International Dealer News IDN 124 April/May 2015 | Page 4

•

COMMENT • COMMENT • COMMENT • COMMENT • COMMENT • COMMENT •

Don't get fooled again!
N terms of business activity, two of the first signs that
better times are ahead are recoveries in the spend on
advertising and marketing, and increased mergers and
acquisitions activity (M&A).
The recent news about Bahrain based Investcorp's purchase of
Dainese, Warren Buffet's Berkshire Hathaway takeover of Detlev Louis
and ChinaChem's audacious grab for Pirelli would suggest that the
investment community is fulfilling its end of the bargain - the mergers
and acquisitions, strategic investment, partnerships and alliances
industry is active and playing its part in the dynamic of a recovering
capitalist economy.
Kudos to Dainese and Detlev
Louis for being such a well run
businesses that organisations
such as Investcorp and Berkshire
Hathaway should be impressed
enough to want to buy them but don't get fooled again.
Don't get fooled into thinking
that the pictures seen of Warren
Buffet sat astride a Geico
Insurance promo custom bike
(yes, he owns Geico among many, many other businesses), and his
bailing-out of Harley-Davidson's ailing finance arm in 2009 are
symptoms of a desire to be in the motorcycle industry as such. They are
not.
qually, although Pirelli Metzeler are big players in our small pond,
ChinaChem isn't spending € bn so owner Ren Jianxix can get a
7
better deal next time he needs a new set of radials for his Panigale!
Don't expect to start seeing a bunch of 'suits' in Bahrain swapping
their corporate uniform for race leathers any time soon.
The lingua franca of the investment community isn't two wheels, it is
profit - and where that profit comes from, how it is made, is way less
important than how much there is and how long it can be relied on for.
In fact, what is noticeable is that there is a distinct lack of M&A activity
taking place on a European motorcycle industry business to European
motorcycle industry business basis. The investments, equity deals and
"strategic alliances" that have been seen have involved Asian (mostly
Chinese and Indian) businesses taking positions in or buying out
European or North American motorcycle makers or parts and accessories
manufacturers and brand owners.
There has been very little intra-market activity as such and this points
to the low levels of capital available to and being generated by
motorcycle businesses, and the still uncertain degree of macro economic
confidence being seen in Europe.
With the spectre of deflation and a Japanese style "lost decade" of
economic activity still haunting Europe, it is no surprise that the fragility

I

of the "recovery" was seen in the motorcycle registration data seen in
January and February.
ACEM's data for the first two months of the year point to Europe as
a whole being down by around 3 percent. While March and April do
appear to have seen some recovery in Germany and other markets where
growth stalled (see our StatZone reports on pages 6 and 7 of this
edition), there is no question that market progress could still stall.
In that context it is not surprising that the motorcycle market itself is
not yet generating sufficient capital for rivals or fellow-travellers to buy
each other or merge, nor that the list of businesses that are attracting
outside interest is thin.
It is instructive that where there
has been intra-Europe activity, it has
been automotive led - VAG taking
over Ducati, Mercedes taking a
stake in MV Agusta and so forth.
Mentioning no names, some other
of our well known manufacturers
are vulnerable at this time, exactly
because while their earnings are
sound, their ability to defend
themselves against take-overs, or
secure their positions by themselves being acquisitive, is non existent.
he last intra-market deals were KTM's purchase of Husqvarna from
BMW, and Harley-Davidson's MV Agusta fire-sale to its prior
owners for $1. As is well known, outside Europe the Indian PTW
and automotive corporates have been active, and the Chinese
motorcycle makers continue to eye Europe for fast-track branding shortcuts.
The most active and arguably most successful powersports industry
business at this time is Polaris. They have been spending heavily on new
businesses, and extensions and new facilities worldwide and have been
able to do because they have been generating capital and have seen
their share price climb from below $10 in 2009 to over $160 recently.
While all (well, most) motorcycle manufacturers have been diversifying
their brand offer, none have done it as well as Polaris. It is to be hoped
that if there are to be further acquisitions of European manufacturers, it
might be from an intra-market player such as Polaris.

“mentioning no
names, others are
vulnerable”

E

T

Robin Bradley
Publisher
[e-mail]