Mahindra & Mahindra’s (M&M) component arm Systech has acquired a controlling stake in Italian design firm Engines Engineering (EE) for an undisclosed amount. The Bologna-based firm, with annual revenues of about $12 million, develops motorcycle prototypes and two-wheeler designs. The acquisition further underscores reports that the Mahindras are interested in the growing two-wheeler market.
“Demand for offshoring of engineering services has been growing rapidly…acquiring this design house provides us the perfect vehicle to penetrate markets like Europe, China and Russia,” said Hemant Luthra, president of M&M’s components unit Systech. “Now that we have a design house in Italy, we will look for one in Germany to further penetrate the European markets, he added.
M&M through Systech has been looking at acquisition of reputed design houses. “Engines Engineering has been operative for the last three decades and a partnership with M&M will fuel growth,” said Engines Engineering chairman Alberto Strazzari. “I have great comfort level with M&M, having worked together with them for the last two years. We can combine our technological strengths, customer base and lower cost engineering excellence to fuel growth in Europe and India,” he added.
About 70% of the acquisition cost will be paid in cash and the selling shareholder Strazzari will continue to hold 30% and will combine his business with Mahindra Engineering Services. This indicates our model of partnering and leveraging on each other strengths, Mr Luthra said.
Engines Engineering was founded in 1979 by Alberto Strazzari, who holds 85%, and three other investors holding the remaining equity stake. It is based in Castenaso near Bologna and is involved in the entire chain for a design company right from ideation to a finished product, to deliver a product in line with the latest styling trends. Some of the names associated with Engines Engineering are Benelli, Beta, Ducati, Gilera,Honda, LEM, Malaguti and Yahama.
M$M has acquired components makers in Europe in recent years to access new technologies and markets. Recently private equity firm ICICI Venture Funds and M&M acquired Italian gear maker Metalcastello. Through Systech, M&M is targeting a turnover of $1 billion by 2010 from automotive component and related businesses. Its current turnover is around $800 million. Shares of M&M closed down 1.2% to Rs 561.15 on BSE.
Although three years old, Systech today figures among the top five ancillary companies in the country mainly due to a series of acquisitions in the auto component space. Systech has several component companies, listed and unlisted, with a minimum ownership varying between 51% and 100%. It is a fully-integrated ‘art-to-part’ automotive component supplier.