PMV Middle East
M&A, A FAST ROUTE TO COMPETITIVE ADVANTAGE
The global disruption triggered by COVID-19 led executives at many companies to review their portfolios during 2020 and into 2021 to reassess their strategies. These reviews have led to both strategic acquisitions and divestitures as companies redirect management resources and funds into those parts of the business with the highest growth potential and where they enjoy a distinctive competitive advantage. This has led to a trend of corporates using M&A to acquire capabilities they don’t have, often in technology, to enhance existing capabilities and reinforce that advantage.
A PWC report titled ‘Global M&A industry trends: 2021 mid-year update’ indicates how focusing on competitive advantages has worked well for companies that were able to incorporate technology into their products and services during the pandemic. Leaders at companies that lacked these capabilities recognised the importance of acquiring them, leading to an increase in efforts to find the right target and execute a deal, whether through outright acquisition, joint venture or strategic alliance.
For example, John Deere has a long-term strategy to create smarter machines with advanced technology. The company views autonomy as an important step forward for the agriculture industry, and therefore, invested $250 million to acquire Bear Flag Robotics, a Silicon Valley-based startup that develops autonomous driving technology compatible with existing machines.
CNH Industrial will be spending nearly $120 million over the next four years to acquire Italy-based excavator manufacturer Sampierana to gain a competitive advantage in the mini and midi excavator market.
Hyundai Heavy Industries (HHI)
Holdings has acquired a nearly 35% stake in Doosan Infracore for approximately $734 million. Both the companies will operate independently under HHI
Holdings and invest heavily in areas like future technologies and innovation, such as electric excavators, battery packs, and hybrid fuel cells to gain a competitive edge among the top five heavy equipment manufacturers in the world.
PWC remains bullish on M&A activity during the second half of 2021. According to its annual global CEO survey 2021, the majority of CEOS have a sharp focus on M&A strategies to accelerate growth, gain scale, and digitise to reshape their businesses.
The biggest M&A deal so far in this heavy equipment industry this year is the $1.08 billion acquisition of Euro Auctions by Ritchie Bros. The world’s largest industrial auctioneer has a history of making strategic acquisitions for geographic expansion and digital transformation. Since 1999, Ritchie Bros. has acquired over ten rival companies and service providers in North America and Europe, which has enabled the company Bros. to offer multichannel platforms and accelerate its transition to an end-to-end asset management and disposition solutions provider. Prior to the Euro Auctions’ deal, Ritchie Bros.’ largest acquisition was Ironplanet in 2017, worth approximately $758.5 million.
The company’s most recent acquisition before Euro Auctions was Rouse Services, a leading provider of data intelligence and performance benchmarking solutions.
The acquisition of Euro Auctions marks a new era for Ritchie Bros., giving the company unprecedented market dominance in the EMEA region and a monopoly in several international markets. The cover story in this issue explores the strategic rationale for the acquisition, the Dubai auctions calendar for 2022 and how new formats, partnerships and services will drive growth in the MEA region.