M&A Critique

TVS Motor buys UK-based iconic bike brand Norton

In a landmark deal, India’s leading two-wheeler manufacturer TVS Motor Company has acquired the iconic 122-year-old United Kingdom bike brand Norton for 16 million pounds, or around Rs 150 crore in an all cash transaction. The Chennai-based company finalised the acquisition through Project 303 Bidco Ltd, a newly incorporated company under its Singapore subsidiary TVS Motor Singapore, specifically to acquire Norton. The deal reflects TVS’s rising prominence in the international two-wheeler market and marks the trend of Indian companies acquiring an iconic British brand, after Jaguar Land Rover became part of Tata Motors.

The deal, according to Sudarshan Venu, joint managing director, TVS Motor is in line with the company’s effort to cater to the aspirations of discerning motorcycle customers. He underlined that Norton would continue to retain its distinctive identity with dedicated business plans and TVS Motor will work closely with the customers and employees of the British company.

It is bolt on acquisition for TVS Motor and now it has motorcycle models in all range.

The funding has been through internal accruals. It is an asset purchase as Norton has been going through a tough time with its annual sales plunging to 500 units in the past two years. TVS Motor has not taken any past liabilities or responsibilities.

In recent times, TVS Motor has been quite active in acquiring companies. In March this year, it made additional investments in New York City-based big data analytics startup Scienaptic Systems, a company set up in 2014 by Pankaj Kulshreshtha. This was done to augment the company’s technology platform to improve customer experience. Last year, it invested $3.85 million in startup Tagbox Solutions, a machine learning company. TVS had also invested in Pune-based Altizon Systems, a company that develops solutions based on the industrial Internet of Things.

About TVS Motor

It is the third-largest motorcycle company in India. In FY20, it recorded net sales of Rs 18,849 crore as compared with Rs 20,160 crore in FY19. The company reported net profit of Rs 655 in FY20 as compared with Rs 724 crore in FY19. It has an annual sale of more than three million units and an annual capacity of over four million vehicles. The company is the second-largest exporter in India with exports to over 60 countries.

Table 1: Financials of TVS Motor

Particulars FY16 FY17 FY18 FY19 FY20
Sales 11,377 12,463 16,295 20,160 18,849
Other Income 91 165 145 25 52
Total Income 11,468 12,628 16,440 20,185 18,901
Total Expenditure 10,823 11,911 15,171 18,441 17,173
EBIT 645 717 1,268 1,745 1,729
Interest 70 60 338 663 855
Tax 151 149 266 357 219
Net Profit 424 509 664 724 655

Strategy: Global leverage by acquiring Norton

The deal marks TVS Motor’s entry into the top end (above 850cc) of the superbike market. Known as an iconic bike brand, Norton was established in 1898 in Birmingham, England by James Lando Norton. The company’s ownerships have changed hands five times in the past. The last one, before TVS acquired the company, was in 2008 when British businessman Stuart Garner bought the brand from an American owner. Norton manufactures classic and luxury motorcycles models like V4 RR, Dominator, Commando 961 Cafe Racer MKII, Commando 961 Sport MKII and more.  The first Norton bike was called Energette, powered by a 143cc engine sourced from Belgium. In 1907, it built its own engine Big Four with 633cc capacity and it remained in production for over five decades. The company supplied motorcycles to the British army during both the World Wars.

At present, Norton sells superbikes in 21 countries at a price range of 25,000-45,000 pounds with custom-built features. Under the new owner, Norton’s production pipeline would include 650cc Atlas range. For the past few years, Norton has been reporting lower sales because of the slowdown in economy in Europe and America and was looking for a buyer to sell the company.  Norton, however, has great global appeal and TVS Motor can nurture the brand globally. There is a strong synergy between the two companies and Norton can leverage TVS Motor’s global reach and supply chain capabilities to expand to newer markets. The acquisition will help TVS to introduce newer and bigger displacement motorcycles in the future from the technological know-how of Norton. This will help TVS to widen its product line-up and launch more premium products in the domestic and international market in the future.

TVS has indicated that it will build a new plant in the UK which will be the new facility for the design and development of existing and upcoming motorcycles from the British brand. After the deal, manufacturing will continue in the existing Norton’s facility and all the customer orders will be done from the plant. However, future sales will take a hit because of the Covid-19 pandemic, which has hit the world, especially in the US and UK. As Norton is not a capex-heavy business, there will not be any immediate cost-reduction measures.

Competition: TVS gears up for competition

The acquisition of Norton will help TVS Motor to compete with Royal Enfield in the niche category of motorcycles in the domestic and international market. At present, Royal Enfield of Eicher Motors has a huge domestic market share in bikes across the 350cc-650cc engine. The deal gives TVS the much-needed edge in technology capabilities to make bigger engines – especially two- and four-cylinder powertrains.

Indian companies have a strong penchant for British automobile companies, especially the iconic ones.

In fact, with more people moving up to the mid-segment motorbikes, the category has attracted several manufacturers including Bajaj Auto, which tied up with UK’s Triumph Motorcycles. Similarly, Mahindra & Mahindra Ltd, which acquired British and Czech brands BSA and Jawa, respectively, and the iconic US-based Harley-Davidson Motor Company among others want to expand both in the domestic and international market.

Following Trend: Penchant for British automobile companies

Going by the past transactions, it clearly indicates that Indian companies have a strong penchant for British automobile companies, especially the iconic ones. In 2008, Tata Motors acquired the Jaguar Land Rover businesses from Ford Motor Company for a net consideration of US $2.3 billion in an all-cash transaction. Jaguar and Land Rover were two iconic British brands. Post-merger, Jaguar Land Rover retained their distinctive identities and continue to pursue their respective business plans. In fact, in the midst of the global financial crisis when the deal happened, everyone wrote off the deal. But with the astute leadership of Tata Motors, the ailing JLR was turned around, which helped Tata Motors post a steep rise in profit three years later.

Similarly, Eicher Motors is the proud owner of bike brand Royal Enfield.  In 1990, Royal Enfield collaborated with the Eicher Group and merged with it in 1994. Royal Enfield currently sells motorcycles in more than 50 countries. In 2015, Royal Enfield took over a UK-based motorcycle design and manufacturing firm, Harris Performance Products, which had developed the chassis of the Royal Enfield Continental GT Cafe Racer.

Even Bajaj Auto and UK-based Triumph Motorcycles announced long term, non-equity partnership that would focus on building a brand-new range of mid-capacity motorcycles. Triumph currently is the largest British motorcycle manufacturer. The partnership will help Triumph to expand its global reach and get a foothold in the high-volume emerging markets, like India. Bajaj will become one of Triumph’s key distribution partners in crucial new markets around the globe. Going forward it also will take over Triumph’s Indian distribution activities, when exactly that will happen has not been confirmed yet.


It is bolt-on acquisition for TVS Motor and now it has motorcycle models in all range like its peers and global reach. It seems the acquisition cost is mainly for the brand, though it goes some assets and employees. Any scaling up of production most likely to happen in India to capture cost efficiencies and to upgrade its present products.  It needs to work hard to integrate in terms of technology and marketing and distribution reach of its present products with Norton iconic products.

As acquisition is in the middle of black swan event of the Covid-19 pandemic, TVS should put in place a plan to bring back the company on track and gain people’s faith in the iconic British brand. That will indeed be an additional and immediate challenge for TVS as the very first priority post-acquisition will be to restore the operational continuity of Norton as soon as possible.

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M & A Critique