Could Zoomlion run Terex?

From a short term investor point of view, the Zoomlion proposal may seem like a good deal. At the time of the offer, Zoomlion was offering a significant premium on Terex's share price. But, is it a deal that would help build Terex in the long term, and provide a good ongoing return for investors with an eye to the future of the company? Would it be a good deal for Terex's customers and employees?

I think many people in the crane industry would have doubts. So far, Chinese companies have not managed to persuade buyers in developed markets that they can provide the aftersales support that is needed for high-end cranes. Joint venture and similar deals between Western and Chinese crane companies have not typically performed well for anyone.

A key part of any concern over a Zoomlion acquisition is what, exactly, the Chinese company hopes to achieve from the deal. Is it looking just to buy Terex's sales network and customer relationships? Or is it hoping to share in the knowledge and experience of those sales networks?

A few years ago, as Western companies struggled and Chinese manufacturers were looking for new routes in the markets like the EU, many of us thought that Chinese investors were just looking to buy sales. But, when one looks at deals like Sany's acquisition of Putzmeister, XCMG buying Schwing Stetter, or Zoomlion's purchase of CIFA, it becomes clear that these companies are increasingly looking to the long term, towards adopting global standards of quality assurance and support.

At the same time, these deals allow the Chinese to buy global talent and top tier technoiogy: marketing and design teams that are used to developing products for customers established markets; supply chain controls and quality assurance that deliver reliable cranes and consistent parts supply; and executive teams that are used to running global crane companies.

Even if the intention of the Chinese buyers is to make the most of this broad knowledge, the question for their management will be to run their acquisitions in a way that allows them to learn from the companies they buy. I understand that this is very much the intention of the Chinese politicians who influence state-backed businesses like Zoomlion.

That does not mean that a Chinese-owned Terex would be better than a tie up between the Americans and the Finns. But maybe it indicates that the decision for Terex's directors and shareholders is not as simple as it first looks.

Will North editor
wnorth@cranestodaymagazine.com