It is a good time to own a firm specialising in turbine blade production. Some of the largest turbine manufacturers are sniffing around for takeovers, and that means potentially big rewards for those blade firms’ owners.
This week, we have seen German turbine maker Senvion announce that it is set to buy blade specialist Euros for an undisclosed sum. The deal is set to boost Senvion’s blade production capacity by 25%, and also help it to cut the amount of time that it takes to make its turbines.
This follows the €1.5bn buyout of LM Wind Power by General Electric revealed last month. GE sees the deal as a way to bolster its technical capabilities, while also cutting the cost of its turbines and reducing the cost of wind power. This is GE’s second big blade M&A deal in a little over a year, as it bought UK-based modular specialise Blade Dynamics in October 2015.
We expect to see more transactions like these in the next year. As well as giving manufacturers access to new technology that can help them to cut the cost of wind power, these deals offer other benefits too: the ability to grow sales fast and expand into new markets are just two.
There will be more takeovers by manufacturers throughout the supply chain. The owners of some of those acquired firms stand to benefit from lucrative paydays. Happy days.
But let us not forget a key group here: the blade specialists themselves. While some people walk away from such acquisitions with a bulging wallet, major M&A transactions can also cause concern for those in the rest of the company. What if the manufacturer has only come in to buy the intellectual property? Will this expansion come at the expense of jobs?
We can understand the concern – but we would like to think it will not become reality in these cases. There will always be an element of restructuring after deals of this kind. Changes at the top level of a company will, of course, have an impact on that company’s strategy. It would be remarkable if it did not.
But we do not think such deals should lead to major job cuts. Companies like GE and Senvion are not only buying specialist companies for the technology they have developed so far. They also want access to the people with the skills and knowledge to come up with brand new innovations that can keep them at the leading edge. The buyers want to retain those experts.
You could argue that we are being too optimistic, but we think the fundamentals bear out our view. Wind is a growing sector and competition between manufacturers is fierce. It would make little sense for a manufacturer to buy a great specialist firm and then shed the people that made it great. It’s bad business, and risks those experts turning up at a rival.
Uncertainty at a company will always cause some concern among employees. However, we hope that in these deals such concerns will prove to be unfounded.
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