China Business News: Sany M&A "Elephant": Do not pursue the best control

Source: China Business News Author: Zhang Rongwang

On the outskirts of Stuttgart, about 20 kilometres from the city, the world's concrete giant Putzmeister is home to Germany's Putzmeister AG, and not far from it are home to car giants such as Mercedes-Benz and Porsche.
Putzmeister is one of the world's most well-known construction machinery manufacturers, its "Elephant" brand concrete pump from the early 70s of the last century began to sell well all over the world, the company has gradually become the world's largest concrete conveying equipment market enterprises, market share, regional coverage, technology first, product coverage and so on are in the forefront of the world's peers. Especially in the field of concrete pump truck manufacturing, the company's market share has long been in the world's first.
In August 2012, Sany Group officially acquired "Elephant", opening a new road for the internationalization of Chinese manufacturing.
 

M&A does not pursue relative control

In an en-suite office of less than 40 square meters in the "Elephant" factory, Jiang Xiangyang is pointing to the technical cooperation schedule on the wall and asking his assistant* about the latest developments. Jiang Xiangyang is the deputy general manager of Sany Heavy Industry and the liaison officer of Sany in Putzmeister, Germany. Here, Jiang Xiangyang is responsible for coordinating the cooperation between Sany and Elephant with only two assistants, one of whom has more than half of the time to work at Sany Heavy Industry's production base in Cologne.
"I'm just a 'translator.'" Jiang Xiangyang said with a smile that the "elephant" has not changed much after the acquisition of Sany Heavy Industry, and it is completely operated and managed in accordance with the German model, and the management and workers are also the original team. "We want chickens that lay eggs, not eggs that are in full control." According to Jiang Xiangyang, Sany Heavy Industry's acquisition of "Elephant" is an important step to realize its internationalization strategy, and the important mentality for Chinese enterprises to acquire overseas is to be good at using the original management team and management model, rather than pursuing relative control or transforming it with the Chinese model.
Liang Wengen, chairman of the board of directors of Sany Group, also said at the time of the acquisition that "Elephant" will still operate independently after the completion of the merger. Putzmeister's headquarters in Stuttgart will become Sany's new global headquarters outside of China, and Sany will continue to focus on developing the low-end market in China. Putzmeister, on the other hand, continues to maintain its position in the high-end segment.
"Norbert Scheuch, the former Executive Officer, is a professional manager who joined Putzmeister to help with its restructuring. The current CEO, Gerald Karch, has been working as Senior Vice President and responsible for technology at Putzmeister. Jiang Xiangyang said. In other words, this executive change means that the acquisition of Sany Heavy Industry is now the end of the United States, and the next step is for Sany Heavy Industry to further use Putzmeister to realize its internationalization strategy.
 

The internationalization strategy is accelerating

"Putzmeister has three strong aspects, one is the brand, the other is the global sales network, and the technology is relatively strong. This is the most important thing for Sany Heavy Industry. In an interview with China Business Daily, Gerald Karch, executive officer of the company, said that the reason why Putzmeister has been performing well after the merger and acquisition is related to its consistent emphasis on technology. According to Gerald Karch, even in 2009, when Putzmeister* was in trouble, they continued to invest heavily in research and development of new technologies.
The cooperation between Sany Heavy Industry and Putzmeister can be called a "flash marriage". According to Jiang Xiangyang, it was Putzmeister who first revealed the intention of cooperation to Sany at that time. After receiving this news, Sany Heavy Industry quickly gave feedback, and the senior management went to Germany collectively for inspection and quickly reached a cooperation intention.
According to public information, the acquisition of Putzmeister was a surprise for Sany Heavy Industry. This is not unrelated to the internationalization strategy continuously pursued by Sany Heavy Industry and its market position. In fact, Sany Heavy Industry has been a strong competitor of Putzmeister in recent years, and it was not until 2009 that Sany Heavy Industry surpassed Putzmeister for the first time to become the world's concrete pump manufacturer with a sales volume of 5655.
"The board of directors of Sany Heavy Industry believes that even if it is 20 billion yuan, we will take Putzmeister. 20 billion yuan is the profit of Sany Concrete for two years, but the acquisition of Putzmeister shortens the internationalization process of Sany by 5~10 years, and reduces a competitor. You know, a few months ago we were fighting for business in India. Xiang Wenbo said this at the time of the merger.
In fact, in its 2010 annual report, Sany also pointed out that the pace of internationalization was too slow. In the 2012 annual report, Sany Heavy Industry said that its overseas business sales approached the 10 billion yuan mark for the first time. Putzmeister's sales, profits and other business indicators have improved significantly, achieving a good start after mergers and acquisitions, Sany Brazil, India has also achieved localized manufacturing, excavators,Truck cranesand other products have won wide acclaim in the market in Brazil and the Middle East, and Sany PALFINGER truck-mounted crane products have been officially launched, laying a solid foundation for the future of Sany internationalization.
This cannot but be said to be a huge change brought about by an "unexpected" acquisition, and since then, Sany Heavy Industry's internationalization strategy has accelerated significantly.
According to the annual report of Sany Heavy Industry, internationalization is the "third venture" of Sany Heavy Industry and an important guarantee for the company to realize the dream of "quality changes the world".
A RECENT SURVEY OF 5,400 ONLINE QUESTIONNAIRES FROM NINE COUNTRIES AROUND THE WORLD BY EDELMAN, A PUBLIC RELATIONS CONSULTING FIRM IN THE UNITED STATES, SHOWS THAT RESPONDENTS ARE NOT OPTIMISTIC ABOUT THE ACQUISITION OF LOCAL COMPANIES BY MULTINATIONAL GROUPS INCLUDING THOSE FROM CHINA. At 80 percent, respondents ranked 5,656 in trusting German companies, while Chinese companies ranked seventh with only 42 percent. Among emerging countries, Chinese multinationals are trusted by their own nationals, with a trust rating of 83%, but the trust of developed countries in Chinese companies is only 24%, and the trust of German companies in Chinese companies is only 19%.
It can be seen that if Chinese companies want to change their image in developed countries, in addition to product quality and innovation, many "soft indicators" are also important, such as the employment guarantee for employees of the acquiring company, the degree of development when the company communicates with the public, and the transparency in dealing with the crisis.
Sany Heavy Industry's localization and opening strategy for the international strategic layout may be worthy of reference for most Chinese enterprises.