Its Spring and Consolidation is in the Air!
It’s Spring. New life is in the air. Sheep are having Lambs, Birds fill nests with chicks, new growth is seen everywhere. And parking companies are consolidating. They are melding, they are buying one another and forming larger and more formidable organizations.
We have in the past few months seen FAAC buy Zeag, then Datapark, now Magnetic Automation. Standard in acquiring Central. You can look for a number of European companies purchasing US manufacturers in the near future. I can’t talk about it but you may hear some rumblings in June at the IPI.
So, is this a good thing or a bad thing? It depends on the wisdom of the purchasing company. We have seen financial institutions buy parking operators only to run them into the ground and have to declare bankruptcy of their “infrastructure” units. We have seen parking companies invest in other parking companies to the great credit of both.
It is important that the buying company keep the best of the new company and only shed itself of the worst. Now is not the time for egos. It’s the time for wisdom. For instance, when NationsBank bought Bank of America they wisely held the Bank of America name even though NationsBank was the purchaser and B of A at the time was failing due to a bad investment in a hedge fund. The board in North Carolina (NationsBank’s home) knew that Bank of America was the name that should survive.
Chrysler is owned by Fiat – the original idea being that Fiat would introduce high mileage European style vehicles to the US. However Fiat quickly found that the money makers in the US were the SUV’s and light truck brands and continued to promote them. In addition it begin to open the European markets to these high profit cars. Plus there are rumors about Fiat’s Ferrari unit using engineering and design technology from Chrysler.
I have been told by people who should know that all parking is local. The long start up time experienced by some European equipment manufacturers expanding into the US related in good part to their lack of understanding of the US parking market. It’s different here than in Europe and parking systems require different features.
Likewise parking operators who move into different markets, usually through acquisition, take a ‘one size fits all’ approach at their peril. While one company wisely kept the management of newly acquired smaller operators in Los Angeles in place and prospered, another decimated the successful management of the companies it purchased in Manhattan and struggled. Local knowledge is extremely important.
Companies are purchased for two reasons, because they are failing, or because they are prospering. Recent purchases in the parking manufacturing sector seem to relate to prospering companies. The surviving boards of directors would do well to determine just what it was that made those companies successful and nurture those factors.
When Amano bought Cincinnati Time they virtually closed the entire product line, however they kept and nurtured Cincinnati’s powerful dealer network, in the end creating a more flexible and responsive organization. They not only removed a competitor from the field of play, they strengthened their distribution network.
Time will tell, of course, but consolidation can bring benefits. Larger companies often have resources to invest in R and D and in service and support that was formerly unavailable to smaller companies. Sometimes they bring together technologies that are synergistic, a merging that would be impossible if the companies remained separate.
Employees that are left jobless as the result of a merger are forced to move on, and in doing so may bring new ideas and innovation to the industry that was stifled in their previous lives. We will see perhaps new small companies springing up that will provide nimble and striking hardware and software to rival their owner’s former bosses. Boutique parking operators that know the local business scene can compete with their larger rivals and perhaps even make both better.
There is a lot of money sitting on the sidelines due to the economic climate. Wise companies are looking for deals and have the cash to act on them. Whether it’s an Italian or Spanish manufacturer, a French or US operator, or a Canadian pension fund, money is there and it’s being used.
Stay tuned – more of this to come.