EMS@C-LEVEL
As Forbes, Entrepreneur, Fast Company and SCOOP writer, Philip Stoten, continues to talk to EMS (Electronic Manufacturing Services) executives he learns more about their individual and collective experiences and their expectations for their own businesses and for the entire electronic manufacturing industry.
EMS@C-LEVEL
The EMS M&A Rollercoaster: Who’s Buying and Why? With MP Corporate Finance MD Shaan Tharani
In the episode of EMS@ C-Level we explore the intricate world of mergers and acquisitions in the electronics sector. We dive into how global macroeconomic trends impact the strategies companies adopt amid shifting political landscapes. With Shaan Tharani's expertise, we unravel the complexities of M&A, discussing the implications of recent geopolitical changes and how they shape investment decisions.
You'll discover how tariffs and economic uncertainties have influenced corporate strategies, particularly in the burgeoning electronics field. Shaan shares valuable statistics that shed light on investment patterns in the industry, illustrating a landscape filled with both risk and opportunity. We analyze case studies of recent acquisitions, highlighting successful initiatives and what they reveal about market participants’ strategies.
This conversation is particularly relevant for executives looking to navigate these turbulent waters. To remain competitive, businesses must engage in proactive planning and establish a clear M&A strategy that aligns with broader business goals. As we look to the future, the discourse focuses on how to position effectively for forthcoming opportunities while also maintaining a critical eye on market dynamics.
Join us for this enlightening discussion, and if you find value in what we cover, please subscribe, share, or leave a review. Your engagement helps us continue to bring forward-thinking conversations to the forefront!
You can find Shaan on LinkedIn at https://www.linkedin.com/in/shaantharani/ or email him at tharani@mp-corporatefinance.com
Like every episode of EMS@C-Level, this one was sponsored by global inspection leader Koh Young (https://www.kohyoung.com).
You can see video versions of all of the EMS@C-Level pods on our YouTube playlist.
Hello from my house to yours, welcome to EMS at Sea Level. I am joined for the first time this year by Sian Thurani from M&P. Sian, thanks so much for joining me. Last time we spoke it was at Electronica. There were some deals happening and there were some deals in the pipeline. Everything just seems to have moved so fast Since then. We've had the start of the Trump presidency, tariffs, geopolitics it just seems to be moving so fast. This weekend we had the German, german elections. What do you think is happening with the, with the macro trends globally, and, and how do you think that's affecting the desire to make m&a deals or the concerns to wait and see what happens next?
Shaan Tharani:yeah, perfect, hi, phil, first of all, thank you for having me today. Uh, it's always a delight to be exchanging views with you and I hope our talks today provide some food for thoughts for, as your podcast is called, ems for c levels, food for thought, right and inspiration, particularly to decision makers and executive leaders. Yeah, uh, that, that, uh, you know that we know of and, as well as those that that we try to help strategize, as you mentioned. Of course, happy to dive into greater details about macro clarity, whether it's fueling or installing M&A generally, and then, of course, into our area, which is electronics, ems, pcb cable connectors the entire space. Electronics, ems, pcb cable connectors the entire space. Well, I do have a position here.
Shaan Tharani:Everyone is asking and wants to answer right, regardless of what type of market participants you are are you a single investor investing in stocks or are you a corporate leader trying to navigate through these challenges? Now I want to take maybe a step back here to address this question and look at the bigger picture. Before we understand what's happening now, let's understand what's happened, maybe in the last year so 12 months, 18 months ago, generally in the M&A market I don't know before pre-Trump era. You'll be surprised to hear this one statistic or data point, which is looking at it from a German point of view. You mentioned German elections, right. So looking at it from a German point of view, did you know that 40, the DAX 40 companies and 50 MDAX companies spent approximately 4343 billion in acquisitions in 2024.
Shaan Tharani:Now, these constituents are not only in the electronic space, they're in pharma, retail and so on, but the majority of them have the demand and need for electronics, regardless of its component, device or so on. And it's not that they need this to sell to the b2b or b2c, but they needed to produce the goods or services right to deliver them and so on. So electronic content flows in there. So, but in these investments are mainly due to, uh, getting a foothold in us and either production wise yeah or or or optimizing footprint, or increasing footprint, yeah. So now to the viewers here $43 billion as a data point doesn't say much. That's one number. You need to compare it to another number.
Philip Stoten:So we take the year before.
Shaan Tharani:This is $20 billion less, okay, so it doubled. $43 billion is quite a jump. So with the statistics, one could say you know that larger market participants anticipated that trump would win. First of all, right, and took a position or gamble, yeah, to invest in the us, which they rightly so did. And that figure is is is, uh, supporting it, yeah, yeah, yeah, why. And that figure is supporting it? Yeah, and the question is okay, great, there's a figure they invested. Why? So? Because they anticipated that post-Trump era. And that's where we get the fueling, or the stalling part of M&A this year and years to come. Beyond that, in this four years of administration, we see that they anticipated the acquisitions will be much more expensive, yeah, yeah, and there'll be high barriers to entry. And that comes maybe to that point, right, that once the new government comes into place, these items will be born, and they're right.
Shaan Tharani:And that comes to, maybe, the topic of what everyone's talking about tariffs.
Shaan Tharani:Right, I won't go in details of what everyone's talking about tariffs, right, I won't go in details of tariffs saying, oh, you know, there's a 10% tariff between, and reciprocal tariff between, india and US, and so on. I won't get into details, but it's the following Since the 20th or the 24th of January, since he stepped in I would like to call it this tariff roulette yeah, no one, regardless if you're a C-level now or a government yeah, you had no clue what was coming your way. It just, basically, he woke up one day and said, hey, you know, I don't like that country, yeah, I'm going to impose a tariff on that. And that's what happened at first, and now he's having this reciprocal tariff. So we see there that in this first quarter now, it is still uncertain what his actions are and one cannot anticipate it. So therefore, that comes back to the point why those let's call it 40 MDAX or 50 MDAX companies and 40 DAX companies invested that amount of money ahead of time. So that is one of the understanding of stalling or fueling of M&A.
Philip Stoten:I think what's interesting there sorry to interrupt, sean is when you look at that strategy of European companies buying in the Americas. A lot of companies were already thinking about that and thinking about strategies in the build-up to the pandemic. They stopped in the pandemic and there was a kind of a desire to restart afterwards, but they weren't quite sure how to do it. And that fits exactly into your timeline of, you know, thinking ahead of the next presidential election and thinking, well, where do we need to be positioned in that? And it became even even more critical to be positioned in that. And it became even more critical. But the fact that by the middle of 2022, when the pandemic was easing off, they hadn't already made those acquisitions, although some had managed to do some business during the pandemic, meant there was a kind of a latent demand building up.
Shaan Tharani:I mean, that's the perfect word for the talk of the window of opportunity. You had the COVID part where everyone was uncertain. Those that were maybe and then I look not electronics, those were that addressing ventilation business, medical sector were thriving. Therefore, they were thinking, if I'm making anyway this good performance, I don't need to think about strategy now. I'm just going to have that cash cow come in, short-term minded strategies. And then those that said, ok, next election is there, covid, pre-covid is here, what do I need to do? And they'd use that window of opportunity to invest. And regardless, whether you're a large player now, yeah, and dax player, for example, or you're a smaller player, such as a keytron or scanfield or the likes of that in the ems sector, yeah, regardless.
Shaan Tharani:Some thought, while some thought far ahead, other players were just mindful that, as your business grows, yeah, and I look at it always more because I support a lot of europe and uk clients, right. So I look at their strategy. And if we look at the ems market, the top 16 15 players in ems per se, yeah, are all below three, two billion, two and a half billion. Three billion is almost the biggest right, whereas if we compare it to the EMS in the US. Right, they're all multi-billion dollar companies Greg Flex, sanmina, celestica so they're more mature and building up, yeah, in the US, whereas in Europe they're more focused in their countries or their regions, focusing on Eastern Europe and focusing a bit on getting customers in Asia and setting up Asia, which was that was evolution, that was the correct way to go.
Shaan Tharani:So, regardless of that, those who took some food for thought and said, okay, I need to be mindful that, as my business grows, north America remains an important marketplace, both B2B and B2C, because it's a 300 plus million population. So if they consume, regardless if it's a chocolate or a device right, an electronic device there is demand there. So it's important at context to understand that there need to be strategies done and to get a foothold. Either get a foothold or expand your foothold, not in a few moments, but definitely that is what I see in terms of macro clarity. That it's what before. In the first quarter, I believe it will be stalled. Yeah, we approach summer, yeah mna whether there's more clarity clarity, the dust settles.
Shaan Tharani:All the actions have been spoken out by trump. Yeah, then we will see uh mna being fueled again. But that does not mean that the leaders of today, yeah, executive leaders are sitting around and just concentrating on the business. Behind the scenes and I can tell you for the one or the other client I'm supporting, behind the scenes, there's already, you know, contemplating moves, understanding, not sitting.
Philip Stoten:Exactly.
Shaan Tharani:Not only also keeping targets warm, having the discussions and so on, because they know that when it comes, the leadership is there and they understand that I need to make the move quicker than my competitor. Right, yeah, momentum on the global stage. Yeah, from leadership teams, I'm broiled and they are embracing that and they're ready.
Philip Stoten:Yeah, yeah, yeah, and I think it makes sense. And you know, I think what's what's fascinating there is that kind of shift in momentum to to fuel stall and then and then fuel again, and the timing and what people are thinking about in the interim. What I actually think is also fascinating, sean, is the fact that the largest EMS zoner in Europe is sub $3 billion and you've got, you know, $25, $30 million flex and J-bill in the US and even down to like benchmark and plexus. There they're much larger. That tells an M&A story of the last 20 years, which is a completely different discussion and a completely different show when you look at the strategies these people are applying going forward, there's always a consideration of continents. Is that Europe's often gone greenfield rather than acquisition and the US has moved fast and broken things and acquired instead? What do you see as that equation with respect to greenfield as opposed to acquisition, and do you have examples of how they've worked differently?
Shaan Tharani:so, yeah, I think that's a that's a very good question and I think that that move let's call it the moves getting into us, yeah, so, while us firms right as you've mentioned are are eyeing acquisitions abroad, yeah, because we see there's a big multiple spread now that has developed in the last quarters and is developing now even more, whereby US firms' current trading are higher than their counterparts in the Europe area. Yeah, and the spread is getting bigger. Hence, us firms are possibly also eyeing, while there's good growth in their country, they're realizing that they're possibly eyeing deals or transaction and targets in Europe, among others because there's a discrepancy between multiples and therefore you could add value in that sense, right, because if I buy something cheaper multiple, then I buy multiple. It's accretive in that sense, right. So that is the first thing, but what you're asking is the opposite, the way around. Yeah, and I believe that inbound investments and acquisitions in the US are set to rise.
Shaan Tharani:Yeah, as you recall, european companies, as I mentioned, are prioritizing US investments. We saw it with that statistic I gave you yeah, I made the global's, say macro sentiment. Now there is the need to have a foothold there, especially if if Trump is putting up his shoulders and elbows? Right, you need that. Yeah, so, from an electronics and EMS point of view, yeah, we can see that these moves have already been made by and initiated by a few in 2024. Yeah, however, only Maybe a handful limited ones were successful in executing it. So I know many market participants who have looked at stuff in 2024 but did not execute. Why is it so? That comes back and, based on my knowledge, many have screened the market. They understand what they have out there, but acquisitions are way too expensive. Yeah, and and as a result, if it's too expensive, is there's a valuation gap between buyer and seller, right?
Shaan Tharani:yeah and this valuation gap? Yes, it exists, but that does not mean you, you, you get off the table and stop negotiating. There are mechanisms to manage this effectively. Right, and some players and that comes to me, some players don't want to hire advisors like myself, yeah, yeah To help them get the deal across the line. They'd rather do it themselves.
Shaan Tharani:However, we bring different creativity aligning and making sure that the gap is closed between buyer and seller, and that can be done through effective M&A tactics and strategies and mechanisms, and that's one of the reasons why a majority of them, who said I can do it on my own, have failed in acquiring a footprint in the US, among other areas. But therefore, let's look at it the other way If you do not do that, you're not successfully seeing your strategic roadmap being materialized. Yeah, and that's a critical factor and a factor that is not to be undervalued, especially when hiring an M&A advisor who's a specialist, like myself, in electronics. Yeah, but coming back to your question, more importantly, as a result of two expensive deitions in the US, the alternative is what? If you don't acquire, you do greenfield or brownfield development. And so, if we look at one of the companies and that's a good example SVI.
Shaan Tharani:Svi Group is a Thai electronic manufacturing services group based out of Bangkok, thailand. They're set up globally and they make approximately over 600 million in top line sales, and what they've done is they've announced their opening of the production facility in US in January, and this is a pure greenfield. What that means for the viewers who don't understand is instead of acquiring, they took the time. They found a plot, they found a building, they equipped it and so on. It's great. This is one way to get your foothold and footprint in the US right. But you know, with the efforts of Greenfield is very, very and the efforts of Brownfield is very strenuous, yeah, it takes much longer, right. So there's a timing element. It requires significant upfront investment, right, yeah, and then you're at the beckon and call of, basically, government to give you the permits, yeah, yeah, to wait for the permits and hopefully an incentive as well, yeah, and then maybe you have to incentivize them, right, yeah, and vice versa.
Shaan Tharani:Maybe you get incentivized tax breaks and whatnot for a setting up shop there, right, but at the end of the day, it's a far lengthy process. It is hiring, yeah, and retraining and reskilling of employees and, last but not least, if you're a specialist in one or the other area, like medical or so on, you need to re-qualify or qualify your site and audit it. And all these factors take time, money and take off focus from executive management to focus on the core of the business. So, therefore, immediately, if you acquire a company, yes, there's a transaction timeline that takes place between six to nine months, right, and integration and the cost of integration. However, if you acquire something, you're immediately a plug and play, so to speak. Yeah, you are, and that waiting time is something of uncertainty you cannot control and it's a risk factor.
Philip Stoten:Yeah, it is absolutely a risk factor and it's a big risk as well. I think what's interesting is, if you look historically, over the last 10 years, there have been a few European companies that have been successful, with Greenfield or Brownfield in Mexico, for example, and I think that's where available stock of acquirable businesses has been really low, so there has been almost no choice but to do that. And then you look at other success stories, maybe like Zona in Costa Rica, which has been a fabulous partnership and been very successful for them. What I think was really interesting just reeling back to what you were talking about about the asymmetry in terms of multiples in of valuations is it looks to me like it's an opportunity for maybe some midsize American companies to reverse into something larger in Europe, which I think is a really interesting opportunity, because if you're if you're, say, 300 million and you pick up something in Europe by reversing into it that is maybe a billion and you then have that as an addition to your US multiple, then that's a huge value add to your business.
Shaan Tharani:Quite? Certainly so. But you need to look at it this way that if I, right now, am focusing in the US market, imagine I'm a pure player right like SMTC right now, who's just focusing on US. I have nothing outside in Europe. Yeah, that could be one strategy, but maybe I could reach so much growth from the American market right that that is better than acquiring abroad. So it depends on what the strategy is, that that is better than acquiring abroad. So it depends on what the strategy is, and that's why one of these companies needs to do or that's what we do on behalf of our clients is you need to analyze what is smarter for me.
Shaan Tharani:Do I continue to operate in my area, or do I take money in my hand whether it's equity or debt, right, and buy something abroad, and will that add value, and how much value will it add to my entire portfolio? But then the second layer on that part is that if I add that, who am I? Am I a family owner? Am I a publicist company or am I private equity owned? Because if you're private equityowned and you have an exit horizon, you might not feel the benefits or reap the benefits in the timeline you have left If you're a publicly listed company, that is a great signal to the market because your stock price will go up, hence your market capitalization will go up.
Shaan Tharani:And if you're an owner, then you need to be in it for the long term and have a succession plan in place to see, you know, reaping the benefits, uh, from your acquisition. So there are multiple dimensions to be looked at on. On the surface level, as you mentioned, yes, it is a great strategy, but it really many dimensions, many layers, and then what you know you can buy a larger piece in europe, but then maybe you know you're only focused in industrial and you have a big client and it's lots of dependencies which could be risky as well.
Philip Stoten:Yeah, there's a lot of factors.
Shaan Tharani:So that's the factors, right. But going now to the question that you asked me about Greenfield versus Brownfield, right? So I'm giving you the example of SVI. We'll see how it works, but that has gone live in January. If we take the other side now and we look at it, who has managed to pursue acquisitions successfully in order to get foothold in the US? I want to say Indians have been very successful. So there's a company an.
Shaan Tharani:Indian EMS group called ScientDLM it is publicly listed, I believe and they appeared at Altec Electronics in the last quarter of 2024. So Altec Electronics is not the biggest right now, but it has a strong footprint in medical healthcare and industrials right the sectors which Scient strengthens itself on. Right, these capabilities in these end markets Add diversity to its existing customer base. Right, but most importantly, cyan dlm has obtained a local footprint and local access and that's an important step not accomplished by many ems players right now. And another one like that, I believe, was dixon was it dixon or canes? It also acquired, uh, another us company. Uh, uh, acquired another US company summer-ish, maybe around summer 2024.
Shaan Tharani:So you see that these two Indian companies have been successful, but we've not seen in 2024 any European company electronics EMS company acquire in the US. They've screened, probably, the market, but they want to see it through, right. So then the question mark is will we be seeing transaction this year? And they've screened, probably, the market, but they want to see it through, right, yeah? So then the question mark is will we be seeing transaction this year and next year from EU companies or European UK companies in the US? Or will they be saying, hey, that's too expensive for me. I'm going to focus on the area in my region, right.
Philip Stoten:Yeah, there's some economics. There isn't there Because you know, obviously price is high is one thing that puts you off purchasing, but also cash flow is the other factor and there's been a dampening of demand in Europe. So those European companies are probably not doing quite as well as they were 18 months ago. For sure, 2024 was a pretty tough year for the European EMS industry.
Shaan Tharani:Exactly. I think the average time was about 15%. You mentioned everyone was reporting a drop in revenues and so that was a big factor for 2024. People were working on the inventories which were left in their warehouses right, that's how cash flows well which are now with their customers Exactly. Which were left in their warehouses right, that cost cash flow as well, With their customers Exactly, and hopefully that will get sold. So there are more call orders that come in right To the EMS world. But regardless of that, to get a foothold or expand operations in America is key. Yeah, it just depends who you are, what size you are and what's your ownership structure, right, Regardless now if it's US, Canada, Costa Rica or Mexico, I think you will need it either in the short to mid-term.
Philip Stoten:Yeah, and I think if it's Canada, costa Rica or Mexico, you need to figure out what the tariff outcomes are going to be and there's going to be a little bit more clarity on that month by month. I think what's really important from a selection of support is the work that you do when you're thinking about the business strategy, the ownership, the succession planning, all those things, and look at that holistically and build the M&A strategy on top of that, rather than using the M&A strategy on top of that, rather than using the M&A strategy to drive everything. It's got to be synergistic with what the business is looking for and what the owners are looking for as an outcome and what those timelines and horizons are.
Shaan Tharani:I totally agree, and that's why we are specialists in the electronic space. Yeah For M&A, meaning that, in comparison to other advisors, they understand the process well. But while we understand the process well as well, right, our, our, our forefront and competitive positioning is that we understand the companies, understand where they need to grow, how they need to grow and what fits. And then comes the M&a process as a tactical toolkit to fill that roadmap and to get you what you want, right, yeah, so, so that's for me, that's huge the idea that you've got to teach someone the ms industry first, and it is a strange beast that is, you know, has got a lot of history, a lot of with it.
Philip Stoten:So you really need to understand what's happening, and you do that, sean, so I think that's hugely valuable.
Shaan Tharani:I must be honest, it's a bilateral learning between the executives and me. Yeah, because I also learn.
Philip Stoten:Absolutely Every day is a school day, Sean. We both know that. Before we wrap up, I just want to run through some of the deals that we've seen recently and give me a little bit of a examination of the rationale behind these. Let's start with Xero and EPSA.
Shaan Tharani:OK, good. So Xero, epsa, let's start. So, looking at 2024, january, it was a below average year of emitting activity in the electronics market and EMS. Yeah, we saw that rebound at the very end of 2024. And that's why I'm guessing you're going into these deals because, let's call it, the deals that happened in 2024 were small, regional or distressed, and I want to mention that towards the last quarter of 2024 into 2025, the beginning of the first weeks there were three noteworthy European deals to mention or examine.
Shaan Tharani:The first one, as you mentioned, is EPSA. So the Zero Group acquired EPSA, right German-owned, german-owned, where MP Corporate Finance was exclusively mandated by the founder of Zero, which we initially sold back in the days to a German financial investor called Archibald Halliburton. And so, under the new ownership, xero Group then grew from its one plant in Germany near Stuttgart to having an Eastern European facility, which is low cost, or best cost, as they called it back in the days, and then they acquired a small US footprint by acquisition as well. Yeah, that happened. So they've grown significantly, both in revenue and geographic production presence. However, they were lacking MedTech let's call MedTech equipment high-end industrial applications which was bolstered by the acquisition of EPSA. Also, what EPSA had. Epsa was East Germany in its recent acquisition. What also EPSA had was additional development capabilities, enhancing the expertise in software and hardware development and mechanical engineering, which is an important element. Now, as you try to grow your margin, you need to offer your clients engineering capabilities. So that was the deal there in terms of getting additional capabilities.
Shaan Tharani:It wasn't so a regional play or getting more market share? No, because it was.
Philip Stoten:German on German German on German yeah capacity and capability.
Shaan Tharani:Exactly. The question is what's next in store for Zerogroup and how will it navigate, moving from the 200, 250 top line to the next cluster of players, which is then getting to the top 20, so to speak, once you get to the 350, 400 million?
Philip Stoten:in Europe. Yeah, to the top 20 in Europe.
Shaan Tharani:So that's the bridge that they need to gap. Now the question is will the current owners bridge that gap or will the new owner bridges that? That is a question that we're waiting to see and we'll find out in the coming quarters.
Philip Stoten:Okay, and what about the deal between Sercor and Profectus? What was that one all about?
Shaan Tharani:Another Swiss-German deal. So I have to say Sercor has been really on a shopping spree in the last 24 months, so to speak, 36 months, but particularly in the UK. They months, but particularly in the UK. The acquisition they did three acquisitions in the UK, which was very good from my point of view, or my perspective was a very, very good move as it allowed them to reconfigure the end market presence of the group, thereby focusing more through access, electronic TT acquisition in the UK, getting more E&D exposure, which has then helped them to increase the EBITDA performance increase the top line, of course, but EBITDA performance in a higher ratio than its top line in terms of value. But its share price has also increased from that. So it's definitely a good and a good path. Some might argue a why should I buy such smaller targets?
Shaan Tharani:but it does so correctly, because you're not going to find large andd targets in europe yeah and then now it's acquired perfectus, which allows them to get that german footprint, get the industrial energy and market exposure. Yeah, but my public and to public knowledge or to my understanding, perfectus was not the strongest performer. Yeah, yeah, which I believe will change under the control of mr hageman and team of sequels. Yeah, and that's yeah they're pretty.
Philip Stoten:They're pretty um bit of swiss efficiency there. It's a strong brand but it's an interesting strategy and I wonder if that post-brexit has added some attraction to some of those UK acquisitions. You look at Circor's acquisition trail but you also look at Note, for example, that have acquired a few companies in the UK and have done that process of taking companies that are a relatively low multiple and adding them into a business that has got a double digit multiple that is much more attractive in terms of bolstering their stock price.
Shaan Tharani:That has been very lucrative. Now the question to Secor is and it's public news, it's been mentioned, it's a market rumor, I guess that they're looking at Eolan, which is the French company. I think acquiring all nine sites on top of my head, if it's nine sites it will be a big game changer for Secor, both in terms of size that will jump the ranks to under the top 10, right in Europe. Nevertheless, I believe acquiring Eolan will come with significant operational challenges, along with inheriting a larger cost base, which, if you're a 300 or almost 400 million company like secor, you understand your area. But if you add another four or five hundred right I don't know is at the right now. But in that ballpark you're becoming a billion dollar company.
Philip Stoten:Yeah, much bigger ship to navigate right and challenges so that jump is quite a big bite or shift, and the integration of nine sites, most of which are in france, which is a challenge in itself.
Philip Stoten:with um, with the social requirements. Just recently we've seen all circuits announced the um, their acquisition by um, um d. What is it? Dg group, dg technologies, the chinese company? So um, that's an interesting one because, again, that's a footprint play. They have position in Vietnam, they have position in China, they have position in India, none of which all circuits have, and all circuits bring Europe, north Africa and Mexico to that party. So it looks like a sensible acquisition. The last one I wanted to ask you about was Flex, triest and Faircap. Yes, what's your take on that?
Shaan Tharani:So this is another sort of a deal, yeah, unlike the next two, the previous two.
Shaan Tharani:So Flextronics, the global giant, as everyone knows, or Flex in short, is looking to, you know, to reconfigure its portfolio and acquisition strategy and thereby let loose of non-core business, one of them being the Trieste site, and so it has now offloaded the site to a German financial investor called Faircom.
Shaan Tharani:So this is a very different attempt here, where financial investors are looking to buy low-hanging fruits, consolidate them in Europe and in an attempt to collect a portfolio of EMS companies or EMS and beyond, even some are looking at value chain beyond that and operate them and establish a new market participant. As this happens and there are several cases we'll be seeing in the next months and we've seen in the past in France, netherlands I want to call them the domestic groups that are being built. I want to understand more about how these companies will then be a participant in the wider competitive let's call it landscape compared to the traditional ones that we know in Europe. Landscape compared to the traditional ones that we know in Europe, right? So it'll be interesting to see how they will progress, if they will progress in the midterm, and whether they become a threat, yeah, to those strategic groups, the traditional ones, or will there be some onboarded by some right?
Philip Stoten:Yeah, yeah. And is that picking up a, as you mentioned, low hanging fruit? But is that also picking up a bargain? Is that what that's all about?
Shaan Tharani:Yes, Picking up a bargain, trying to turn it around right.
Philip Stoten:Yeah.
Shaan Tharani:And make something out of nothing, yeah.
Philip Stoten:Yeah, a site that basically the previous owner wants to exit, and at least this way the jobs are saved and potentially there's some value built from it. Almost like a carve out.
Shaan Tharani:Yeah, it's a total carve out here. Yeah, the only difference is that maybe you know, with the new owners they will go to smaller customers and try to serve them in the vicinity, whereas if you had a larger corporate, the corporate doesn't look at those small customers because they don't make their threshold of minimum revenue. So different is small, but then some of those regional customers will build up then into becoming larger key clients again as they evolve, as their product gets more mature, as a solution offering comes, or as they expand internationally. There's always this element there of re-establishing the company itself.
Philip Stoten:Right, yeah, yeah. Quick question before we wrap up. You mentioned earlier the two Indian companies that are acquired in the US. Obviously, india is being indicated as a substantially growing market. It has a some might say overheated stock market and some very high valuations on their EMS companies, so there's some value differential there. Do you see activity between India and Europe, india and US growing in 2025?
Shaan Tharani:So until a week ago the last week, basically there was quite a dip in the equity markets in India, which can be seen across the board, but regardless of that, the valuation of EMS companies remain incredibly high compared to the norm. So, with that being said, I wouldn't look at it from that point of view. I would look at it that indian companies have the firepower to acquire. Now the question is do I acquire in europe, yeah, or do I reap the benefits of a growing domestic market? Now, yeah, I think it is twofold. It's a dual strategy. You should, they should, continue, uh, doing the market what they're good at, but at the same time, get acquisitions done in Europe and US, yeah, in order to have this cross-selling potential and funneling customers back from, or larger key accounts that you serve in Europe. Maybe those brands can be served in India as well.
Philip Stoten:So, there's an element of play.
Shaan Tharani:You just don't need to buy big and be established globally. You need to be buying something with a good customer base that you can hopefully funnel back if it allows you to, and then no rigid elements such as aerospace and defense. But to conclude that I think India is a good market. It is something in the strategies of many global players. Yeah, it just very. You have larger, mid to large players that are owned in India, publicly listed, but then you have several mom and pop stores. So we're seeing the same China effect which we probably had 10 years ago.
Shaan Tharani:Yeah, india Now playing out. Now playing out, yeah, but generally what we're seeing is from a private equity point of view. Yeah, we're seeing increasing pressures for general partners. Yeah, to return the capital that they uh, that capital to lps. You know the legal part. Combined, combined with record levels of dry powder, right, yeah, it means and improve conditions, lower interest rates coming down, and those elements will certainly drive M&A and new growth opportunities, both in EMS, electronics and the general market sentiment. So, coming back to answering the question, macro clarity will fuel M&A after the first quarter. Nevertheless, those listening, I believe that those who will lose out are those who will just sit and watch and observe those who will win, those who are getting their their, their ducks in order, their strategy and being ready to say when when it's time to go, to go efficiently, yeah, and knowing what they need right yeah, no, I absolutely agree with you, sean.
Philip Stoten:I think it's that time where you need to watch very carefully what's happening, particularly as we we have these changes in power in um in the us, but also in germany. I think that's interesting to see what happens there. I think, whilst that's happening, it's not just wait and see. It's make sure you have your m a partner in place, make sure you have those strategies aligned with your business and what is potentially out there, make sure you've identified targets and started to build a dialogue with them. So, three months time, when we do have clarity on everything, you can hit the button and you can.
Shaan Tharani:You can start moving quickly exactly I mean coming through last point, coming from the german election. Now the results of that has also led to a probable joint venture between ryan metal and leonardo right because increased defense spending and so on. So these market participants that the ems or able connectors industries serve, yeah, yeah, the supply chain are also changing so you need to navigate that and I look forward to steering my, my existing and new clients to navigate through these challenges or a current situation not challenges and welcome the opportunity to help them architect a fitting strategy.
Philip Stoten:Yeah, yeah, yeah, and I would recommend anybody that that isn't talking to sean to get in touch with him. I I'll make sure his contact details are all available in the show notes below. Sian, thanks so much for your time. Always a pleasure to chat. Thank you, and look forward to the next time we're together in person.
Shaan Tharani:Phil, it's been a pleasure and let's catch up again, hopefully before summer, to check on the pulse of the market. Thank you, have a great day, bye-bye.