Striking synergies through overseas acquisitions and working towards a win-win situation for the entities is quite a challenge. The process could, however, be smooth when the acquiring company belongs to a corporate group steeped in traditional values like the T V Sundram Iyengar & Sons. This is evident from the way in which TVS Logistics Services Ltd has gone about maintaining continuity at Multipart, a logistics supply chain company headquartered in Chorley, Lancashire, U.K. (TVS Logistics had last month announced the acquisition of Multipart (Holdings) for an undisclosed amount.)
Multipart is a Rs. 500 crore (65 million pound sterling) company catering to automobile industry, defence and utility sectors. It employs around 250 people. “Multipart will be a showcase for TVS Logistics’ expansion/acquisition in the U.K. and Europe,” said R. Dinesh, Managing Director of TVS Logistics Services.
Cost benefit
In an interaction with a group of visiting Indian journalists and media persons from the U.K. in Chorley last week, he said physical presence in the U.K. was important for TVS Logistics. The acquisition would bring significant sourcing synergies and cost benefits to Multipart customers. Mr. Dinesh said the level of value addition that it could provide to the customers was one of the key aspects that determine acquisitions by TVS Logistics.
Chris Gateley, Managing Director of Multipart, who took the media group around the 2.68 lakh sq. ft. warehouse in Chorley, said TVS would bring to Multipart lot of contract opportunities for growth and significantly contribute to an existing cost base. For TVS the benefits of the acquisition include leveraging the strong brand of Multipart, opportunities to benefit from low-cost country (LCC) sourcing and develop into OE (original equipment) line feed and direct sales, he said.
The buy-out by TVS Logistics would help Multipart address its funds constraint by accessing finance on the strength of the balance sheet of the Chennai firm. Mr. Gateley and his management team had bought out Imperial Multipart (Holdings), as the company was then called, in a 20 million pound sterling in 2008. The client base of Multipart includes Isuzu Trucks, JCB, Iveco and Optare.
According to Mr. Dinesh, TVS Logistics will be investing Rs.125 crore to expand Multipart’s business by 2010. “We are looking at further consolidating our presence in India, the U.S. and Europe through joint ventures or acquisitions and will the South American and Chinese markets in 2010.” Mr. Dinesh said. TVS Logistics would cross a turnover of Rs.1,000 crore by 2010 and to Rs.2500 crore by 2012, he added.
Listing out the new contracts, Mr. Gateley said last month it got a business from a brewery company for Drinksflow, a service created for the beverage sector, to supply parts to pubs. The contract would help the brewery company reduce its inventory of equipment in pubs such as handpumps used to dispense drinks from 7 million pound sterling to 4 million pound sterling. Multipart has also bagged a two-year rolling contract early this month from Brush Turbo Generators.
Multipart provides the conventional logistics services of warehousing and distribution and adds value to them through an extensive range of inhouse support capabilities. These extend from tailored IT solutions, electronic part cataloguing, technical publishing, strategic procurement, inventory management and supplier management to reverse logistics that complete the supply chain cycle.
At the Chorley facility, over 1.5 million pound sterling was spent on creating 40,000 small parts locations housed within twenty 12 metre tall Hanel lean Lifts linked to an automated conveyor system capable of processing 200 totes an hour. This installation is one of the largest combined vertical storage solutions in Europe.
The journalists were also taken on a visit to the facility of the Northamptonshire-based TVS C.J. Components Ltd. TVS Logistics acquired C.J. Components Ltd, a family-owned firm, starting with 80 per cent stake in 2004 and the balance 20 per cent about 18 months ago.
According to Stephen Williams, Manager-U.K. operations of the unit located in Daventry, the acquisition by TVS has given the much required financial strength and support. TVS C.J. Components, which is targeting a turnover of 4 million pound sterling this year as against 3.7 million pound sterling last year, has grown significantly in the last five years, from six to 12 key customers and from 80 to 120 suppliers, including four TVS group companies.
The company’s expertise is not in merely handling the logistics. It helps identify suppliers for its customers, especially from low-cost countries such as India and China.
On the operations, he said at the 45,000 sq ft warehouse with 6,500 pallet locations components were sourced from different suppliers and countries, properly packed and labelled before being shipped to the company’s customers. “We provide full supply chain solution,” he said, adding that the customer list included Cummins Engine Company, Cummins Turbo Company and Perkins Engine Company.
Way forward
According to Gillian L. Jarrett, Director, TVS C.J. Components, tying up with an established name like TVS is clearly the way forward if the company were to grow. This was mainly on account of the strategy of TVS against looking at such acquisitions merely from the perspective of physical assets.
Mr. Dinesh told a meeting organised by business and trade promotion organisations in Manchester that there was no magic mantra behind the growth of Indian companies other than the fact that the genuine prosperity was reaching out to large populace. It was also about the humbleness and openness with which you approach the country (where you are acquiring a company).
