, Sinoboom complements Skyjack’s current
positioning in North America and Europe. To take advantage of Sinoboom’s brand equity,
products in the emerging markets will be co-branded as Skyjack-Sinoboom for a period
following the acquisition. The R&D teams for each company will work collaboratively to
establish a common product line of AWPs. This line will include a spider lift, which is currently
manufactured by Sinoboom but it is new to Skyjack.
In the emerging markets, a large portion of Sinoboom’s sales are through direct
distribution as opposed to the rental model seen with Skyjack’s customers. In order to add value
for these industrial customers who own their equipment, an extensive servicing option will be
made available. This option will establish Skyjack-Sinoboom as the leader in high-quality,
reliable AWP equipment in the emerging markets.
By 2025, Skyjack will achieve an annual return on investment of 26% through their
acquisition of Sinoboom. Through pursuing this global expansion strategy and adding a servicing
component to their business, Skyjack will diversify their customer base and ensure strong growth
potential beyond 2020.
4. 4
The Existing Opportunity
As one of the leaders in the aerial work platform (AWP) manufacturing industry, Skyjack
is currently on pace to reach its 2020 vision of $1 billion in sales and $100 million in profit.
Beyond the 2020 goals, Skyjack would like to pursue further opportunities that offer a 20%
return.
Recommendation
In order to capitalize on future opportunities, as well as maintain consistency with the
decision criteria (Exhibit A), Skyjack should focus its resources towards global expansion. With
the North American and European markets maturingi
, there are higher growth opportunities in
emerging and developing markets such as the Middle East and Asia (Exhibit B).
It is recommended that Skyjack first look towards establishing a presence in the Middle
East and Asia. They will then look to grow, using China as their primary geographical hub due to
inexpensive labour and future infrastructure growth. In addition, Skyjack will offer an extensive
servicing component, including maintenance and repairs to their AWP and telehandler
products. This is a result of the direct distribution strategy in these markets where customers are
not typically rental companies, but industrial users who own their fleet. This servicing option
will allow Skyjack to differentiate themselves within the market and capitalize on the growth
potential in the Middle East and Asia.
In order to accelerate this expansion, Skyjack will look towards the potential acquisition
of a company based in Asia. Hunan Sinoboom Heavy Industry Co. Ltd. (Sinoboom), a growing
Chinese AWP and telehandler manufacturer represents a promising opportunity. With operations
already established in these target regions, Skyjack will be able to leverage the existing synergies
to integrate the two businesses and expand smoothly into Sinoboom’s markets (Exhibit C).
5. 5
Growth Drivers in the Middle East and Asia
Cumulative growth in the Middle East for the construction industry is expected to
increase to 80% over the next decade, compared to the expected global industry growth rate of
67%ii
. The fastest growth will be realized in Qatar as a result of $100 billion USD in planned
expenditure dedicated towards infrastructure in preparation for the 2022 FIFA World Cup. In
addition, there are various growth drivers present in Saudi Arabia and the Middle East due to
increasingly lenient Government regulations and a shortage in availability of affordable housing,
resulting in increasing demand for constructioniii
.
In China, the current market for AWPs is small, but there is a projected compounded
annual growth rate (CAGR) of 12.2% from 2013 to 2018iv
for non-residential construction.
Similarly, other civil engineering and large-scale contracts have a projected CAGR of 13.9%
from 2012 to 2017v
. The majority of work-at-height is currently done using scaffolding, as it is a
cheaper alternative to an AWP. Through lobbying by the Association of Equipment
Manufacturers (AEM), the Chinese government has agreed to implement legislation in the next
five years that will eliminate 50% of the scaffolding usedvi
, thereby increasing the market for
AWPs.
Construction growth in India is very promising with a forecasted CAGR of 15.5% from
2013 to 2017, compared to a CAGR of 1.5%vii
in Europe. In addition, India’s urban population is
projected to grow from 331 million to 500 million in the same periodviii
, placing further demands
on infrastructure and the construction market.
Sinoboom, an Accretive Acquisition
Sinoboom and Skyjack have similar characteristics, and as such there are numerous
synergies. While both companies offer AWP products, Skyjack sells to rental companies while
6. 6
Sinoboom largely sells directly to its end customers. Both companies have positioned themselves
to provide simple, safe, and reliable AWPs and telehandlers in their respective markets. As seen
in Exhibit C, Skyjack has established itself with the scissor lifts in large markets such North
America, Latin America, and Europe, while Sinoboom which is based in China, has a significant
presence in the Middle East and Asian markets. Through the acquisition, Skyjack can leverage
Sinoboom’s existing networks and facilities, as well as utilise their strengths in the boom lift
industry, including the spider lift, to grow further in Skyjack’s core markets.
Embracing Diversification
Sinoboom has established a strong presence in Asia through direct selling and supplying
AWPs to a variety of customers including container shipping companies, dockyards and
shipbuildersix
. Their expansion into the Middle East has been successful through customers such
as Saudi Aramco, the national oil company of Saudi Arabia and the Saudi Bin Laden Group, the
largest construction company in the worldx
. In July 2013, Sinoboom signed an exclusive
distribution agreement with the Juffali group who is described as the "key to Saudi Arabia" and
offers a strong business and financial network in the Middle Eastxi
.
Through the acquisition of Sinoboom, Skyjack is able to expand their customer base
beyond rental companies without diverting their focus from AWPs. This fortifies Skyjack’s
position as a leading manufacturer of AWPs in a global market.
Servicing as a Differentiator
Skyjack’s existing customer base in North America and Europe, predominantly
composed of rental networks, already have infrastructure in place to service and support their
sizeable fleets. However, many major purchasers in the emerging markets own their equipment
rather than rent and do not have economies of scale to justify an internal servicing departmentxii
.
7. 7
When vital equipment, such as a boom, is out of commission for even a few of hours it can cost
projects upwards of $1600xiii
. Therefore, strong product support and servicing can be used to
strengthen existing relationships and establish Skyjack as the market leader in emerging markets.
Alignment in Organizational Values
Sinoboom’s operative goal is to provide safe and reliable lifts for their clients. This is
conducted through steady operations, strong R&D, high quality production and thoughtful
customer servicexiv
. Along with being safe and reliable, there is an emphasis on their customers
as they strive to be a one-stop solution by designing their lifts to meet customers’ specific
requirements. Their slogan, “Always for better access solutions”xv
signifies their focus on
reliability, innovation and providing value to their stakeholders. As a result, Skyjack’s
acquisition is highly realizable due to the strong alignment in company values and culture, as
well as the brand image of being simple and reliable.
Integrating Operations and Planning
Through Sinoboom’s existing networks, Skyjack will achieve greater efficiency within its
supply chain. Due to China’s proximity to the Middle East and India, Skyjack can utilize
Sinoboom’s existing production facilities to optimize efficiency in manufacturing and delivery,
as well as within the supply chain. In the long term, Skyjack can evaluate the existing production
facilities in China, as well as explore centralizing their production to minimize costs and
overhead.
As a result of Sinoboom’s strong focus on innovation and R&D, Skyjack should benefit
from this innovative stance while sharing human and intellectual capital between these two
previously separate organizations. If necessary, Skyjack can further optimize R&D operations as
a whole through consolidation into a central location.
8. 8
Implementation Timeline (Exhibit D)
Stage 1: Present Acquisition Proposal to Sinoboom (Q3 2014)
When presenting the acquisition to Sinoboom, their current CEO Xu Hong Xia, will be
offered the VP of Asia position at Skyjack to account for the potential fear of power loss. It
would also be emphasized that there would be no job loss or drastic changes to Sinoboom’s
current culture, values and organizational structure due to the close alignment with Skyjack. By
using current employees, we can take advantage of their existing cultural knowledge of local
markets.
Stage 2: Acquire Sinoboom (Q4 2014)
The acquisition of Sinoboom is projected for the end of 2014 for $30 million (Exhibit
E/F). In order to ensure the smooth acquisition of Sinoboom, it is important that employees are
well informed of Skyjack’s values and how they conduct business. Skyjack will employ a task
force to carry out organization development conferences at Sinoboom to promote these changes.
Stage 3: Introduce Servicing Department (Q1 2015)
Skyjack will introduce a servicing department for the existing Sinoboom Middle East and
Asian markets, offering equipment maintenance and repairs. This service department would be
placed under the VP of Asia within the organization (Exhibit G/H) and composed of certified
equipment technicians that would be filled internally or hired externally. These technicians will
be re-trained yearly to ensure they are servicing equipment to their highest potential and will be
experts on all company equipment with the ability to conduct troubleshooting, diagnostics,
technical support, and repairs. To regain the expenses of the additional mechanics, extended
warranties will be offered at cost. As the mechanics service multiple customers, Skyjack should
9. 9
strive to break even while achieving economies of scale thereby passing cost savings onto their
customers.
Stage 4: Co-branding in Asia, the Middle East and Latin America (Q2 2015)
By acquiring Sinoboom, Skyjack will obtain an organization that has built substantial
brand equity within the Middle East and Asian markets. Skyjack will leverage this strong brand
presence and reputation with the objective of creating one global brand encompassing both
Sinoboom and Skyjack products.
Shortly after the acquisition, all products sold in Sinoboom's primary markets will be co-
branded with promotions featuring the names "Skyjack-Sinoboom." Since Sinoboom does not
have a presence in North America and Europe, equipment in these markets will solely be
branded as Skyjack. As the Skyjack brand gradually becomes synonymous with the reputation
and quality of Sinoboom, the “Sinoboom” name will eventually be phased out.
Stage 5: Launch Sinoboom’s Spider Lift in Existing Markets: (Q3 2015)
The spider lift will be introduced to the North American and European markets to
compliment Skyjack’s current product line. Skyjack will sell the spider lifts to rental companies
that carry their equipment. In addition, to inform potential customers of the new product, their
current catalogue advertising will highlight spider lifts (Exhibit I).
Stage 6: Product Line Collaboration Between R&D Departments (Q4 2015)
The R&D departments of both Skyjack and Sinoboom will both leverage their
collaborative resources, as well as share human and intellectual capital. These departments will
incorporate the strengths of each product offering from the different brands to engineer a
superior product line of AWPs and telehandlers. In addition, the communication between the
10. 10
R&D teams will aid Skyjack in becoming more innovative in its existing markets as the
Sinoboom R&D team has a higher level of expertise in boom lifts, the origin of their business.
Stage 7: Increase Presence in India and the Middle East (Q1 2017)
Due to the projected infrastructure growth in the Indian and Middle East markets, after
the acquisition, Skyjack will begin to increase their presence in both of these markets. Skyjack
should first look to strengthen its presence in India and later focus its efforts within the Middle
East, especially in Qatar with an eye towards the 2022 FIFA World Cup.
Contingency
The acquisition of Sinoboom is projected to be the optimum strategy for Skyjack.
However, if the acquisition is unsuccessful, similar strategies will be used to enter the emerging
markets. Skyjack can develop a department headed under a new VP of Asia, while establishing a
presence in China, India and the Middle East through sales offices. Skyjack will then target the
various key industries (oil, shipping, construction) in this market as Sinoboom has done in the
past. However, this strategy would continue to have Skyjack as a follower in these markets. To
establish themselves as the leaders and quickly gain market share in global emerging markets,
the acquisition of Sinoboom remains ideal.
Conclusion
Through the proposed acquisition of Sinoboom for $30 million, Skyjack can achieve an
annual return on investment of 26% (Exhibit J). In addition, through pursuing this global
expansion strategy and adding a servicing component to their business, Skyjack will diversify
their customer base and ensure strong growth potential beyond 2020.
11. 11
Exhibits
Exhibit A: Decision Criteria
1. Achieve a 20% Return on Capital
2. Maintain budget of $25-$75 million
3. Maintain Skyjacks current brand image
4. Minimize Risk
5. Grow beyond $1 billion target for 2020
Exhibit B: Recommendation Decision Rational
Decision 1: Which Growth
Strategy?
- Due to the North American and European market for AWPs saturated
with competition, market penetration would not be ideal
- Due to lack of knowledge of end consumer needs and the high cost
and time it takes to develop a product, product development would
not be ideal
- For the same reasons as product development, without knowledge of
end consumer needs, developing a product for an entirely new market
is difficult and risky
- Market expansion is ideal because the developing and emerging
markets show great opportunity, which will help to expand out of
saturated markets.
Decision 3: Which Markets To
Expand To?
- In South America, the construction industry has seen an overall
increase in recent years however, the CAGR seen from 2008 to 2012
was only 0.3%, which indicates slow growth
Decision 2: Which Market
Expansion Strategy?
- Direct investment can be risky, especially when you do not have
knowledge about end consumer needs in a new market
- Acquiring Sinoboom, a company with growth potential that has
already established itself in the emerging and developing markets
allows Skyjack to leverage Sinoboom’s existing presence to grow its
business.
13. 13
Exhibit D: Implementation
Stages 2014 2015 2016 2017 2018
Short Term
Stage 1
Stage 2
Stage 3
Medium Term
Stage 4
Stage 5
Long Term
Stage 6
Stage 7
- Stage 1: Present acquisition interest and plan to Sinoboom
- Stage 2: Acquire Sinoboom (Assuming they accept)
- Stage 3: Introduce Servicing Department
- Stage 4: Begin co-branding with Sinoboom products in Asia, the Middle East, and Latin America
- Stage 5: Introduce and launch Sinoboom’s spider lift in the North American Market and begin promotion for the
spider lift
- Stage 6: Collaboration by R&D Departments to determine which product lines to keep for each company
- Stage 7: Increase presence in India and the Middle East
Exhibit E: EBIT as Percentage of Revenue
Company EBIT as % of Revenue
Skyjack 8.6%
Haulotte 5.2%
Manitou 1.8%
Terex (Genie) 6.7%
Average 5.6%
-This exhibit shows EBIT as a % of revenue for Skyjack and its
competitors
-JLG is not included since they were acquired by Oshkosh and
financials solely related to access equipment are unavailable
Exhibit F: Acquisition Price Calculation
Sinoboom’s Revenue $37,000,000
Average EBIT % of Revenue 5.6%
Sinoboom EBIT $2,072,000
Average EBIT Multiple* 10.24
EBIT Multiple Proposed** 14.48
Proposed Acquisition Price $30,000,000
* As per Bloomberg – average multiple for all 2013
acquisitions in Asia-Pacific within the industrial sector
** Premium EBIT multiple proposed is due to the potential
for high growth
18. 18
End Notes
i
Interviews with Aerial Manufacturers: Period of Growth. (n.d.). Rental Equipment Register.
Retrieved July 18, 2014, from http://rermag.com/aeriallifting/interviews-aerial-manufacturers-
period-growth
ii
Middle East Construction Boom surpasses global growth . (n.d.). The Big 5. Retrieved July 19,
2014, from http://www.thebig5.ae/files/report_middle
iii
Middle East Construction Boom surpasses global growth . (n.d.). The Big 5. Retrieved July 19,
2014, from http://www.thebig5.ae/files/report_middle
iv
China - Non-Residential Construction. (n.d.). MarketLine. Retrieved July 19, 2014, from
http://advantage.marketline.com.libproxy.wlu.ca/Product?pid=MLIP1309-0006&view=d0
v
China - Construction & Engineering. (n.d.). MarketLine. Retrieved July 18, 2014, from
http://advantage.marketline.com.libproxy.wlu.ca/Product?pid=MLIP1059-0006&view=d0e21
vi
AEM Opens Door for More Aerial Work Platform Business in China. (2013, August 26).
AEM. Retrieved July 20, 2014, from http://www.aem.org/News/Advisors/AEM/?A=1136
vii
Growth of Construction in India . (2013, July). Thought leadership, July 2013. Retrieved July
20, 2014, from http://www.leap29.com/thought-leadership/growth-of-construction-in-india.pdf
viii
Growth of Construction in India . (2013, July). Thought leadership, July 2013. Retrieved July
20, 2014, from http://www.leap29.com/thought-leadership/growth-of-construction-in-india.pdf
ix
Partners - Aerial Work Platform - SINOBOOM. (n.d.). Partners - Aerial Work Platform -
SINOBOOM. Retrieved July 19, 2014, from http://www.sinoboom.com/Client/
x
Partners - Aerial Work Platform - SINOBOOM. (n.d.). Partners - Aerial Work Platform -
SINOBOOM. Retrieved July 19, 2014, from http://www.sinoboom.com/Client/
xi
SINOBOOM and JUFFALI signed official Exclusive Distributor Agreements in K.S.A -
Sinoboom. (n.d.). Retrieved July 22, 2014, from http://www.sinoboom.com/News/cont-100.html
xii
Partners - Aerial Work Platform - SINOBOOM. (n.d.). Partners - Aerial Work Platform -
SINOBOOM. Retrieved July 19, 2014, from http://www.sinoboom.com/Client/
xiii
AWP equipment maintenance. (n.d.). Mason Contractors Association of America RSS.
Retrieved July 18, 2014, from http://www.masoncontractors.org/2012/01/31/awp-equipment-
maintenance/
xiv
SINOBOOM Boom Lift. (n.d.). Retrieved July 18, 2014, from
http://www.sinoboom.com/Produce/
19. 19
xv
Red SINOBOOM under the Blue Sky of Auckland – the Sidelights on Routing Inspec - News
- Aerial Work. (n.d.). Sinoboom. Retrieved July 20, 2014, from http://www.sinoboom.net/show-
13-102-1.html
