M&A materials handling style
February 25, 2011
Editor’s note: This blog was originally posted on the web site of Modern Materials Handling, LM’s sister.
Want to know where all that corporate cash we hear about sitting on the sidelines is going? Try the materials handling industry.
The last couple of years have seen more merger and acquisition activity in the materials handling industry than I can ever remember seeing.
Daifuku got the ball rolling in 2007 when it acquired Jervis B. Webb. That was followed by Intelligrated’s purchase of FKI in the spring of 2009 and the acquisition of Diamond Phoenix by System Logistics that fall. Last summer, Dematic acquired HK Systems. Just last week, Savoye, a subsidiary of Groupe Legris, acquired Retrotech.
In the pallet industry, Brambles, the parent company of CHEP, intends to acquire IFCO and CAPS and PECO Pallet was acquired by a private equity firm. I know I’m leaving out a few deals in the rack and lift truck industries.
It’s as if the old geezers are now the most popular dance partners at the sock hop. What’s interesting to me is that we’re getting to be hot at a time when many in the industry are eschewing the term materials handling for more exciting terms like logistics.
What’s behind this sudden surge in interest in our industry? Yesterday, I spoke with a representative from the DAK Group, an investment bank that was involved in the Retrotech deal about the trends she’s seeing in our industry. I’ll post that next week. Meanwhile, I have a couple of thoughts and I think they’re connected.
The first is that in North America, the bulk of the industry is comprised of privately-held, family-owned businesses. The owners are graying and their kids chose sexier fields. With no one to pass the business on to, they’re thinking about cashing out. I’m Exhibit A: My Dad had four kids and none of us was interested in the family pallet business.
The second is that what we do is finally getting the respect it deserves by business.
Warehouses and factories used to be black holes to the business; C-level executives mostly noticed us when things went wrong. Today, there is a recognition that materials handling is integral to broader business goals. In fact, I increasingly hear from companies that they did a makeover of their warehouse because of a new business strategy. That makes solution providers more attractive.
The third is that business is increasingly global. IKEA, for instance, has developed several cookie cutter designs for its warehouses that it rolls out everywhere it does business. The idea is that a warehouse manager in Georgia could walk into a warehouse in Sweden and run the joint. Ditto global manufacturers. Global companies are going to choose partners that can serve them on a global basis.
This was driven home to me a few years ago when Markem, a leader in case marking and bar code technologies with more than $300 million in sales, was purchased by Dover. At the time, I asked the company’s CEO why he sold. His answer was succinct: “We were too small to compete.”
Back then, Markem was a family-owned business headquartered in my home town. The family members managing the company were in their early 60’s. Their kids were largely uninvolved. Meanwhile, Markem’s global customers wanted it to install and support solutions anywhere in the world they built plants. Markem either had to invest to provide that level of support, contract and serve a limited market or sell. They sold. It’s no coincidence that the corporate headquarters is now Paris and not Keene, NH.
Given the amount of cash that’s supposed to be sitting on the sidelines and the interest in our industry, I expect to see more of these deals in the future.
For more articles on materials handling, please click here.
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