Ingersoll-Rand ups investment with M&A
JIANG JINGJING,China Business Weekly staff
SHANGHAI: Starting out as a mining business 130 years ago, Ingersoll-Rand Company Ltd decided to diversify its business scope through merger and acquisition (M&A) two decades ago. Recently the company planned to put over 200 different brands it had merged under the company name.
Ingersoll-Rand, a world leading diversified industrial firm, is always courageous and aggressive in its making strategies.
Now, the US firm has its eyes on China, which so far accounts for 5 per cent of the company's global business. It believes the Chinese market will be the firm's future.
"China's fast-growing economy gives every reason for Ingersoll-Rand to focus on the market. From road building to supermarket refrigeration systems, we have business opportunities everywhere," said Herb Henkel, president and chief executive officer of the firm.
The president revealed that Ingersoll-Rand aims to double its sales revenues in China to US$1 billion in the coming three years.
Talking about the strategy, Henkel said it will increase Ingersoll-Rand's investment scale in China by M&As.
He said in an exclusive interview with China Business Weekly that the firm is seeking M&A candidates to prolong its product line in China.
"We will be interested in firms which own new technologies, especially in security and safety systems," Henkel said.
The firm has been discussing with potential candidates for three months, and some deals will be finalized within weeks.
Henkel declined to name its new partners, only saying they are small- and medium-sized companies, with annual revenues of US$25 to 30 million.
Henkel is confident in the co-operation with the new partners, despite an unpleasant experience with Luoyang Refrigeration Machinery Factory.
In August, Ingersoll-Rand acquired the remaining 45-per-cent stake in a commercial refrigeration equipment manufacturing business based in Luoyang, Central China's Henan Province.
Together with Ingersoll-Rand's Hussmann unit, which owns 55 per cent of the factory, Ingersoll-Rand wholly acquired the Luoyang plant.
"The two sides of the joint venture then faced a major divergence - the Chinese side wished to share the profits while Ingersoll-Rand aimed to make investments to enlarge capacity," Henkel said.
"When the two parties could not reach an agreement, we were forced to break up," he said.
The Luoyang plant employs 300 people and primarily produces Hussmann commercial refrigeration equipment for perishable-goods distribution operations as well as grocery and convenience stores.
"This transaction, on the other hand, reflects our commitment to accelerating Ingersoll-Rand's participation in the Chinese market and the entire Asia-Pacific region," Henkel said.
"The Luoyang facility enhances our ability to deliver the full range of commercial climate-control solutions throughout the Asia-Pacific region, and extends Ingersoll-Rand's overall capabilities in China. In addition, we will benefit from production efficiencies by leveraging the China-based Hussmann and Thermo King manufacturing operations to meet regional demand for climate-control products and solutions," he added.
Ingersoll-Rand also manufactures Thermo King transport refrigeration equipment at facilities in Shenzhen and Suzhou.
Ingersoll-Rand now operates 12 manufacturing facilities in China that produce a wide range of products, including air compressors, compact construction equipment and climate-control technologies for trucks and buses.
As one of the leading companies in the top 500 global industrial enterprises, Ingersoll-Rand has been named one of the world's 100 best-managed companies for four consecutive years by US Industry Week.
Entering China in 1974, Ingersoll-Rand has introduced nearly all its products and over 200 brands to China.
(Business Weekly 01/26/2005 page11)
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