Short break in the consolidation battle

Kronberg-Taunus. German auto suppliers lost interest in making any acquisitions last year, according to a study by M&A International.

German-based auto suppliers participated in 37 acquisitions in 2003, said the consulting group, which specializes in company acquisitions. That compares to 50 acquisitions in 2000 and 45 in 2001.

The overall total of acquisitions in German industry in 2003 was 1,174, down about 30 percent from the previous year. "The auto industry is certainly following the trend," said auto industry expert Ali Tasbasi, director of M&A.

Tasbasi said the slow German economy meant more businesses were for sale in 2003 than in 2002. But there also were fewer interested and financially strong investors and often a big difference between what buyers would offer and what sellers wanted. Other acquisitions failed because financing could not be obtained.

Tasbasi also said some sectors have largely completed consolidation, including the braking sector. M&A international counted three acquisitions in 2002, such the takeover of Bendix Commercial Vehicle Systems by the Knorr Bremse AG in Munich, but none last year.

Similarly, in the engineering service sector, 2003 was quiet after seven acquisitions in 2002, one being the takeover of the IVM GmbH in Munich by Edscha AG in Remscheid.

But M&A International noticed an increase in acquisitions within engines, drive train systems and engine components sector and among electrics and electronics suppliers. Twelve motor specialists lost their independence last year, more than twice the number in 2002.

Tasbasi believes the buyers were interested mainly in the know-how of the companies they target. "Strategic buyers have expanded and strengthened their core competences by making acquisitions," he said.

The proportion of investors from abroad and domestic investors was almost balanced, with a ratio of 14 German to 16 international buyers. In seven cases both buyer and seller were from Germany.

Tasbasi expects more acquisitions this year. He said that many companies are being forced to enter new markets in eastern Europe, South America or Asia to escape recession in Europe and North America and to follow their clients.

Tags: Suppliers

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