FRANKFURT - The nature of US investment in the European supply industry is changing, according to Klaus Pflum, an automotive mergers and acquisitions specialist at the investment banking house Salomon Smith Barney.
'They're not just buying turnover or sales in Europe as they did before,' said Pflum. 'The big US strategic acquirers now do very focused acquisitions.'
Salomon Smith Barney is one of the bigger players in automotive corporate finance. Recent deals include Renault/Nissan, TI Group/Walbro and Kolbenschmidt-Pierburg/ Zoellner Pistons.
'Even bigger groups are now trying to focus because they do not have the money to spend on R&D in all sectors,' said Pflum.
He points to TRW's decision to put the former LucasVarity diesel and TRW's engine component business up for sale, and Delphi Automotive's disposal of its lighting and seating businesses.
US supplier Dana says it wants to focus on a limited number of core business areas in the future, after growing rapidly by acquiring a range of businesses in Europe.
'Historically almost two-thirds of our growth has been in internal, organic growth and one-third acquisition,' said a Dana spokesman. 'The recent acquisition activity has changed that ratio but we anticipate more organic growth in the future.'
'Being a consolidator is a difficult thing to do,' said Karl Storrie, president and chief executive of Dura Automotive Systems. 'You have to develop the skills to do it and a lot of people have done it wrong.'
Dura has been a very active consolidator in Europe in the last few years - focusing on cables, doors, windows and mechanisms. Dura has acquired Schade in Germany and Adwest in the UK.
'We have been very careful to stay inside of the technology that we already understand,' said Storrie.
The drive to focus is also affecting fast-growing groups assembled by financial groups in recent years.
'A lot of the big groups that have been put together by financial buyers are currently in the process of being sold,' said Pflum. 'It is partly because the investor appetite and multiples for an initial public offering, especially in North America, are going down.
'It is not that easy to raise money now,' he said. 'Most parts companies do not show the growth rates of telecom or high-tech companies.'
Salomon Smith Barney now sees a lot of European suppliers moving toward the USA or Asia, 'really forced by the OEMs.'
Faurecia's recently announced seating contract with General Motors underlines that the big OEMs would like four or five global players in each sector, said Pflum.
He said European companies have been kept out of the USA by the high prices for component makers there.
'They are now getting more opportunities in the core sectors in the USA,' said Pflum. But he believes the move into Asia will be slower.