The geography of Scandinavia–Norway, Sweden, Finland and Denmark–is more like Russia than northern Europe: cities are smaller, and there are greater distances in between them. That has created the conditions for lots of family-owned mobile crane rental firms dotted thinly over the landscape. But over the last decade, they have begun to disappear, not because they fail, but because they are bought out, or merged with larger acquisitive crane rental companies.
Scandinavia also has lots of natural resources. Off the coast of Norway platforms tap submerged oil and gas deposits. Offshore wind farms harness the wind. Mineral reserves in northern Finland and Sweden have nurtured steel mills and other heavy industry. These industries often demand one extreme of Scandinavian lifting work: complex and meticulously planned projects.
On top of these customers are the usual commercial and residential construction contractors, which demand the same pay-by-the hour work for taxi-crane rental as everywhere else in the world. Despite the widely varying safety and project management requirements, all four crane rental companies maintain a presence in each type: construction, industrial, project and taxi-hire.
Partly, industrial work is about having depots in industrial regions: coastal Norway and northern Sweden and Finland. Havator CEO Erkki Hanhirova calls this latter area an industrial ‘banana’ stretching from Sundsvall, Sweden around the northern coast of the Baltic Sea to Vaasa, Finland. “What we aimed to do, and what we did, was to have a network on both sides of the Sweden/Finland border, so there is a synergy to operate on both sides of the Baltic Sea. Of course that way we can transport cranes both ways, by land or with ferries,” Hanhirova says. Half of Havator’s growth—which stands at around 30% a year over the past decade—has come from acquisitions.
“When we operate in five or six different countries, we can balance the capacity of cranes, and we don’t need to sell them in a recession, because we can find work for them in our market area, because it is so wide,” Hanhirova says. In other words, small differences in the construction industries of individual Scandinavian countries have provided opportunities for single-country companies worried about having put all their eggs in one basket. Cross an international border, and the market changes.
Jens Enggaard, of the Enggaard family, which owns Danish crane rental company BMS, explains the value of TP Kranar, its subsidiary in Sweden. “Right now, things are going down in Denmark, but they are good in Sweden. There are synergies with having cranes in both places. Three years ago, the situation was different. Sweden was slow, but Copenhagen (Denmark) was building.”
He says that market pressures are forcing crane companies to work together. “Our prices are not getting better, but our costs are increasing. People have to find synergies.”
The Enggaards bought BMS in two stages, 50% in 2004 by merging its crane rental company Kran Ringen, and the rest in 2007, from construction firm MT Hojgaard. BMS had a 2007 turnover of EUR65m, and owns 200 cranes.
Jens Enggaard describes why Kran Ringen decided to join up with its then-competitor BMS. “In 2004, there were the same reasons for consolidating. Prices were getting bad in relation to costs, and both companies had difficulties. BMS were in our area, and we had cranes in their area. We actually passed each other on the roads. Today, altogether, we have a much better logistics system.”
He admits that he would consider other acquisitions in Sweden, if opportunities arose. “There are quite a few crane rental companies in southern Sweden; there are more competitors. They are all family firms, and that makes things more difficult. I know from my own position; we had thought a lot before joining MT Hojgaard, because then we would not be a family company any more,” he says. “When you are dealing with family companies, there are feelings involved, and of course it is difficult to buy them out.” Now BMS is back to being a family business.
Two family businesses have avoided the disruption of mergers and acquisitions by collaborating on a joint venture. Coastal Norwegian firm Stangeland has joined up with Norwegian, and Swedish, crane rental firm Kynningsrud. In March, the two family-owned companies signed a 50:50 deal to start a new company, Nordic Crane Services.
The deal provides each company with a much bigger market, and a foothold in different markets: oil and gas-project heavy Stangeland shares with Kynningrud’s exposure to construction and industrial markets in southern Norway and Sweden. “We are trying to make the best out of each company. We take the best from each, and are trying to put that together,” explains Trond Helge Skretting, Stangeland manager. “On safety, there is a lot we can do to work together.”
Combined, the companies have 375 employees, 300 cranes, and expect a turnover of NOK 650m (81m EUR) in 2008. Each company continues to buy and own its own cranes, Skretting says, with two notable exceptions. Kynningsrud’s two largest cranes, both Terex-Demag CC 2800s, used for windmill erection, are now owned by Nordic Crane Services. But the companies will share each other’s equipment, and depots. This sharing comes in handy when Stangeland is working on a 50-crane refinery job, Skretting says.
The Enggaard family also have access to project work, not so much through BMS, but through a 50% stake in KR Wind, a Danish wind turbine erection company joint venture with Mammoet. (The Enggaard family also has a 33% stake in Mammoet Norway Holding). KR Wind has expanded vertically by acquiring German special transport firm Brande Maskintransport (BMT), which handles turbine parts on land.
“BMT is the perfect partner and a great asset to KR Wind and our customers”, says John Hartvig Larsen, KR Wind president and CEO, who also takes over BMT. “Through organic growth and acquisitions, it is KR Wind’s offensive business strategy to become one of the world’s leading turnkey suppliers for the wind turbine industry.” The company, which also works in the Americas and Australia, acquired Canadian wind turbine contractor RJS Mechanical earlier in the year.
BMS also uses a kind of vertical integration to help make extra cash. A third of its turnover is from renting aerial work platforms; it has a fleet of 800. “In rental, there is a synergy: we rent cranes and access platforms to the same customers. First they need excavators, then the cranes come, and then the manlifts,” says Jens Enggaard.
Like BMS, Finnish firm Pekkaniska has a big aerial work platform business, which is of great strategic importance, says vice president Jere Penttinen. “Our strategy is to offer our customers all equipment and service related to lifting, whether it’s lifting things or people. The best synergy comes in the area of sales, because our customers know that if they have to lift something, they can always call us and get what they need.”
Pekkaniska’s business is split in half from taxi crane and project work, although the company’s largest cranes, the 750t capacity Liebherr LR 1750 and 500t capacity LTM 1500 tend to work on energy-related jobs. The company is a huge Liebherr customer, having received more than 100 units of mobile cranes in 2006-7. It also bought Liebherr’s largest crawler, the 1,350t capacity Liebherr LR 11350, which will be delivered in 2009.
The company aims at the top end of its markets, which, apart from Finland, are in eastern Europe: Latvia, Lithuania, Ukraine, Russia and Belarus. “Our strategy is to always rent our cranes with well-trained operators, because we want to set ourselves apart from competition also in that area,” Penttinen says. The company has set up its own training school, in cooperation with Liebherr and local authorities.
Its Finnish competitor Havator, which expects a turnover of EUR90m in 2008, has also focused on building up the company to handle more project work. “Renting cranes for just an hourly rate, at five Euros cheaper than your neighbour, is not a good strategy to grow. It is better to build up your skill in the company’s capacity for larger packages,” says CEO Erkki Hanhirova.
Although industrial contracts might be the richest pickings, such project work makes demands of its own, Hanhirova says. “We don’t want to be the biggest; we want to be the best,” Hanhirova says. “It is challenging enough to stand up with all of this safety and environmental issues that are coming at us all the time. It is the largest and most important thing in operations. We are recruiting safety engineers just to follow up on workers’ daily safety. You can’t do that in a company of 20 people. But we, as a company of 550 employees, find that money invested in this comes back many times over, to look after what we do and what our people do. This safety thing is a costly and bumpy road, but it’s the only issue that counts in the future,” he says.
“You have to educate people all the time, and follow the requirements of big refineries and oil and gas and steel plants. These tough requirements we are trying to standardise throughout all of our operations.” Havator employs five safety managers, each based in a separate country. The company is also recruiting mainly white-collar workers—engineers and project managers—to manage the planning demands of these lifts. These two jobs make up more than a fifth of the company staff. “In construction, the client is only interested in the price per hour, nothing else. In industry, they are interested in how you can do this differently, or faster. Factory shutdowns in industry cost millions, it is a totally different scope of thinking about things.”
He says that the company is diversifying into the steel erection business, as well as running crane rental and haulage. “Half of our business is in taxi work. But industrial projects and industrial clients are our main target,” Hanhirova says. “The amount of cranes that we have is not that important any more, but the flexibility of the company, and how many different areas it can handle, are. Sometimes we get crane jobs through the transport department, and vice versa.”
Havator continues to acquire companies: Swedish firm Allyft in February 2008, Transports Priuska in March, Holmstroems Kranar in May. In 2008 its Polar Lift company joined forces with Polarbase AS in the Barents Sea. The Allyft deal he regards as particularly significant. “We can now offer our customers lifting, transportation and installation services, all from the same house. This business idea represents the future of the entire Havator Group in Scandinavia, the Baltic countries and Russia,” Hanhirova wrote in an article in the Havator in-house magazine.
Hanhirova admits that some of his ideas for the business are not new. He says that in project work he has applied the strategy of global heavy lift firm Mammoet, whose visual icon is an elephant, to the smaller region of Scandinavia. “We are Dumbo,” Hanhirova says, referring to the baby elephant in the Disney film of the same name.
