Siemens Elpro Acquisition

Merger’s & Acquisitions (Siemens India Ltd & Elpro international ltd.)

Introduction Siemens India Ltd:technology giant in more than 190 countries, employing some 475,000 people worldwide energy, industry, communication, information, transportation, healthcare, components and lighting products in varied capacity from 17 KV to 800 KV.

Elpro international ltd:one of the few manufacturers outside the United States manufacturing Surge Arresters and Zinc Oxide Discs. with GE technology – acknowledged to be the best in the world. Some of Elpro’s national clients include ABB India; (BHEL); (NTPC); Reliance Industries; Siemens India; Tata Power Company international clients include GE USA; Isoelectric Italy; KWPA Iran; Saudi Electric Company; Taiwan Power Company and Virginia Transformers USA.

Pre Acquisition Status Siemens Loss of business due to incomplete product portfolio stiff competition in India and developing countries by L&T, ABB, Kirloskar & Elpro. import isolators from Europe or from China. outsource isolator manufacturing to the competitors which took undue advantage. looking for an opportunity which would facilitate them to produce isolator cost-effectively & efficiently.

Elpro International Ltd one of the few manufacturers outside the United States manufacturing Surge Arresters and Zinc Oxide Discs. acquired an Isolator & Switchgear manufacturing unit in 1994 in Hyderabad. diversified models of isolators products only. had no funds and lack of time to build new facility before competitors would peep into their business.

Core reason for Acquisition: Siemens was looking for ready diversified isolators business with ready customer base and available market.

Siemens acquires Elpro's isolator business: Mr. J. Schubert, Managing Director of Siemens Ltd, said, "The acquisition of the isolator business from Elpro International is part of our investment-led growth strategy. This new business will enable us to close the gap in our PTD portfolio and further strengthen our position in the growing power sector." Siemens Ltd on 3rd may 2006 announced the acquisition of the isolator business of Elpro International Ltd. All cash transaction; Purchase consideration of $ 5 million. Payment through reserves and surplus. integrated with Siemens Power Transmission and Distribution division, with all its 108 employees

STRATEGIC RATIONALE FOR ACQUISITION Siemens had no isolators in their business portfolio in India. used to import the isolators from Germany or any other Siemens factory. Competitors affecting the breaker business of Siemens by forcing clients. Imported isolators not sellable in African, south-Asian, and southAmerican countries. facilities for manufacture of variety of isolators was readily available due to acquisition. It would have taken at least 10yrs for Siemens India Ltd to design, produce & introduce that product into market & that would have taken about 100crores.

Elpro International Ltd: Elpro Ltd foreseen the stagnancy in the present product market they were in. nor any opportunities which had potential growth for the company. company has 30 acres of land located at Chinchwad, Pune of which 15 acres is not in use Plan to use that land for real estate business. Get into insurance business.

Post Acquisition Status  Advantages to Siemens India.  Access to South American, South Asian and African market.  facilitated Siemens India Ltd for expansion in varied models in isolators .  availability of isolators in portfolio has minimised threat.  Elpro had 10% of market share in South Asian countries, Elpro’s market share and customers were readily available to Siemens India.  Siemens is well known for cost efficient production so, they will be earning more profits on the same sales volume.

Advantages to Elpro International Ltd  U.S. $ 5 million is a very good consideration for a business wherein only one product of isolator was being Produced.  they had foreseen the stagnancy in the business and no growth.  it was obvious for them to sell off their business because sooner or later the big rivals like L&T, Siemens, ABB & Kirloskar would have hampered their business.  they were interested in new business like real estates and insurance sector, which are in boom now.  can concentrate on other business Surge Arresters and Zinc Oxide Discs

Conclusion Inorganic Method is the method adopted by most of the Organizations today with the only motive of achieving their goals within less time and less cost incurred

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