M&As, emerging markets key for big players
Updated: 2007-11-30 17:14
Regulators are cautious about foreign investment in China's construction equipment industry, as the sector has become strategically important for the nation.
US buyout giant The Carlyle Group is still waiting for approval to invest in top Chinese player Xugong Group Construction Machinery Co Ltd after a lengthy process.
But Ron DeFeo, chairman and CEO of the world's third largest construction equipment maker Terex, said it is important to consider the added value a foreign company can bring to a Chinese partner and the nation's economy.
He said in an interview in Beijing that Terex plans to make acquisitions in China.
"I am not coming here to tell Chinese companies how to run their business, but with an open mentality to collaborate to help accelerate their business globally," said DeFeo.
Many Chinese construction machine makers including Sany, Longgong and Xugong have established overseas offices or factories, but their success is small scale and mainly in developing markets. In developed markets like the US or Europe, these companies still face difficulties.
As the global construction equipment business consolidates frequently and competition builds on a larger scale, acquisition and emerging market are key terms for every big player. In July, South Korean firm DooSan paid $4.9 billion for Bobcat under the ninth largest player Ingersoll Rand, taking DooSan to seventh place in the industry.
Japanese firms like Komatsu and South Korean companies like DooSan, which came to the Chinese market earlier, also benefited from the growth of the construction market in the world's fastest growing economy. Caterpillar also said in October it plans to quadruple its sales in China to $4 billion in 2010.
For Terex, which has been growing at an enviable 28 percent on average in the past 11 years, mergers and acquisitions (M&As) have been key.
DeFeo said his company aimed to achieve 10 percent organic growth worldwide a year and another 10 percent from M&A activities.
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