CV & NRMM SERVICES

M&A Briefing

www.kgpauto.com

In collaboration with

Briefing 9

KGP’s Briefings for the Commercial Vehicle and Non-Road Mobile Machinery Markets

Page | 1 E: Consult@kgpauto.com W: www.kgpauto.com T: +44 1332 856301

KGP, a management

and technology con-

sultancy, has special-

ised in the Commeri-

cal Vehicle (CV) and

Nonr-Road Mobile

Machinery (NRMM)

market for 30 years.

See our website for

information on:

Regular Services

• CV Engine and

Aftertreatment

Forecast

• NRMM Engine and

Aftertreatment

Forecast

New Services

• NRMM Driveline

Forecast

• NRMM Hybridisa-

tion and Electrifica-

tion Forecast

• CV Hybridisation

and Electrification

Forecast

KGP’s Partners:

As the automotive world prepares for the

most significant changes in decades,

OEMs and Tier 1 Suppliers are beginning

to strategically position themselves in order

to be successful in the ‘new-look’ industry.

Joint ventures, mergers and acquisitions

will play a vital role in this, OEMs and sup-

pliers which fall behind in strategic invest-

ment, could suffer in the coming years.

This briefing reviews 2017’s M&A activity

and high-profile JVs and also introduces

KGPs financial analysis of both the CV

and NRMM markets.

Top 10 M&A of 2017

Figure 1 Top 10 M&A in 2017 ($/m)

In the NRMM market, the biggest acquisi-

tion of 2017 was John Deere purchasing

Wirtgen Group for $5.2 billion. Wirtgen spe-

cialises in road construction equipment with

annual sales of €2.59 billion in 2016. The

acquisition of this German based company

supports Deere’s long-term aim to expand

both the agriculture and construction busi-

ness globally.

Komatsu completed their acquisition of U.S.

based manufacturer of mining machinery

Joy Global in April 2017 for approximately

$3.7 billion including and debt. The acquisi-

tion allows Komatsu to offer a full range of

mining solutions and adds over 10,000 em-

ployees with strong mining industry experi-

ence and knowledge. For the year ending

October 2015, Joy Global generated sales

of $3.2 billion with a net loss of $1.2 billion.

In April 2017, AAM completed their $3.3 bil-

lion acquisition of Metaldyne Performance

Group (MPG) who generated net sales of

$3.0 billion in 2015. MPG produce compo-

nents for powertrain and safety solutions for

light, commercial and industrial OEMs. The

acquisition will broaden AAM’s capabilities

as a Tier 1 automotive supplier. An addition-

al benefit of the acquisition is the reduction

of reliance on General Motors who are cur-

rently AAM’s largest customer generation

revenue of $7 billion for the company.

Atlas Copco’s re-focussing saw it sell its

road building business to the larger compet-

itor, Fayat Group in mid-2017.

Some of the most interesting M&A activity of

the past couple of years has been the sale

of Terex’s construction machinery business

to a variety of manufacturers. The sale start-

ed back in in 2009 when Bucryrus pur-

chased Terex’s mining division, and contin-

ued in 2014 with Volvo buying Terex’s haul-

er business for $160m. Then in 2016 three

acquisitions occurred with Yanmar purchas-

ing the compaction equipment business in

Germany for $60m; Mecalac buying the

backhoe loader and site dumper business in

Coventry; and Manitou acquiring Terex

Equipment Private Limited based in India.

Manitex also purchased the 49% of ASV, a

skid-steer manufacturer that partly owned

with Terex. In addition to construction equip-

ment, Konecranes has bought Terex’s ma-

terial handling and port solutions business

for $795m. The sale of the construction ma-

chinery business was to allow Terex to fo-

cus on cranes, access equipment and

crushing/screening equipment. Although

2017 sales were down 1.8%, due to the

M&A activity, fourth quarter sales were up

9% in comparison to 2016 for Terex signal-

ling strong performance in the global crane

market.

Hitachi is to increase it’s North American

sales network, to promote the launch of its

Social Innovation Business, along with

strengthening its air compressor business

by acquiring manufacturer Sullair. The ac-

Briefing Paper # 9 – Strategic Positioning —

M&A in CV and Non-Road Sector Paris Kiernan, Senior Analyst

Company Acquired Value ($/m)

John Deere Wirtgen 5200

Komatsu Joy Global 3700

AAM Metaldyne 3300

Various Terex 1250*

Hitachi Sullair 1245

Timken Various 500*

Dana Brevini and U.S. Mfg 445

Fayat Atlas Copco 400*

BorgWarner Sevcon 200

WABCO R.H. Sheppard 145

Mahindra Erkunt Traktor Sanayii 117

*estimate

KGP’s Briefings for the Commercial Vehicle and Non-Road Mobile Machinery Markets

Page | 2 E: Consult@kgpauto.com W: www.kgpauto.com T: +44 1332 856301

KGP, a management

and technology con-

sultancy, has special-

ised in the Commeri-

cal Vehicle (CV) and

Nonr-Road Mobile

Machinery (NRMM)

market for 30 years.

See our website for

information on:

Regular Services

• CV Engine and

Aftertreatment

Forecast

• NRMM Engine and

Aftertreatment

Forecast

New Services

• NRMM Driveline

Forecast

• NRMM Hybridisa-

tion and Electrifica-

tion Forecast

• CV Hybridisation

and Electrification

Forecast

KGP’s Partners:

quired company will cost a value of $1.245

billion which Hitachi will pay to the parent

Accudyne Industries.

Dana acquired 80% of the power-

transmission and fluid power business of

Brevini Group with the remainder to be pur-

chased by 2020. The total value equates to

$325m and will expand Dana’s current

product portfolio in the NRMM. The acquisi-

tion will also benefit Dana’s initiatives for

hybridisation and electrification. Dana has

also purchased the production operations of

U.S. Manufacturing Corporation for $100m,

this will bring new processes technologies

for Dana’s light-weighting products.

Timken growth strategy has been M&A fo-

cussed for the last 7 years, after their first

major acquisition in 2010. Since then the

company has spent over $1 billion with their

largest acquisition this year purchasing

Groeneveld Group, supplier of on- and off-

highway lubrication solutions, for $280 mil-

lion. In addition to Groeneveld Group, Tim-

ken has also acquired Torsion Control, ABC

Bearings and PT Tech in 2017 along with

Lovejoy and EDT Corporation in the previ-

ous year.

BorgWarner, who serve both the CV and

NRMM market, acquired Sevcon a global

player in electrification technologies. The

acquisition totalled $200m and will aid

BorgWarner in providing propulsion sys-

tems for all applications: combustion, hybrid

and electric. In a similar vein, albeit for

what was likely to be a lower, but undis-

closed transaction price, Federal Modul ac-

quired Controller Powertrain Technologies,

a spin off of powertrain technologies from

Visteon back in 2007.

WABCO has purchased R.H. Sheppard,

who specialise in steering solutions for the

CV market, for $145m. This will benefit

WABCO’s intention of providing break

through technology for active steering to the

CV market.

Mahindra have entered the Turkish tractor

market by acquiring Erkunt Traktor the

fourth largest tractor manufacturer in Turkey

holding 6% market share. In 2016, the Turk-

ish company sold 4700 tractors with reve-

nue of $88m.

Other M&A in the AG sector has been fo-

cussed on implements, with many transac-

tions over the past few years. AGCO

closed its acquisition of Lely’s forage busi-

ness in October 2017, acquiring the brand

and its Dutch plant.

On the CV side Knorr-Bremse made seven

acquisitions in 2016 adding and extra €1

billion in sales for the company. Three of

the acquisitions were commercial vehicle

specialised in commercial vehicles: GT

Group a UK supplier of engine air manage-

ment systems, Bosch’s CVS transmission in

Japan, tedrive Steering Systems based in

Germany allows Knorr-Bremse to enter the

steering business. The acquisition of Voss-

loh Kiepe who are mainly in the rail industry

also add to Knorr-Bremse commercial vehi-

cle business as they provide electrical sys-

tems for buses.

Knorr-Bremse hoped to acquire the Swe-

dish based brake system manufactures for

commercial vehicles. However the bid has

been terminated as the deal could not be

completed inside the current acceptance

period after Haldex withdrew their support

for the merger. However, the company has

successfully entered a joint venture with

DongFeng to produce AMTs for the Chi-

nese CV market.

Joint Ventures

Some interesting joint ventures have been

agreed during the last year, especially in the

CV market, with Navistar and VW and

Eaton and Cummins partnering as well as

the re-combining of Ashok Leyland and Hi-

no. In the NRMM market, the Liebherr and

Kamaz joint venture looks an exciting pro-

spect.

Volkswagen truck and bus purchased a

16.6% stake in North American truck manu-

facturer Navistar in September 2017, after

agreeing an alliance in March. The partner-

ship will result in an all-electric medium-duty

truck launched by 2019 in North America.

The two companies will also collaboratively

work on digitisation and connection of

trucks and big bore diesel powertrains. The

alliance is expected to save the two compa-

nies $500 million in the first five years.

Navistar and Volkswagen already had a co-

operation to produce the Navistar Big Bore

engine, which was originally 11 and 13l,

with the 11l later dropped.

Ashok Leyland continue their long-term

KGP’s Briefings for the Commercial Vehicle and Non-Road Mobile Machinery Markets

Page | 3 E: Consult@kgpauto.com W: www.kgpauto.com T: +44 1332 856301

KGP, a management

and technology con-

sultancy, has special-

ised in the Commeri-

cal Vehicle (CV) and

Nonr-Road Mobile

Machinery (NRMM)

market for 30 years.

See our website for

information on:

Regular Services

• CV Engine and

Aftertreatment

Forecast

• NRMM Engine and

Aftertreatment

Forecast

New Services

• NRMM Driveline

Forecast

• NRMM Hybridisa-

tion and Electrifica-

tion Forecast

• CV Hybridisation

and Electrification

Forecast

KGP’s Partners:

partnership with Hino to add Mutual Coop-

eration Agreement in which Ashok Leyland

will use Hino’s engine technology to devel-

op Euro VI and BS VI engines. Hino will

strengthen its competitiveness in India by

using Ashok Leyland to supports their en-

gine parts procurement

Eaton and Cummins have joined together to

form Eaton Cummins Automated Transmis-

sion, with Cummins to pay $600m to Eaton

for 50% of the JV. The JV will benefit Cum-

mins’ growth strategy to increase product

offerings and extend their global presence.

The JV will provide transmissions for the

medium and heavy-duty CV market, with

Endurant being the first product developed

by the JV. Cummins recently also went on

to acquire Brammo, a CV battery supplier in

October 2017 and Johnson Matthey’s bat-

tery business at the end of January 2018,

strengthening its intent to no longer be con-

sidered ‘just’ an engine producer (even

though it has strong component companies

already in the exhaust, filter and turbo-

charger business). On the transmission

side Valeo also finally completed the acqui-

sition of FTE Automotive, agreed in 2016.

Liebherr and Kamaz’s JV started production

January 2018 for their jointly developed 6-

cylinder diesel engine. The JV engine will

be the most advanced engine family for

KAMAZ as they seek to enter new markets

and optimise products for customers.

Spin-Offs

During 2017 there was a number of compa-

nies re-positioning in the supply chain. In

late 2017 Delphi Automotive split itself into

Delphi Technologies, focussed on power-

train systems, and Aptiv Plc on autonomous

vehicle technologies.

Bosch Automotive sold its conventional al-

ternator and starter business to a Chinese

manufacturer, ZMJ, with the division being

renamed SEG Automotive under the new

parent.

More is to come in 2018 as Honeywell splits

the company, with its Turbocharger busi-

ness to become a standalone entity sepa-

rate from the aerospace and domestic busi-

ness units. GKN’s future is also uncertain

at the time of publication.

Impact...

With the growing pressure of clean air,

TCO and technology advancements forc-

ing society and OEM/operators drivers to

converge, we are seeing M&A and JV in-

tensifying as suppliers and OEMs are

forced to work together in order to meet

future market requirements. Companies

are becoming more vertically integrated

and supply chain relationships are becom-

ing more frequent and closer.

The electrification hype is fuelling invest-

ments, for example, with both Cummins

and Deutz both acquiring companies who

specialise in electronics in 2017/8 we ex-

pect to see a real shift in the supply chain

for electrification in both the CV and

NRMM markets. A briefing focused on this

topic will be realised in April along with

KGP’s new hybrid and electric study.

Its an interesting time for the players in the

industry as they need to assess an unpre-

dictable future market in order to correctly

time investments and enhance production

portfolios. OEM and suppliers strategy

could reap massive rewards or very dam-

aging losses as the industry changes over

the next decade… only time will tell who

these winners and losers will be.

KGP has spent many years analysing the CV and Non-Road supply chain and is currently developing a model of the financial structure of the segment. It is difficult to include all companies within the analysis but we seek to include all companies with over $250m CV and Non-Road turnover, including machine OEMs. Up and coming tech firms and niche machine OEMs are also includ-ed. The total list covers over 1,000 com-panies in the sector. Analysis covers basic SWOTs - what are the companies key SWOT factors. What sectors does it operate in. What share of the business in total is CV or Non-Road related?

What can it tell you? Which are the top 5 component growth segments? Who are the top 10 players in each segment. Who are the fastest growing mainstream man-ufacturers? Who are the new entrants to watch? Which segments are most at risk from the current drivers? What is the es-timated commodity purchasing from each segment? Which companies may be partner or M&A targets?

KGP’s Briefings for the Commercial Vehicle and Non-Road Mobile Machinery Markets

Page | 4 E: Consult@kgpauto.com W: www.kgpauto.com T: +44 1332 856301

KGP, a management

and technology con-

sultancy, has special-

ised in the Commeri-

cal Vehicle (CV) and

Nonr-Road Mobile

Machinery (NRMM)

market for 30 years.

See our website for

information on:

Regular Services

• CV Engine and

Aftertreatment

Forecast

• NRMM Engine and

Aftertreatment

Forecast

New Services

• NRMM Driveline

Forecast

• NRMM Hybridisa-

tion and Electrifica-

tion Forecast

• CV Hybridisation

and Electrification

Forecast

KGP’s Partners:

Meet us!

KGP will be attending various industry events in Spring 2018. Contact us to arrange a free con-

sultation on Single Client, Multi-Client and Special Reports at any of the following:

• Intermat - 23rd to 28th April - Paris, France

• Integer Europe - 26th to 28th June - Brussels, Belgium

We can also prepare a client specific webinar to introduce our services and provide an industry

overview.

New Products in 2018

• Non-Road Mobile Machinery Electrification and Hybridisation - A Critical Impact Report

• Non-Road Mobile Machinery Electrification and Hybridisation Production Forecast

• Commercial Vehicle Electrification and Hybridisation – A Critical Impact Report

• Commercial Vehicle Electrification and Hybridisation Production Forecast

Briefings

KGP’s free briefings are published twice per month covering Commercial Vehicle and Non-Road

Mobile Machinery topics. Forthcoming briefings will include:

References

• KGP’s Q3 2017 NRMM Engine and Aftertreatment Market Summary Report:- Click Here

• Off-Highway Research International Database Service - Click Here

• KGP’s Q4 2017 CV Engine and Aftertreatment Market Summary Report:- Click Here

• LMC Global Commercial Vehicle Forecast - Click Here

Contacts

Alex Woodrow, Managing Director

alexwoodrow@kgpauto.com

James Dorling, Head of NRMM Services

jamesdorling@kgpauto.com

Paris Kiernan, Analyst

pariskiernan@kgpauto.com

Mick Beeson, Sales Manager

mickbeeson@kgpauto.com

Knibb, Gormezano and Partners

6 Lancaster Park, Newborough Road, Needwood, Staffordshire, DE13 9PD UK

Disclaimer

Information contained in this document has been obtained by Knibb, Gormezano & Partners

from industry sources believed to be reliable. However, because of the possibility of human or

mechanical error by our sources, Knibb Gormezano does not guarantee the accuracy, adequa-

cy, or completeness of any information and is not responsible for any errors or omissions or for

the results obtained from the use of such information.

Copyright Knibb, Gormezano and Partners 2018

10 11 12 13

Briefing NOx Emis-

sions

Batteries for

CV and NRMM

CV CO2

Legislation

Electrification

Supply Chain

Week

commencing

19/03 02/04 16/04 30/04