The MHEDA Journal - Fourth Quarter, 2015 - (Page 76)

MONEY CONSOLIDATION MATTERS Material Handling M&A: 3 Realities in Today's Industry D BY BEN RUDMAN espite the maturity of the material handling industry, OEMs have continued to find ways to grow and improve margins and-increasingly-that's been through mergers and acquisitions. In today's market, it can be tough for manufacturers to stand out. Gamechanging technologies aren't introduced on a regular basis, and differentiating features are often quickly copied by the competition. Additionally, markets are well defined, so expansion through increased marketing or awareness is inherently limited. For many manufacturers, the most effective way to boost business has come from improving distribution networks through expansion or consolidation. The following three M&A strategies have proven successful for several companies recently: Strategy #1: Distribution Expansion Large, well-capitalized dealers can be hard to come by. Training for dealers in the material handling space, as opposed to automotive dealers, is more complex, as dealers have to learn about the products and develop an understanding of the industrial world. Additionally, dealers have to be well capitalized in order to purchase and retain large chunks of inventory. The value of good dealers has many manufacturers making M&A moves 76 MHEDA | themhedajournal.org focused on bolstering their distribution networks. Methods for doing this include: * Acquiring a competing manufacturer. Buying a competitor gives manufacturers instant access to the acquired company's distribution channels. This way, manufacturers can strengthen their dealer network in regions where they have a limited presence or none at all, without requiring negotiations with existing dealerships or the establishment of new ones. For example, Mitsubishi Heavy Industries (MHI) recently announced its acquisition of UniCarriers, a joint venture of Nissan and Hitachi, gaining access to its network of dealerships. UniCarriers' dealer network improved MHI's access to different geographic regions throughout the United States. The acquisition ensured that other manufacturers, particularly international competitors in expansion mode, could not gain meaningful access to the U.S. market through the UniCarriers dealer network. * Buying dealerships. Dealers tend to vary in strength and size, which can impact each outlet's sales. Manufacturers can bring more uniformity to their distributors by acquiring them. Vertical integration gives manufacturers more control over the supply chain across the board. New equipment can be easily moved and coordinated across geographies, while parts can be centralized at large dealerships or in regional distribution centers. Vertical integration can also reduce competition - for talent as well as territory - among the manufacturer's various affiliated dealers. Manufacturer Crown is a good example of this trend. After several strategic acquisitions, the company is estimated to own 53 dealers, or 78 percent of its dealership channel, and it has also begun building new dealerships of its own. A trend we see less often is OEMs buying dealers that are part of competing OEM networks. There is difficulty around switching the focus of sales professionals and mechanics from one product to another, especially after decades of experience with the previous OEM. * Acquiring manufacturers of adjacent products. This can be an attractive way to boost dealer offerings and add more customers. Adjacent products, such as attachments or specialty lines, also tend to have niche markets and higher margins. If the acquired company has existing dealerships, the manufacturer can http://www.themhedajournal.org

Table of Contents for the Digital Edition of The MHEDA Journal - Fourth Quarter, 2015

President's Perspective
From the Desk of Liz Richards
Editor's Note
Ask Your Board
MHEDA University Calandar
MHEDA MEMBER PROFILE
@WORK
MHEDA’S 2016 CRITICAL IMPACT FACTORS
COLLABORATING TO GET THE JOB DONE
Industry Pulse
HOW TO GET YOUR ONLINE MARKETING EFFORTS BACK ON TRACK
BACK TO BASICS
PRIVACY AND SECURITY
A TREASURE CHEST OF EMPLOYEE TRAINING
GETTING THE MOST OUT OF AN INTERNSHIP PROGRAM
FACING INFLATION
MATERIAL HANDLING M&A: 3 REALITIES IN TODAY’S INDUSTRY
PRICING THE FORGETTABLE LAST FIVE PERCENT
New Members
Spotlight on Association News
MHEDA Milestones
TEN MORE REASONS WHY YOU CAN’T FILL JOBS
Index to Advertisers by Product Category
The Last Word

The MHEDA Journal - Fourth Quarter, 2015

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