Tyre Companies are Prime Takeover Territory
A new report is suggesting that the effects of the wider financial meltdown are going to result in a series of takeovers and sell offs that will “sweep the market.” According to the Plimsoll Publishing report, a combination of needs is forcing smaller companies to consider selling to their larger rivals and larger players are looking to buy their smaller rivals to diversify and develop their businesses.
“It has a great deal to do with necessity. Many of the larger players in the market, despite the downturn, are desperate to find new ways to develop their business, but with the current climate, costs are being cut and business development is being slashed. So they need options to help them protect their futures and tap into exiting revenue and profit streams. Financing a series of small acquisitions at key niche players in the market will give them: a quick route to increasing sales for relevantly low cost; and a foothold in the emerging sectors of the market,” senior analysts David Patterson commented.
According to the report, larger companies have been surviving on wafer thin margins, most only making 1.9 per cent or less, for the last few years. And what’s 20 of the UK’s top 201 players are actually said to be losing money at the moment. Plimsoll says this is evidence that their strategy of chasing sales and volume compromises profits. At the other end of the market, an emerging group 18 companies, are smaller, high focused players. These fast-growing companies have been able to carve out niche markets for themselves, some with premium profit margins. The best examples of these companies are: reporting sales increases of well over 19.1 per cent per annum and reporting margins of 14.1 per cent.