Last month seemed to be the time for Mergers and Acquisitions in many parts of the world. In our little team itself we had a miniature m&a ourselves as we took over the management of Oman’s luxury title Crème de la Crème. That would have been excitement enough for us here except that we also got news about the potential sale of Aston Martin by its Kuwaiti investment company owners.
Now we all know that Aston Martin is the venerable British maker of such classics as the DB5 and various other cars that have appeared in assorted James Bond movies through the past fifty years. We all associate the brand with Bond, while other makes like Mercedes, BMW and Range Rover have been used by those on the dark side of the Bond equation. Is it surprising that these brands too have been on one side or the other of the automotive M & A business?
Another coincidence is that the lead bidder for this acquisition is Indian tractor major Mahindra and Mahindra. Yes, M&M make cars and have done so through the past few years, but seriously their mainstay is tractors. They make the most tractors in the world and their other lines of business include trucks under the Navistar brand and a bunch of utility vehicles. Just last year they managed to put out a rather edgy, home-designed, upmarket (for India) utility vehicle called XUV500. So why in their right minds would they be interested in buying a high-end marque like Aston?
To start of with there is no similarity at all in their lines of business. The manufacturing technology used by Aston Martin in developing its cars is way beyond anything M&M ever use. I cannot imagine what use M&M would have of composite and plastic bonding processes, spaceframes and advanced engineering techniques when it doesn’t produce anything close. It isn’t as if they are getting Aston Martin at a throwaway price either. This is an investment company selling to the highest bidder, not a Ford Motor Company hiving off loss making investments. Admittedly the brand is currently doing relatively well, selling more than 500 cars a year. But this investment would make sense if M&M can replicate the business success of the Tata Motors purchase of Jaguar Land Rover. What is the new product that M&M can make in the Aston stable. Are they doing this for the Cygnet? Will it be the next Reva electric car?
The problem is that in most cases like this all an outside observer sees is the white noise generated by the principal participants. You can never really judge what the real intentions are – however in this case there seems so little common ground that the confusion adds to the noise.
If M&M really had to acquire a landmark global brand over the past few years they should have bid and taken Hummer. The GM brand was available, the price was not too high to start off with and the focus on SUVs would have been complementary as they anyway saw in in their later purchase of Ssangyong. Instead Hummer is now trapped between a GM no-man’s land and a Chinese bureaucratic hard place.
Will we see the desirable Hummer buy happen soon? Imagine an M&M utility line-up with Hummer at the top, Ssangyong mainstream around the world and home-brand for India and other developing countries. They way I see it, it should be a certainty.
Every M&A that’s happened in the auto world doesn’t necessarily work out – take the case of the famed Daimler Chrysler ‘merger’. That lasted for about as long as it took people to understand that this was way less than a marriage of convenience. Then when Chrysler got dumped, went bankrupt and got bought into by FIAT it seemed like chapter 2 of that same saga. But somehow we got that wrong too. Today Chrysler has turned the corner, is paying up its dues and looks like it will be the stronger half of the partnership.
Fortunately in our little world the return of Crème de la Crème to our stable doesn’t have the same implications and will only strengthen our position at the top end of the magazine market. After all there is a natural symbiosis between luxury and automobiles.