Aus E-Mag M&A China/Deutschland 2013
The acquisition of Dürrkopp Adler by ShangGong in 2005 was one of the first M&A deals with a Chinese strategic investor in Germany. This year SGSB acquired two other German companies, Pfaff an dKSL Keilmann Group. Zhang Min, CEO of ShangGong, explains the reasons for the strong German bias.
Unternehmeredition: Mr. Zhang, SBGB acquired two German companies up to now. What makes the German companies so interesting for you?
Zhang: We were interested in the technology, R&D, and the production in Germany. Dürkopp Adler and Pfaff are very old companies in the sewing industry. The brands are very important for us to increase our image. Both companies have a lot of products with leading technology, which can match with our Japanese competitors. In the sewing machine industry the Japanese companies occupy the first and second market position. If we want to compete with them, we will need a good technology. Dürkopp Adler and Pfaff are the right choice for us from a strategic point of view. With the help of them we enhanced our production efficiency.
What were the major challenges in the Dürkopp Adler deal?
It was a big challenge for us, because nobody trusted us. Especially the banks were not willing to give us money. One closing condition was a credit line of 9 million USD. We went to several German banks. They said that our concept was good. Anyway we did not get the credit line because Dürkopp Adler was in loss. They would not even lend us small amounts of working capital for the target company. Finally we did it with the support of a Shanghai bank. They issued a guarantee to WestLB. So WestLB gave us the credit line of 9 million USD. We closed the deal after seven months and became the majority shareholder of Dürkopp Adler.
What about the German employees and unions?
The unions in Germany are more powerful than in China. They asked me to attend the employees’ meetings and wanted me to promise that the production would not be moved to China. My answer was clear: According to my strategy Bielefeld will be the R&D center for the whole company. I promised to keep the Bielefeld factory as high-end production plant. I had an intense discussion with the management team about the reorganization of the Bielefeld production site. Due to the labor costs we moved the low-end production to Romania and the dye casting to the Czech Republic. We finished this reorganization within nine months. After that Dürkopp Adler immediately became profitable again. And suddenly everybody trusted us because we had obviously made the right decisions. The jobs remained in Bielefeld. As a Chinese Shareholder the biggest challenge was to be trusted by our partners, employees and banks.
What did you learn from Dürkopp Adler regarding the Pfaff deal?
After a long discussion with the Pfaff shareholder and the management team we promised to maintain the jobs in Kaiserslautern for a long term and keep Pfaff as an independent company. Anyway we have to integrate Pfaff into the Dürrkopp Adler and the SGSB organization. Otherwise we would not get rid of the losses. The management agreed. Now they do their best to shift some tasks to the Czech Republic and to China. At first the management and the employees wanted to keep everything in Kaiserslautern. The costs for that would not have been acceptable.
Looking back, what were the key factors for successful takeovers of German companies?
Communication is the key. It is also important to have a German management team leading a German company. We only sent two Chinese managers to Germany. Their task was not to control the German management. They should improve the communication between SGSB and the local management team.
You are currently acquiring another German company. Can you already talk about some details?
We already signed the contract. The company produces custom-made products, not standard machines like Dürkopp Adler and Pfaff. They buy the machine head from Dürkopp Adler or Pfaff and make the automatic solution for our customers. It is a very special company which can expand with the help of our money. They need financing to be innovative, but they were too small to get money from the banks. Their business is different from Dürkopp Adler and Pfaff. KFR stands for the new business and enhances our R&D capacity.
Mr. Zhang, thank you very much for the interesting conversation!
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