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19 January 2023

By International Construction

Eager to benefit from a post-pandemic demand for equipment, construction equipment manufacturers have been engaged in an arms race to buy up technology firms to make their machines more efficient, more environmentally sustainable and safer.

Ola Kinnander, media relations manager at equipment giant Epiroc, reels off a list of names; Mernok Elektronik (South Africa), Remote Control Technologies (Australia), Wain-Roy (US), RNP Mexico; just a few of the companies the equipment giant has acquired in 2022.

“Acquisitions are part of our strategy for profitable growth,” Kinnander says, pointing to a total of nine acquisitions made in 2022 for companies all over the world specialising in everything from wireless connectivity and collision avoidance systems to rock drill manufacturers and excavator attachments. And that comes after the Swedish giant made eight acquisitions in 2021.

Construction mergers and acquisitions

Like many construction and mining OEMs, Epiroc has been engaged in an acquisitions arms race, eager to benefit from a post-pandemic boom to buy up firms offering technology. The goal is to make its machines more efficient, more environmentally sustainable and safer, as well as to gain market share in a market where skills shortages, inflation and supply chain issues have been causing bottlenecks.

For equipment manufacturers, like Epiroc, the race has become particularly intensified over the past couple of years because rising demand for commodities has prompted raw materials groups to expand their operations.

“We are growing organically but also through acquisitions,” Kinnander says. “They not only add to our revenues but bring us vital technologies and expertise in areas that we are focusing on, including automation, digitalisation, electrification, and the aftermarket. For us it is therefore natural to have more acquisitions than divestments.”

Epiroc’s latest purchase, announced on 13 December 2022, is CR, a 400-strong ground engaging tools provider headquartered in Australia, which produces cast lips, teeth and protective shrouds installed on mining buckets and loaders and whose digital solutions include a real-time GET loss detection system.

Specialist acquisitions

“We focus our acquisitions on the niches that we operate in, which are hard rock mining, mining exploration, and civil engineering and construction,” Kinnander says.

“The acquired company should also be attractive from a growth and profitability point of view and have strong synergies and strategic fit with Epiroc, and they should also be able to have a leadership position within the niche.” In fact, of the seventeen companies acquired by Epiroc over the last two years, around half produce specialist machinery or electrification expertise.

“New and relevant technology – for example that they provide advanced connectivity solutions or electrification infrastructure – and the competent teams that come with the acquisitions can certainly also be strong factors for why we would be interested in acquiring a specific company,” Kinnander reveals.

And Epiroc is not alone. Caterpillar, Komatsu and Sandvik are just a few of the multinationals which have been on the acquisition trail as part of this new technology arms race. Sandvik, which also specialises in manufacturing engineering and construction equipment, purchased nine new companies in 2022 and 14 the previous year.

“Shift to growth is a central part of our strategy with focus on organic growth as well as acquisitions,” a Sandvik spokesman says. “We have a strong balance sheet and good cashflow generation that allows for further investments.”

Sandvik points out that research and development traditionally forms a major part of its investment strategy while many of its recent acquisitions have been based around getting hold of cutting-edge digital technology and expanding the company’s expertise in the solid round tools sector.

“We focus on the digital shift where Sandvik enables companies in many industries to boost productivity and become more sustainable with digital solutions, from automated mines with self driving machines to factories where tool data and machining instructions are updated from the cloud,” the spokesman adds.

“Solid round tools is a fast growing segment in which we want to expand. The demand is driven by the transition towards lighter materials and requirements on high precision tools.”

And Caterpillar, the world’s largest supplier of both mining and construction equipment, too has been boosting its offering with a number of key acquisitions.

These include Australia-based Minetec which supplies high-precision tracking and data communications networks and software to improve productivity and safety. They also, in May 2022, included US-based Tangent Energy, which uses Energy as a Service (Eaas) software to monitor customers’ energy use patterns and then come up with ways of dispatching resources to maximise return and monitise results without disrupting normal business operations – something which can be especially beneficial for customers with high peak energy demands such as mining operations and data centres.

And Caterpillar started 2023 announcing an investment in US-based battery technology company Lithos Energy, which produces lithium-ion battery packs.

Carl Gustaf Göransson, a former president of construction at CNH Industrial and managing director of Volvo Construction Equipment, who jointly runs off-road consultancy ABCG with Alan Berger, says current business conditions make expansion and diversification particularly attractive to OEMs.

“Throwing money at a problem can both add scale and competence fast,” he says. “What comes in addition to this in CE [the construction equipment manufacturing industry] is the fact that we have a traditional business undergoing a large transformation in many areas. This includes new business models (e.g., power by the hour), technology, autonomy and the shift from internal combustion engines to electric power.”

Göransson describes the unprecedented pressures on OEMs to buy up tech firms as the ‘triple technology challenge’, with manufacturers rushing to add technology quickly in three key areas; connected products and automation, alternative fuels and disruptive business models.

Examples of recent acquisitions based around connected products and automation include Doosan Bobcat’s strategic equity investment in US-based startup radar technologies company Ainstein AI to develop hi-tec radar sensor systems for Bobcat equipment.

Deals featuring alternative fuels include CNH Industrial’s decision in April 2021 to take a minority stake in UK-based Bennamann, a company specialising in developing biogas and liquid biofuel from animal waste.

They also include Caterpillar’s 2021 investment in US-based CarbonPoint, a carbon capture specialist that provides technology to concentrate and capture CO2 which can then be either used or buried so that it is kept out of the Earth’s atmosphere.

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