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These acquisitions will lead to more effi cient use of capital and investment in equipment and technologies.”—CHRIS ROSBROOK, EDGEVIEW PARTNERS


ers is diffi cult, especially those with domestic exposure and not a lot of foreign exposure, so they are looking to satisfy their shareholders’ growth objectives by acquiring [other busi- nesses],” Rosbrook said. So what does an increase in mergers


and acquisitions mean for buyers of castings? Rosbrook does not expect it to be a detriment to capacity—some buyers are reopening shuttered shops— but he does believe it makes it more important than ever to drill down on where capacity is available. “On the iron side, you have from


40% [capacity utilization] in some places to 100% in others,” he said. “As a buyer of castings, you have to ask if that capacity is where you want it.” Rosbrook believes buyers are going


to see top-tier metalcasters continue to invest in their processes and push the lower level fi rms to do the same or go out of business. Because the number of metalcasting facilities continues to decline, only those that can increase levels of productivity will survive. “It’s going to be a marketplace


where working with key partners as true development partners is critical,” he said. “[Buyers will need] to view castings not as commodities but as en- gineered products and work with sup- pliers to develop them. T at is the key to moving forward in this industry.”


Buying for Strategy When Cosma International,


Brampton, Ontario, Canada, acquired a four-facility European diecasting


PURCHASING CHECKLIST


CHRIS ROSBROOK, EDGEVIEW PARTNERS, CHARLOTTE, N.C., SAID BUYERS SHOULD REMEMBER THE FOLLOWING WHEN CONSIDERING THE TRENDS IN THE METAL CASTING SUPPLY LANDSCAPE: • The majority of metalcasting industry acquisitions in recent years have been horizontal—metalcasters acquiring metalcasters. These acquisitions enable more effi cient use of capital for investments in processes, equipment and technologies.


• The industry remains highly fragmented and has some excess capacity. • The difference between metalcasters investing in the future and those that are not will continue to grow more pronounced.


• Metalcasting facilities investing in engineering capabilities will be increasingly well positioned to act as development part- ners with their customers. This collaboration is necessary to realize the numerous benefi ts of castings relative to other processes and products.  Chris Rosbrook


fi rm last November, it was the second time in 2011 the company had made a strategic acquisition. Last August, it purchased a permanent mold automo- tive company. “T e technologies gained from


[BDW Technologies Group, Schwa- ben, Germany] will complement the low-pressure casting capabilities we recently acquired from Grenville Cast- ings, [Smith Falls, Ontario, Canada],” Horst Prelog, company president, said at the time of the second acquisition. A strategic acquisition is one made


by a company looking to add a new fi rm to its existing expertise and help it grow its existing market share. Today, Cosma has 47 manufacturing facilities and 25 product development and engineering centers worldwide. “T e activity by corporate buyers has been very strong,” Rosbrook said. “A few foundry groups have the scale and capital required to make a sizable acquisition. If you look back over the most recent transactions that have involved a corporate buyer, most have a cross border aspect.” Most of these deals have been


horizontal—one metalcasting group acquiring another. Vertical integration (where a company purchases a metal- casting organization to supply castings to its other operations) has been less common, Rosbrook said. He believes this leaves buyers in a good position to leverage diff erent prospective suppli- ers, up to the point where the industry consolidates too much. “The industry remains highly


fragmented, which is easy to say when you still have more than 2,000 foundries,” Rosbrook said. “The bigger players [still have] relatively small market share.”


Buying as an Investment


While some in the metalcast- ing and end-user community have a negative perception of private equity interests, one thing is certain: their interest in the metalcasting industry is increasing. While the volume of general private equity purchases has not rebounded to peak levels, evidence shows the available capital from these fi rms is now in excess of $430 billion. According to Rosbrook, that money


28 | METAL CASTING DESIGN & PURCHASING | Mar/Apr 2012


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