FRANKFURT - American suppliers are getting choosier about their European acquisitions.
Now that Tier 1 suppliers have established themselves overseas, some appear to be abandoning their early growth-at-any-cost tactics, said Klaus Pflum, an acquisitions specialist at the investment bank Salomon Smith Barney.
'They're not just buying sales in Europe as they did before,' Pflum said. 'The big U.S. strategic acquirers now do very focused acquisitions.'
Salomon Smith Barney is one of the big players in automotive corporate finance. Recent deals include the Renault-Nissan merger, TI Group PLC's acquisition of Walbro Corp., and Kolbenschmidt Pierburg AG's purchase of Zoellner Pistons.
'Even bigger groups are now trying to focus because they do not have the money to spend on r&d in all sectors,' said Pflum.
CORE BUSINESS IS KEY
He points to TRW Inc.'s decision to put the former LucasVarity diesel and TRW's engine component business up for sale, and Delphi Automotive Systems' disposal of its lighting and seating businesses.
Dana Corp. says it wants to focus on a limited number of core business areas in the future, after growing rapidly by acquiring a range of businesses in Europe.
'Historically, almost two-thirds of our growth has been in internal, organic growth and one-third acquisition,' said a Dana spokesman. 'The recent acquisition activity has changed that ratio, but we anticipate more organic growth in the future.'
'Being a consolidator is a difficult thing to do,' said Karl Storrie, president of Dura Automotive Systems Inc. 'You have to develop the skills to do it, and a lot of people have done it wrong.'
Dura has been a very active consolidator in Europe in the past few years, focusing on cables, doors, windows and mechanisms. Dura has acquired Schade in Germany and Adwest in England.
'We have been very careful to stay inside of the technology that we already understand,' Storrie said.
The drive to focus is also affecting fast-growing groups assembled by financial groups in recent years.
'A lot of the big groups that have been put together by financial buyers are currently in the process of being sold,' said Pflum. 'It is partly because the investor appetite and multiples for an initial public offering, especially in North America, are going down.
'It is not that easy to raise money now,' he said. 'Most parts companies do not show the growth rates of telecom or high-tech companies.'
Salomon Smith Barney now sees a lot of European suppliers setting up operations in the United States or Asia, as automakers pressure them to establish a global presence.
Faurecia's recently announced seating contract with General Motors underlines that the big automakers would like four or five global players in each sector, said Pflum.
He said European companies have been kept out of the United States by the high prices for component makers there.
'They are now getting more opportunities in the core sectors in the U.S.A.,' said Pflum. But he believes the move into Asia will be slower.