Download - Taking Ramirent to UK
TAKING RAMIRENT PLC TO UK
Global Marketing
The Team Adi Sandler Harshit Krishna Ida Lovis Irene Mathisen Nina Elvested Shani Belisha Tine Wyller
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What’s in store?
Ramirent Group
Analysis of UK market
Mode of Entry
Marketing and Finance
Global Marketing | Ramirent
Ramirent Group
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Ramirent Group
Ramirent is a Finnish equipment-leasing company founded in 1955
Providing products and services relating to leasing of machinery and equipment for B2B and B2C customers
Europe’s leading equipment leasing companies, marketing leaders
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Ramirent Group cont.
Visible in 13 European and Nordic countries Total revenues of EUR 649.9 million in FY 2012 In Financial Year 2011 there was an increase in
revenues of 22.3% over 2010.
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Product Groups
Light machinery (26%) Lifts (19%) Modules (17%) Safefolding (11%) Power and heating (10%)
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Expansion Process
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Segments
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Analysis of the UK market
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Why UK?
Construction industry in the UK is one of the top five with the highest market shares in Europe
• Equipment leasing industry has one of the highest rental penetration levels in Europe.
• Strong competition - enables Ramirent to compete with the biggest equipment leasing companies
• Positive attitude towards FDI.• A step towards entering the
important Anglo-Saxon market
this graph shows potential in constructions in the UK [home prices go up => construction companies have more demand]
UK house Prices
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Problem Statement
How should Ramirent enter UK in order to proceed a profitable and sustainable
business?
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Political• Member of EU,
NATO, G8, and the UN Security Council
• Stable politics with low risk
• Global ranking: #5 ease of doing business
Economic• 6th largest
economy in the World
• Good transportation infrastructure
• Falling currency• The single
European Market
• Obtained most FDI projects in 2009
• UK market between Scandinavia and central Europe in terms of quality and cost factors
Socio-cultural• UK population:
60.2 million• UK Labour force:
30 million, 2nd largest in EU
• Unemployment rate 7.9%
Technology• 2nd strongest
research base in the world
• EU invests 3% of GDP in R&D support programmes by 2020
• Strong ICT infrastructure
• Secures companies’ IPR through the UK Intellectual Property Office
Global Marketing 12
PEST
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The Extent
of Competi
tive Rivalry:
Threat of new entrants:• High capital
requirements due to technology investments
• High switching costs related to the buyers
• Difficult to differentiate
The bargaining power of buyers:• Easily take over
the role of Ramirent
• Undifferentiated products
• Customer base range from the construction sector to private households
Threat of substitutes:• Buy equipment
The bargaining power of suppliers:• The number of
suppliers are high
• Few substitutes• Integrate the
value-added process
Competitive Rivalry• Highly
fragmanted• 14 000 rental
companies• UK: 80% rental
penetration• High costs
related to storage
• Difficult to differentiate products and services
Porter’sFive Forces
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International Competitors in the U.K
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STRENGTH• Strong position in most of
Europe• One of Europe's largest
equipment fleets• Stable economies• Profitable growth• Sets the industry
benchmark• High quality-safety
standards
WEAKNESSES• Weak position in Western
Europe
OPPORTUNITIES• Potential growth in the
overall European market• UK as a pogressive
economy with a favourable investment climate
• Positive economic progression
THREATS• Suppliers can sell their
product straight to construction companies
• The construction companies can buy their own products
• High competitive rivalry
SW
OT
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Mode of Entry
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Mode of Entry
Acquisition Need high degree of control (quality consideration) Market expansion (industry saturating fast in
Europe) Firm expertise and resources (can’t venture into
Asia) Four factors:
Compatible target (similar industry, firm values) Potential target’s existing products, services and
sales Financial viability of the new entity Learning potential / future opportunities
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Mode of Entry
Ideally the business location should be in or around those major centres where construction industry was found to have the highest demand
Location London Birmingham Leeds Glasgow
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Mode of Entry
Target company features Equipment leasing company Experienced in UK Not very large in size (≈10% of our assets and revenues)
Combine their local know-how and connections and our international expertise and resources
Complementary skillset
Guidance for our
expansionOnly a gateway to the market
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Mode of Entry
Ideal choice of target company Small size Senior and well experienced Good knowledge and understanding of the
market Equipment rental industry Moderately successful Relatively small share market Honest and reliable High standards in quality and safety
JG Martin Plant Hire, TP Hire Co.
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Marketing and Finance
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Products:• Same products as in the
other countries.• High technology
products and better quality service gives us an competitor advantage
• Expand to value added services like equipment training
Price• The prices for the
products will be approximately the same as in other markets, but we need to do some local adaptions
Placement• London, Birmingham,
Leeds and Glasgow • Main competition and
most demand localized here
• Use knowledge from the acquired company
Promotions• Use the popular
Ramirent brand name• Position: quality leader• Aggressive advertising to
our B2B customers • Local and national
advertisement
Ma
rke
tin
g M
ix
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Financial Scenario
Closely linked to state of UK economy / industry Unprecedented downturn - fallout of recession Ramirent geographically diversified; resilient Slow consolidation underway in industry in UK
Rutland bought Brandon Hire, HSS Hire’s mgmt buyout Market size projection £1.9bn in UK 53% share - top 10 players, highly fragmented
thereafter Tough competition expected from leading players
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Financial Justification
Revenues / Profits follow investments in capacity (assets) with a 1 year lag
Investments important for growth in sector
Cash flows from operations and efficiency gains can offset cash flows into investing
2004 2005 2006 2007 2008 2009 2010 20110
50
100
150
200
250
300
Gross investments in non-current assetsGross investments, % of net sales
2004 2005 2006 2007 2008 2009 2010 2011
-300 000
-200 000
-100 000
0
100 000
200 000
300 000
Net cash generated from operating activitiesNet cash flow of investing activitiesNet cash flow of financing activities
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Capability to AcquireDebt Capacity
Speedy Hire 33.25%HSS Hire 36.04%
Brandon Hire 42.53%Hewden Hire 51.22%
Ashtead Group 157.85%Cargotec Group 140.38%
Industry Average 76.88%Ramirent Group 40.70%
Debt Position (mn EUR) 262.8Debt capacity (mn EUR) 233.6
Shares overvalued, can use in acquisition
Debt levels much lower than peers, can deploy for expansion purposes
Cash position not very strong due to recent acquisitions and investing activities
Equity ValuationDCF
valuation4.8 EUR
Current Price6.2 EUR
Overvalued
Total Assets (Ramirent)
801.11
Approx Assets (Target) 80.11
Cash Balance (mn EUR)
2. 431
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Benefits from Acquisition
Case in Point: Central Europe (Poland, Hungary, Czech Republic, Slovakia) 12380 equipment leasing firms (near saturated,
fragmented market, like that in UK) Greenfield and Brownfield expansion (mostly
the latter) Ramirent average net sales growth y-o-y (1997-
2011) = 11.9% (at constant currency) Market share (2011) = 3.8% (No1; No2 in entire
Europe) Current Net Sales = 88.7 mn EUR
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Benefits from Acquisition
Conservative projected average sales growth 1st five years = 8% (low base effect) 2nd five years = 6% (half of the central
Europe rate) Terminal period = 4% (stagnant; long term
industry growth rate) Past 10 year average sales growth for
Ramirent PLC = 7.78% (at constant currency)
At 10% of Ramirent’s sales revenue (44.73 mn EUR) Starting Point = 4.47 mn EUR
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Expected Results
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 20270
20
40
60
80
100
120
140
160
Sales Growth
Ramirent UKRamirent PLC
Slow but significant addition to company revenuesAdditional consideration: UK opens up new markets
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Break-even Analysis
Ramirent PLC’s historical gross margin = 69.2%
Ramirent UK’s estimation of gross margin = 34.6% Hidden costs of acquisition
and management change Higher initial investment
expenses Promotion expenses
Cost of acquisition = EUR 80.11 mn
In terms of operating profit, break even in year 12
Sales (EUR mn) Year
4.47 19.30 2
14.51 320.14 426.22 532.79 639.75 747.13 854.96 963.25 1072.04 1181.18 1290.68 13
100.57 14110.85 15121.55 16
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Assumptions
Ramirent finds an acquisition target that fits the bill
Ramirent’s reputation for above standard quality earns it the brand image it requires
Ramirent’s high quality service is not compromised by local cost pressures and is successfully adapted
No crisis on parent company’s end The conservative estimates materialize
(we expect the company is capable of exceeding them by local adaptation)
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Thank You
Data Sources:• MarketLine• Ramirent Website• Vault company guides• Euromonitor GMID• EBSCO host database• www.telegraph.co.uk• www.duedil.com• Datamonitor 360• www.equipmenthirenews.com