19.03.2019

Consolidation - the good, the bad and the ugly?

The past few years have seen an increasing number of acquisitions - from both manufacturers and rental companies - the latest being Tadano’s agreement to acquire the Demag mobile crane business from Terex.

News of such acquisitions can set alarm bells ringing with suppliers and employees for obvious reasons, but also with customers concerned over less choice, the loss of some favoured products, a change of local contacts and higher prices.

The coming together of Demag and Tadano leaves three major European manufacturers of All Terrain cranes, its impact will be has a more significant impact on European and North American crane buyers who rarely consider suppliers outside of Europe, the USA or Japan. In other markets buyer have rarely had more choice of crane or aerial work platform manufacturers, given the rapid growth and development of Chinese manufacturers.

The acquisition, however, might just encourage companies such as Kato - which re-entered the European market with three city cranes in 2015 - to step up activities in Europe and the USA. Kato will unveil a new 100 tonne AT KA1000Rx All Terrain at Bauma, designed for the Asian market, it could do well in Europe as its components however are mainly European including a EU Stage IV diesel.

The choice of crawler cranes is not affected given there is no overlap between the Tadano and Demag crawler crane lines - in fact they are complimentary - but also most crawler cranes are now built in Asia by Kobelco, Hitachi Sumitomo, Sany, XCMG, Zoomlion and others.

At one time it looked as if the global aerial work platform market would be dominated by Genie and JLG, but in recent years companies such as Skyjack, Haulotte and Niftylift have increased their market shares, as have several smaller companies. More recently an increasing number of Chinese producers such as Dingli, Sinoboom, and LGMG have made substantial inroads in Europe and North America.

In the rental market consolidation has always been a factor with the last big wave seeing United Rentals ‘roll-up’ the US general rental market, while Ainscough Crane Hire was the latest to try and ‘consolidate’ the UK crane rental market to create a dominant national supplier. As with the others before, it has struggled to maintain the position it created through acquisitions. It can also be argued that United only survived the financial crisis through creative accounting that was not discovered until after the market picked up. It has since gone on to become an $8 billion business, but one that appears to require ever larger acquisitions to maintain its lead.

A reduction in the number of competitors in a market has can be a catalyst for start-ups to flourish, while stimulating growth of smaller players, as they exploit the confusion and uncertainties typically caused by mergers. Perhaps the Tadano Demag deal will encourage companies such as Link-Belt or Kato to expand their horizons? Far from restricting the market, acquisitions can result in more choice over the longer term.

Mark Darwin

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