European Toner & Inkjet Remanufacturers‘ Association Mergers Acquisitions Cooperations in the European Cartridge Remanufacturing Industry Strategy

European Toner & Inkjet Remanufacturers‘ AssociationEuropean Toner & Inkjet Remanufacturers‘ Association

Mergers <> Acquisitions <> Cooperations

in the

European Cartridge Remanufacturing Industry

Strategy and Process Development

by Friedrich W. Becker-Birck / Senior Partner / BECKER-BIRCK CONSULTING PARTNER GbR – Hofheim/Germany

ETIRA Conference Frankfurt 25th January 2005


Outline

Scenario

Consolidation: Cooperation / Acquisition / Mergers-JV

Search for Pearls and Snips

Golf Course Deals vs. Professional Approach

Structured Process

Selection Process

Evaluation of Alternatives

Negotiations / Closure / Transaction

Conclusion


Scenario

Market growth will continue / attracts newcomers in Europe and from Far East

Battle stronger among OEM, Remanufacturers, Private Label

New trends within distribution channels: commercial vs. retail

Increasing, harsh competion + EURO revaluation: prices, margins, profits decline

Consolidation of a fragmented remanufactoring industry

Key factors for survival and growth: profit level, cost leadership, advanced, high speed R&D and production technology, distribution, branding


Consolidation

1. Cooperation

- Lowest degree of consolidation, engagement – no marriage

- Joint resources, e.g. R&D, production, logistics, receycling or distribution

- Only, if strong synergies

- Disadvantage: > transfer of sensitive information

> considerable conflict potential

- Advantage: good test period for marriage


Consolidation

2. Acquisition

- Requires long-term strategy and strong financial resources

- Different solutions: > share deal / 100% or stake / cross-sharing

> asset deal (properties, accounts, patents)

- Direct marriage, no testing or engagement period, risk to fail

- Total influence on future development

- Better realisation of synergies

- Important: > business plan must show a clear return on investment


Consolidation

3. Mergers – Joint Ventures ( JV )

- Merging 2 or more companies and found a bigger, stronger one

- Mergers are excellent consolidators

- Merger = merge capital and business / give up full autonomy

- Merger , if no survival, no successor / shared autonomy

- JV = start-up by 2 or more existing companies / investors

- JV‘s establish additional players / companies / no consolidation

- JV‘s are mainly established for new businesses or new markets

- JV‘s could be usefull for receycling of empty cartridges


Search for Pearls and Snips We are facing currently a dramatic restructuring process in Europe:

1. Large conglomerates concentrate on core business and divest side business

2. Banks liqidate industrial parcels of shares and participations

3. Family owned medium-sized companies are sold because there is no successor

4. No good climate for IPO‘s

This development has brought Venture Capital and Private Equity

Investors into the market. In order to get the best return they are

searching only for pearls and snips.


Search for Pearls and Snips / continued

VC and PE Companies are mainly American and British:

Blackstone ( USA )

Morgan Stanley ( USA )

Permira ( GB )

Terra Firma ( GB )

3i ( GB )

3i has invested VC in various European companies of the IT and OP

industry. The engagement is limited to approx. 5 years and leads to

an IPO or sale of their shares to other investors.


Golf Course Deals vs. Professional Approach

Golf Course Deals: often based on private contacts

Advantage: vital decisions are taken by handskake, low cost, fast

Disadvantage: > driven by private motives for growth or suvival

> superficial evaluation of effects and r.o.i. > no examination of alternatives

Professional Approach: > involve external expert > market insider and/or analyst

> higher cost and fees > structured

process, time-consuming > evaluation of alternatives > minimisation of risk for investment

Documents

European Toner & Inkjet Remanufacturers‘ Association Mergers Acquisitions Cooperations in the European Cartridge Remanufacturing Industry Strategy