M & A CritiqueIn a bid to increase its global footprints abroad, automotive component supplier Amtek Auto Ltd, backed by investors like Warburg Pincus and Chrys Capital, had signed an agreement to acquire substantial business interests of Germany’s Kuepper Group of Companies.
The acquisition complemented Amtek Group’s existing operations and global manufacturing platform and brought synergy with Amtek Group’s core expertise in casting and forging operations. The transaction provided Amtek Group the muchneeded access to hightech German machining technology and significant machining capabilities in a highly synergetic product range. The deal also added new products and customers from Europe like BMW, Daimler, and Volkswagen.
About the Amtek Group:
Founded in 1985 and headquartered in Gurgaon, Amtek Group is one of the largest integrated automobile component manufacturers in India with a strong global presence. It has also become one of the world’s largest global forging and integrated machining companies. The Group has operations across Forging, Iron and Aluminium Casting, Machining and SubAssemblies. Currently, Amtek Group, along with its subsidiaries, operates around 60 facilities in India, the UK, Germany, Brazil, Italy, Mexico, Russia and the US. The Amtek Group is comprised of the listed corporate entities Amtek Auto, Amtek India, Ahmednagar Forgings, JMT Auto and other subsidiaries.
Amtek Auto Limited (Amtek Auto) is the flagship company of Amtek Group and is one of the largest integrated automotive component manufacturers in India with a strong global presence. The company has world class facilities in India, Europe, and North America. In fact, Amtek Auto has significant expertise in forging, grey and ductile iron casting, gravity and highpressure aluminum die casting machining and subassembly. The company also manufactures components for nonauto sectors such as the railways, specialty vehicles, aerospace, agricultural and heavy earth moving equipment.
Amtek India is a majority owned (around 71%) subsidiary of Amtek Auto. Amtek India is a leading provider of iron cast automotive components in India. The company’s product portfolio consists of a range of components for 2/3 wheelers, cars, tractors, light commercial vehicles (LCV), heavy commercial vehicles (HCV) and stationary engines. The categories of components manufactured are connecting rod assemblies, cylinder blocks, flywheel assemblies and turbocharger housing.
About the Kuepper Group :
With a corporate history spanning 80 years, Kuepper Group is a long established supplier of machined castings to the automotive industry with operations in central Europe. It has significant high-end production technologies focused on iron foundries, aluminium diecasting, machining, and assemblies. It has four manufacturing facilities in Germany and one in Hungary with a total of more than 900 employees. It manufactures both iron and aluminium die cast products with a product portfolio that includes high-quality turbocharger castings, turbo modules, turbo housings, transmission parts, suspension and steering parts.
Kuepper is one of the market leaders in turbocharger machined castings. It supplies components to a wide range of customers, primarily in the automotive sector. End markets include passenger cars, light-medium, and heavy commercial vehicles. Top customers of Kuepper include BMW, Daimler, Renault-Nissan, and Volkswagen.
Transaction overview:
Amtek India had entered into an agreement to acquire substantial business interests in Kuepper group of Germany, through its 100 per cent subsidiaries. Financial details of the transaction have not been disclosed yet, but the news report suggests that the deal was valued at €200 million (around Rs 1680 crore). The transaction was funded through internal cash accruals.
Rationale/benefits of the acquisition : ·
The enhanced capacity and product range enabled Amtek Group to better service its global OEMs and Tier I blue chip customer base.
· The transaction increased the consolidated capacity of Amtek Group to more than one million tons per year. It also increased the number of manufacturing facilities of Amtek Group in Germany to about eight. Thus, the acquisition reinforced the market position of Amtek Group as one of the world’s largest automotive component suppliers.
Amtek Group’s strategy for growth via inorganic route:
Over the last 25 years, Amtek Group has also grown substantially via inorganic route i.e. joint ventures and acquisitions. Kuepper is the second major acquisition in Europe for Amtek after the purchase of Neumayer Tekfor Group for an estimated 500 million Euros in March 2013. Apart from the two German acquisitions, Amtek also bought a controlling stake in JMT Auto, thus making it a part of one of the largest auto component manufacturing companies in India.
Conclusion:
The success of any acquisition, more particularly foreign ones, largely depends on the effectiveness of the integration postacquisition. With the acquisition, Amtek got completely new market and the new set of customers and even technology and processes which helped it to improve its operations in other places. The experience gained during past alliances and acquisitions was a positive factor for Amtek Group and it certainly helped them to integrate Kuepper Group of companies.
