Don't get fooled again!IN terms of business activity, two of the first signs that better times are ahead are recoveries in the spend on advertising and marketing, and increased mergers and acquisitions activity (M&A).
The recent news about Bahrain based Investcorp's purchase of Dainese, Warren Buffet's Berkshire Hathaway takeover of Detlev Louis and ChinaChem's audacious grab for Pirelli would suggest that the investment community is fulfilling its end of the bargain - the mergers and acquisitions, strategic investment, partnerships and alliances industry is active and playing its part in the dynamic of a recovering capitalist economy.
Kudos to Dainese and Detlev Louis for being such a well run businesses that organisations such as Investcorp and Berkshire Hathaway should be impressed enough to want to buy them - but don't get fooled again.
Don't get fooled into thinking that the pictures seen of Warren Buffet sat astride a Geico Insurance promo custom bike (yes, he owns Geico among many, many other businesses), and his bailing-out of Harley-Davidson's ailing finance arm in 2009 are symptoms of a desire to be in the motorcycle industry as such. They are not.
Equally, although Pirelli Metzeler are big players in our small pond, ChinaChem isn't spending €7 bn so owner Ren Jianxix can get a better deal next time he needs a new set of radials for his Panigale!
Don't expect to start seeing a bunch of 'suits' in Bahrain swapping their corporate uniform for race leathers any time soon.
The lingua franca of the investment community isn't two wheels, it is profit - and where that profit comes from, how it is made, is way less important than how much there is and how long it can be relied on for.
'mentioning no names, others are vulnerable'
In fact, what is noticeable is that there is a distinct lack of M&A activity taking place on a European motorcycle industry business to European motorcycle industry business basis. The investments, equity deals and "strategic alliances" that have been seen have involved Asian (mostly Chinese and Indian) businesses taking positions in or buying out European or North American motorcycle makers or parts and accessories manufacturers and brand owners.
There has been very little intra-market activity as such and this points to the low levels of capital available to and being generated by motorcycle businesses, and the still uncertain degree of macro economic confidence being seen in Europe.
With the spectre of deflation and a Japanese style "lost decade" of economic activity still haunting Europe, it is no surprise that the fragility of the "recovery" was seen in the motorcycle registration data seen in January and February.
ACEM's data for the first two months of the year point to Europe as a whole being down by around 3 percent. While March and April do appear to have seen some recovery in Germany and other markets where growth stalled (see our StatZone reports on pages 6 and 7 of this edition), there is no question that market progress could still stall.
In that context it is not surprising that the motorcycle market itself is not yet generating sufficient capital for rivals or fellow-travellers to buy each other or merge, nor that the list of businesses that are attracting outside interest is thin.
It is instructive that where there has been intra-Europe activity, it has been automotive led - VAG taking over Ducati, Mercedes taking a stake in MV Agusta and so forth. Mentioning no names, some other of our well known manufacturers are vulnerable at this time, exactly because while their earnings are sound, their ability to defend themselves against take-overs, or secure their positions by themselves being acquisitive, is non existent.
The last intra-market deals were KTM's purchase of Husqvarna from BMW, and Harley-Davidson's MV Agusta fire-sale to its prior owners for $1. As is well known, outside Europe the Indian PTW and automotive corporates have been active, and the Chinese motorcycle makers continue to eye Europe for fast-track branding short-cuts.
The most active and arguably most successful powersports industry business at this time is Polaris. They have been spending heavily on new businesses, and extensions and new facilities worldwide and have been able to do because they have been generating capital and have seen their share price climb from below $10 in 2009 to over $160 recently.
While all (well, most) motorcycle manufacturers have been diversifying their brand offer, none have done it as well as Polaris. It is to be hoped that if there are to be further acquisitions of European manufacturers, it might be from an intra-market player such as Polaris.
