With the acceleration of the global engineering machinery industry's focus to China, overseas M&A has become the most important means for Chinese companies to internationalize.

The trend of the "eastern advancement" of the global construction machinery industry is increasingly evident.

In 2005, there were no Chinese companies in the top 10 global construction machinery industry, and three Chinese companies in the top 50; in 2011, there were three Chinese companies in the top ten, and 11 Chinese companies in the top 50.

From 2005 to 2011, an important trend in the world's top 50 in the construction machinery industry is that in addition to a handful of veteran players such as Caterpillar, Volvo, and Liebherr, European and US companies have generally fallen in rankings, while Chinese companies have developed into blowouts. situation.

In this process, overseas mergers and acquisitions are increasingly being used by China Construction Machinery Corporation.

Just on the day of Sany Heavy Industry's purchase of Putzmeister's press conference on January 31, another domestic industry giant, Liugong (000528.SZ), issued an announcement announcing the acquisition of a construction machinery business unit of Polish HSW Company for RMB 335 million.

At the same time, Xugong Machinery is negotiating with Schwing (SCHWING) in Germany for M&A.

Counting in 2008, Zoomlion acquired Italy's CIFA, and the four domestic engineering machinery makers launched overseas mergers without exception.

Putzmeister is recognized as the first brand in the field of branch concrete machinery for construction machinery, followed closely by Shi Weiying and CIFA. If Xugong succeeds in acquiring Schwing, then the top three in this field will be attributed to Chinese companies.

The wave of M&A in this round of “changing the competitive landscape of the global construction machinery industry” began before the financial crisis in 2008 and accelerated after the financial crisis. It was Chinese companies that stood at the forefront. Behind the tide was the acceleration of the global engineering machinery industry. China transfers.

After the financial crisis, the income and profits of the traditional giants such as Putzmeister declined year after year, and they were hard to stop. On the other hand, Chinese-funded enterprises have directly stimulated the rapid development of the domestic construction machinery industry because the government has implemented a number of policies that promote the development of the industry. Between the two sides, Chinese-funded enterprises have emerged strongly in the international market.

"Students replace teachers"

President of Sany Heavy Industry whispered to Wen Bobo, “31 loved Putzmeister for more than a decade,” and honored him as “teacher”.

Zhan Chunxin, chairman of Zoomlion, had a similar statement. He still remembers the guilt and shock of his heart when he went to CIFA Italy for the first time. In 2001, Zhan was CIFA's procurement of some core components as an industry leader. “People have more than 70 years of history.” After Zillion completed the acquisition of CIFA in 2008, Zhan Chunxin said, “We are like elementary school students.”

Before 2008, for most domestic machinery companies, it was hard to think about doing overseas mergers and acquisitions. The turning point occurred after the global financial crisis in 2008. This provided a rare opportunity for local companies such as Sany to go overseas to “bottom the bargain,” and the status of “students” and “teachers” has undergone disruptive changes.

Taking Putzmeister as an example, the company’s operating income in 2007 was 1 billion euros, which has since declined year after year. In 2010, it has dropped to 550 million euros and net profit is about 1.5 million euros. In contrast, Sany Heavy Industry had a revenue of 8.36 billion yuan in 2007, 33.95 billion yuan in 2010, and a net profit of 6 billion yuan. Similar changes have also occurred between Schwing and Xugong Machinery, CIFA and Zoomlion, HSW and Liugong.

One side is the European and American companies that have been hard hit by the financial crisis. One side is the Chinese company that has been developing rapidly under the stimulus of 4 trillion yuan in investment. The original market structure of the global construction machinery industry has been broken. In 2006, Putzmeister ranked first in global concrete machinery market share, which was approximately 21.5%, and Shi Weiying ranked second, which was approximately 15%. At that time, the market size of China's concrete machinery was not worth mentioning, and Sany Heavy Industry Co., Ltd. Machinery accounts for approximately 8% of the global market share, and Zoomlion accounts for 5%. By 2009, Sany Heavy Industry has surpassed Putzmeister to become the champion of global sales of concrete machinery market. In 2010, Sany Heavy Industry won the championship, Zoomlion caught up with Putzmeister, and Shi Weiying fell to the fourth.

In 2011, the operating income of China's construction machinery industry increased by 17% year-on-year to approximately 500 billion yuan, and the export value exceeded US$15 billion, setting a record high. However, at present, the degree of internationalization of domestic construction machinery companies is not high. In the first half of 2011, Xugong Machinery's overseas revenue accounted for 13.9% of total sales, Liugong 9%, Zoomlion 4.2%, and Sany Heavy Industry 3.89%.

Today, Sany Heavy Industry and other domestic first-tier companies have locked their next target in the top 5 of the Global Top 50 list. Obviously, internationalization is an important way to achieve this goal.

After the news of the collective sale of the giants to the sea from Putzmeister was reported in the industry, domestic giants such as Sany Heavy Industry, Zoomlion and Xugong Machinery all intended to bid, but we all know that this kind of “buy back can change” There is not much opportunity in the industry landscape.

At present, the domestic construction machinery giants all regard “overseas expansion” as the core strategy. From the high-profile acquisition of CIFA by Zoomlion, to the acquisition of Putzmeister by Sany Heavy Industry; from Xugong to accelerate the acquisition of overseas R&D institutions, to Liugong “camping” 80 countries, all show that local companies and international brands are Taiwan's determination to compete. To Wen Wenbo's position that it is necessary to be competitive must be internationalized, it can be said that it is the consensus of the industry leaders.

In 2002, it can be regarded as the first year of internationalization of domestic construction machinery giants. This year, Sany Heavy Industry sold its products to overseas markets, and Xugong Machinery established a joint venture with a number of international giants. Liugong proposed the goal of “building an open, internationalized Liugong”. Zoomlion should take the first step. In 2001, it took the lead in the acquisition of British Paul Road to begin an international journey.

The start-up time of the internationalization of the four companies is similar, and the internationalization path also has its own characteristics. Sany Heavy Industry and Liugong are mainly self-built factories. Zoomlion focuses on overseas mergers and acquisitions. XCMG focuses on acquiring overseas R&D institutions.

In 2007, Sany Heavy Industry established a subsidiary Sany International Development Co., Ltd. in Hong Kong to operate and manage overseas plants. SANY International has established its own scientific research and production bases in India, the United States, Germany, and Brazil, and has initially completed a globalized layout by direct investment.

The core strategy of Zoomlion’s overseas strategic development is “Boating to the sea”. Since 2001, Zoomlion has carried out nine cross-regional and cross-border M&A integrations and has completed internationalization.

Xugong Machinery hopes to "take the technical route." Its overseas expansion strategy includes the increase of overseas distributors and the construction of overseas spare parts centers, but the most important thing is the acquisition of foreign-funded R&D institutions.

Liugong mainly builds its plants overseas and develops international dealers to dig gold overseas. At present, Liugong has been set up in more than 80 countries on five continents.

The process of accelerating the internationalization of Chinese enterprises is mainly based on two basic demands: first, technology; and second, channel. In terms of technology, local companies have been relying on imports in the field of high-end products such as bearings, gears, and fasteners. In terms of channels, acquisitions are obviously faster than self-construction. In the words of Wenbo, that is, “With the help of Putzmeister, The three-day internationalization process can be shortened by at least five years."

Advantages and disadvantages of the overall acquisition "China's construction machinery companies to go overseas acquisition has a characteristic, tend to wholly-owned or holdings acquisition." Roland Berger, vice president of Greater China Management Consulting, Executive Director of Engineering Products Industry Center Yiping told the "Finance" reporter .

The benefits are obvious: the technology and channels of the target company can be obtained; the risk is from the later integration. At present, Zoomlion's effectiveness in integrating CIFA is acceptable, but the process is arduous and its experience can be used for reference by peers.

In 2008, Zoomlion formed a “combination” with Hony Capital, Goldman Sachs, and the Italian Mandalin Fund, and acquired 100% of CIFA's equity for EUR 271 million, of which Zoomlion contributed 60%. Zhan Chunxin, chairman of Zoomlion, said that “tied together” with these financial companies is to share the risk of integration.

Even so, the Zoomlion with the title of “M&A King” has not been smooth sailing since then. Zoomlion had predicted after the completion of the acquisition that CIFA’s net profit for 2008-2012 would be 251 million yuan, 291 million yuan, 378 million yuan, 442 million yuan, and 517 million yuan respectively. However, the reality is that CIFA was once caught up in losses after being acquired by China United. It did not start profiting until 2011.

Dong Yaguang, a researcher at Guojin Securities Machinery Industry Group, believes that most mergers and acquisitions in the past have failed in integration. Construction machinery companies go overseas not to purchase delivery rooms and equipment, but rather to use technology and channels. The integration of personnel, culture, and other aspects on both sides is crucial.

Zhang Tianbing, the global vice president and partner of Kearney Management Consultants in the United States, reminded that Chinese companies must conduct more "strategic acquisitions" instead of "driving acquisitions." "Do not make a phone call and say that there is an acquisition. Opportunities, companies will do it." Zhang Tianbing, who is concerned about mergers and acquisitions all the time, believes that in the past, the main reason why many companies failed to make overseas acquisitions was the “unprepared preparations” before the acquisition, and little is known about the potential risks of the acquisition.

Unlike most industries, the construction machinery industry varies from country to country.

For example, Italians hope that the body of the excavator will be more narrow, while the Germans would like to be wider; the Italians are less concerned with the actual carrying capacity of the pump trucks, while the Germans are more demanding and must bear the weights on their instructions. The same number of tons. In addition, the use habits of different countries in Europe are not the same. China usually uses roads to build roads. Germans like to use graders for farming. These differences mean that if you want to integrate into the local market as soon as possible, it is best to choose to acquire a local company.

After the extraordinary development, the Chinese construction machinery industry has developed over the past 50 years, and now it has been able to produce 18 categories and more than 4,500 specifications and models. There are more than 1400 production enterprises above designated size in the industry, with annual sales exceeding 10 billion yuan. Family. During the “Eleventh Five-Year Plan” period, the average annual growth rate of sales revenue of the industry exceeded 28%, reaching 446.7 billion yuan in 2010, and the total volume of the industry ranked first in the world. The construction machinery industry in China has been called "extraordinary development" for the past few years.

However, the overall strength of domestic leading companies such as Sany Heavy Industry and Zoomlion still has a big gap with Caterpillar and other global industry giants. In 2010, Caterpillar’s ​​global revenue reached US$42.588 billion, which is equivalent to 4 times that of Xugong Machinery, 6 times of Sany Heavy Industry, 8 times of Zoomlion, and 14 times of Liugong.

Since 2010, the central government of China has implemented a tightened fiscal policy, which has caused the domestic construction machinery industry to turn around in the doldrums after a leapfrog development. Although the growth of operating income of 11 major construction machinery companies in the first half of 2011 was still as high as 54.51%, cash flow was becoming less. The total cash flow of 11 companies was -2.634 billion yuan, compared with 5.613 billion yuan in the same period of 2010.

In this context, many companies have used a zero-down payment method to win customers and abandon the sales model of finance leases and bank mortgages. Many companies have also been caught in a price war.

Will China's construction machinery industry enter the winter? Many people in the industry believe that it is very difficult for the industry to have explosive growth again. However, under the support of multiple positive factors, there will not be a major downturn. For example, during the "12th Five-Year Plan" period, the central government will invest more than 200 billion yuan in rural road construction and the civil aviation industry infrastructure will reach 425 billion yuan. The next ten years will see the investment in water resources reach 4 trillion yuan. It will exceed one trillion yuan. The huge infrastructure investment plan means that the construction machinery industry still has ample room for development.

“My most conservative estimate is that the construction machinery industry still has 20 years of good days to pass. If you are slightly optimistic, you have at least 50 years of good days. If you are more optimistic, I would say that this industry is a day. Falling industry.” Xiang Wenbo said at a press conference to acquire Putzmeister.

According to his colleagues, China’s current urbanization rate is only equivalent to Japan’s level in the 1960s. Japan’s urbanization rate was greatly increased during the 1960s and 1990s, and Komatsu took advantage of this. The period of time has grown rapidly. “The situation in China today is very similar to the situation in Japan at that time, and we have a larger national territory and it is possible that more Chinese Komatsu will be born.”

For domestic machinery giants such as Sany Heavy Industry and Zoomlion, being able to affix “European Manufacturing” labels is undoubtedly an important step in the process of creating “China’s Komatsu” or “China’s Caterpillar”.