Time To Hit The Acquisition Trail?

Hardly a day goes by without some tale or other of economic woe – the sub prime crisis, falling stock markets worldwide; all the indicators suggest that this is a time to batten down the hatches and ride out the storm. However, analysts Plimsoll Publishing have just produced their annual acquisition survey of the Tyre Manufacturers & Distributors industry and their message is that, for the strongest companies in the market, this could be the ideal time to buy a competitor.

The study looks at the fortunes of 207 companies and it finds that the industry “is awash with cash and companies should use this time to go on the offensive and buy up the competition.”
The report found that the driving force of this move in the market is a group of 78 companies who, over the last few years have built up a stock resource of cash, putting them in a very strong position. David Pattison, Senior Acquisition Analyst, comments:
“There is absolute evidence that the rich are getting richer as the gap between those making massive profits and those missing out has widened in the last few years. There has never been a better time for these dynamic companies to splash the cash.”
However, he adds that the profile of acquisition needs to change, saying:

“For years, acquisition activity in the tyre manufacturers & distributors industry has been driven by distressed fire sales. Acquirers have been reluctant to invest heavily, instead they have been content to snap up bargain basement companies often getting bad deals, paying peanuts and getting monkeys. This attitude needs to change. What our report suggests is that companies need to look at the wider strategic picture and spend their money wisely.”
As part of the study, each of the UK’s top 207 tyre manufacturers & distributors companies have been valued and assessed on their future prospects. The report finds that there are 56 companies in the market who would make good strategic acquisitions. These attractive companies are operating in the growth areas of the market and are all extremely profitable.
David Pattison continues: “Having the resources to buy one of these 56 powerful players is the perfect situation. In doing so, you take a strong adversary to your own company out of the market immediately, and it will instantly be generating profitability. The next step is then to focus your attention on the 44 companies we have identified who are failing anyway, pushing them out of the market. This may sound harsh, but if the industry is to develop and evolve then there will need to be casualties. Our latest study shows the candidates least likely to survive 2008 are pretty obvious.”