Aug 25, 2007

PE Firms to Help China and India Shop for U.S. Brands

As we have been arguing for some time, a new era of leadership by incumbent, branded product manufacturers is emerging in western markets. Not surprisingly, powerful southern hemisphere multinationals and contract manufacturers are themselves no longer content with second-tier positions (and margins). As a reuslt, more and more of these sleeper powerhouses are setting their sites on stronger participation in this new global environment.

Of course, Lenovo's purchase of IBM's PC business has been a classic case study in how not to over-simplify the demands of gaining branded product market share. But a new breed of southern competition is emerging nonetheless, and incumbent western players should take note:

The chairman of India's Tata Group said his company is interested in acquiring the Jaguar and Land Rover units of Ford Motor Company, Chairman Ratan indicates that the Tata Group has been seeking overseas acquisitions to gain global visibility after thriving for decades in a protected home market. Mr. Tata said Jaguar and Land Rover could help expand the Tata Motors unit's world-wide reach and reduce its dependence on the Indian market, which accounts for more than 90% of its sales.

A Chinese technology company has expressed interest in buying Seagate Technology, a U.S. maker of branded computer disk drives in the United States. While Seagate, which is the largest drive maker in the United States, was not for sale, the company also said that if a high enough premium was offered to shareholders it would be difficult to stop.
Watch for more and more cross-border M&A activity as strategic action shifts from low-cost overseas sourcing to marketplace growth - through direct ownership of trusted local brands. And as western debt markets panic into retreat, global Private Equity firms will be tapping their soverign funding sources to get a jump start on this emerging trend!

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