Taking Ramirent to UK

TAKING RAMIRENT PLC TO UK

Global Marketing

The Team Adi Sandler Harshit Krishna Ida Lovis Irene Mathisen Nina Elvested Shani Belisha Tine Wyller

Global Marketing | Ramirent

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What’s in store?

Ramirent Group

Analysis of UK market

Mode of Entry

Marketing and Finance


Ramirent Group


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Ramirent Group

Ramirent is a Finnish equipment-leasing company founded in 1955

Providing products and services relating to leasing of machinery and equipment for B2B and B2C customers

Europe’s leading equipment leasing companies, marketing leaders


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Ramirent Group cont.

Visible in 13 European and Nordic countries Total revenues of EUR 649.9 million in FY 2012 In Financial Year 2011 there was an increase in

revenues of 22.3% over 2010.


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Product Groups

Light machinery (26%) Lifts (19%) Modules (17%) Safefolding (11%) Power and heating (10%)


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Expansion Process


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Segments


Analysis of the UK market


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Why UK?

Construction industry in the UK is one of the top five with the highest market shares in Europe

• Equipment leasing industry has one of the highest rental penetration levels in Europe.

• Strong competition - enables Ramirent to compete with the biggest equipment leasing companies

• Positive attitude towards FDI.• A step towards entering the

important Anglo-Saxon market

this graph shows potential in constructions in the UK [home prices go up => construction companies have more demand]

UK house Prices


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Problem Statement

How should Ramirent enter UK in order to proceed a profitable and sustainable

business?


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Political• Member of EU,

NATO, G8, and the UN Security Council

• Stable politics with low risk

• Global ranking: #5 ease of doing business

Economic• 6th largest

economy in the World

• Good transportation infrastructure

• Falling currency• The single

European Market

• Obtained most FDI projects in 2009

• UK market between Scandinavia and central Europe in terms of quality and cost factors

Socio-cultural• UK population:

60.2 million• UK Labour force:

30 million, 2nd largest in EU

• Unemployment rate 7.9%

Technology• 2nd strongest

research base in the world

• EU invests 3% of GDP in R&D support programmes by 2020

• Strong ICT infrastructure

• Secures companies’ IPR through the UK Intellectual Property Office

Global Marketing 12

PEST


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The Extent

of Competi

tive Rivalry:

Threat of new entrants:• High capital

requirements due to technology investments

• High switching costs related to the buyers

• Difficult to differentiate

The bargaining power of buyers:• Easily take over

the role of Ramirent

• Undifferentiated products

• Customer base range from the construction sector to private households

Threat of substitutes:• Buy equipment

The bargaining power of suppliers:• The number of

suppliers are high

• Few substitutes• Integrate the

value-added process

Competitive Rivalry• Highly

fragmanted• 14 000 rental

companies• UK: 80% rental

penetration• High costs

related to storage

• Difficult to differentiate products and services

Porter’sFive Forces


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International Competitors in the U.K


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STRENGTH• Strong position in most of

Europe• One of Europe's largest

equipment fleets• Stable economies• Profitable growth• Sets the industry

benchmark• High quality-safety

standards

WEAKNESSES• Weak position in Western

Europe

OPPORTUNITIES• Potential growth in the

overall European market• UK as a pogressive

economy with a favourable investment climate

• Positive economic progression

THREATS• Suppliers can sell their

product straight to construction companies

• The construction companies can buy their own products

• High competitive rivalry

SW

OT


Mode of Entry


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Mode of Entry

Acquisition Need high degree of control (quality consideration) Market expansion (industry saturating fast in

Europe) Firm expertise and resources (can’t venture into

Asia) Four factors:

Compatible target (similar industry, firm values) Potential target’s existing products, services and

sales Financial viability of the new entity Learning potential / future opportunities


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Mode of Entry

Ideally the business location should be in or around those major centres where construction industry was found to have the highest demand

Location London Birmingham Leeds Glasgow


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Mode of Entry

Target company features Equipment leasing company Experienced in UK Not very large in size (≈10% of our assets and revenues)

Combine their local know-how and connections and our international expertise and resources

Complementary skillset

Guidance for our

expansionOnly a gateway to the market


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Mode of Entry

Ideal choice of target company Small size Senior and well experienced Good knowledge and understanding of the

market Equipment rental industry Moderately successful Relatively small share market Honest and reliable High standards in quality and safety

JG Martin Plant Hire, TP Hire Co.


Marketing and Finance


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Products:• Same products as in the

other countries.• High technology

products and better quality service gives us an competitor advantage

• Expand to value added services like equipment training

Price• The prices for the

products will be approximately the same as in other markets, but we need to do some local adaptions

Placement• London, Birmingham,

Leeds and Glasgow • Main competition and

most demand localized here

• Use knowledge from the acquired company

Promotions• Use the popular

Ramirent brand name• Position: quality leader• Aggressive advertising to

our B2B customers • Local and national

advertisement

Ma

rke

tin

g M

ix


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Financial Scenario

Closely linked to state of UK economy / industry Unprecedented downturn - fallout of recession Ramirent geographically diversified; resilient Slow consolidation underway in industry in UK

Rutland bought Brandon Hire, HSS Hire’s mgmt buyout Market size projection £1.9bn in UK 53% share - top 10 players, highly fragmented

thereafter Tough competition expected from leading players


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Financial Justification

Revenues / Profits follow investments in capacity (assets) with a 1 year lag

Investments important for growth in sector

Cash flows from operations and efficiency gains can offset cash flows into investing

2004 2005 2006 2007 2008 2009 2010 20110

50

100

150

200

250

300

Gross investments in non-current assetsGross investments, % of net sales

2004 2005 2006 2007 2008 2009 2010 2011

-300 000

-200 000

-100 000

0

100 000

200 000

300 000

Net cash generated from operating activitiesNet cash flow of investing activitiesNet cash flow of financing activities


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Capability to AcquireDebt Capacity

Speedy Hire 33.25%HSS Hire 36.04%

Brandon Hire 42.53%Hewden Hire 51.22%

Ashtead Group 157.85%Cargotec Group 140.38%

Industry Average 76.88%Ramirent Group 40.70%

Debt Position (mn EUR) 262.8Debt capacity (mn EUR) 233.6

Shares overvalued, can use in acquisition

Debt levels much lower than peers, can deploy for expansion purposes

Cash position not very strong due to recent acquisitions and investing activities

Equity ValuationDCF

valuation4.8 EUR

Current Price6.2 EUR

Overvalued

Total Assets (Ramirent)

801.11

Approx Assets (Target) 80.11

Cash Balance (mn EUR)

2. 431


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Benefits from Acquisition

Case in Point: Central Europe (Poland, Hungary, Czech Republic, Slovakia) 12380 equipment leasing firms (near saturated,

fragmented market, like that in UK) Greenfield and Brownfield expansion (mostly

the latter) Ramirent average net sales growth y-o-y (1997-

2011) = 11.9% (at constant currency) Market share (2011) = 3.8% (No1; No2 in entire

Europe) Current Net Sales = 88.7 mn EUR


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Benefits from Acquisition

Conservative projected average sales growth 1st five years = 8% (low base effect) 2nd five years = 6% (half of the central

Europe rate) Terminal period = 4% (stagnant; long term

industry growth rate) Past 10 year average sales growth for

Ramirent PLC = 7.78% (at constant currency)

At 10% of Ramirent’s sales revenue (44.73 mn EUR) Starting Point = 4.47 mn EUR


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Expected Results

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 20270

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40

60

80

100

120

140

160

Sales Growth

Ramirent UKRamirent PLC

Slow but significant addition to company revenuesAdditional consideration: UK opens up new markets


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Break-even Analysis

Ramirent PLC’s historical gross margin = 69.2%

Ramirent UK’s estimation of gross margin = 34.6% Hidden costs of acquisition

and management change Higher initial investment

expenses Promotion expenses

Cost of acquisition = EUR 80.11 mn

In terms of operating profit, break even in year 12

Sales (EUR mn) Year

4.47 19.30 2

14.51 320.14 426.22 532.79 639.75 747.13 854.96 963.25 1072.04 1181.18 1290.68 13

100.57 14110.85 15121.55 16


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Assumptions

Ramirent finds an acquisition target that fits the bill

Ramirent’s reputation for above standard quality earns it the brand image it requires

Ramirent’s high quality service is not compromised by local cost pressures and is successfully adapted

No crisis on parent company’s end The conservative estimates materialize

(we expect the company is capable of exceeding them by local adaptation)


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Thank You

Data Sources:• MarketLine• Ramirent Website• Vault company guides• Euromonitor GMID• EBSCO host database• www.telegraph.co.uk• www.duedil.com• Datamonitor 360• www.equipmenthirenews.com