Case Study: M&A Strategy & Implementation
REALINGING A MACHINERY BUSINESS WITH CHINA’S CHANGED ENVIRONMENT
Situation
A German company was seeking to build a successful brand in China, but over the years, it was starting to lose its technological lead and consequently, its market share in China was slipping. The Chinese technology it was competing with had become “good enough” and its Chinese competitors were competing on price. This issue was also repeating itself in their other key markets such as Russia and India.
Approach
Sapphire’s team was retained for an extensive market review to get a deep understanding of the changing environment and the strengths and weaknesses of our client. Once we understood the areas where our client had an advantage, we could develop a Growth Strategy for China which would be centered around and 2 tier approach where the copmany would keep its existing brand as a Premium brand in China but also acquire local brands to aggressive localise their business and cost structure.
Implementation
The Sapphire Team mapped the industry and identified the top five national and regional companies for the different product groups and develped a strategy to approach the competiting companies. After meeting the different companies, we decided which companies would fit best in our strategy, and we assisted our client to commence formal negotiations. The Chinese entrepreneurs we were dealing with were inexperienced in M&A and had to be constantly educated and managed, to make sure that we could maintain the pace with the negotiations.
The Sapphire Team managed the Due Diligence process and ensure that any issues identifyed were rapidly brought to the negotiation table so their impact on the negotiations could be taking into account.
Result
Our Client acquired three companies and more than doubled its sales turnover in China. Once the companies and their systems and processes were integrated, their margins were significantly improved. This allowed our Client to use the newly acquired businesses to export to other markets where it could mirror the same China strategy. Acquiring some of their key competitors also removed some of the pressure on the Premium Brand, which had started to grow its market share again whilst the local brands were thriving as well.
