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How are mergers and acquisitions affecting the industry?

August 7, 2003
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How are mergers and acquisitions affecting the industry?

Mergers, acquisitions and joint ventures—oh my! It seems that almost monthly there is a new report of one company buying or integrating with another. What is going on in the industry to cause this? What will the end result be? In July, we asked visitors to our website what they thought and here is how they responded.

First, we wanted to know if this news even matters to respondents. Turns out, it does. Every respondent, 100 percent, replied that it did matter; of those, 29 percent said it mattered substantially, 57 percent reported that it mattered depending on which companies were involved and 2 percent responded that it only slightly mattered. Some reasons for this included whether or not the merger/acquisition involved a company that the respondent worked for or with, or whether they used the brand of equipment the company supplied. Chris Henry of Texas said, “Mergers usually mean drastic changes in personnel and procedures. With suppliers, it could mean a phase-out of certain models that one might be using or really like. An example [of this is] TDS and Zeiss.”

Others said it depends on how and if the products are changed. An Illinois surveyor who responded feared that price competition might decrease, leading to higher equipment costs. A New Zealand surveyor responding was concerned that the service might change for the worse.

These responses were in line with the responses to the question about which specific areas surveyors are concerned about being affected by a merger or acquisition (M/A). Leading the list of concerning issues was changes to particular products, with 86 percent being concerned about that. Following closely was technical support with 64 percent and personnel changes with 57 percent concerned. Reputations of companies at stake and product line removal, creation and/or maintenance each concerned 36 percent of respondents. Twenty-one percent were concerned with office locale changes and 7 percent were concerned with loss of jobs.

Brand loyalty is a huge factor for surveyors who have to make large investments in equipment, which they may not profit from for several months. We asked how many of the respondents changed their brand loyalty due to a favored company being bought out and the responses were pretty much split, with 57 percent responding that they had not changed their brand loyalty and 43 percent responding that they had. When asked about their personal experience with product or product line discontinuation because of an M/A, 43 percent responded that a product or line they were using was discontinued. And 57 percent responded that they had not had that experience.

But when it came to rebranding products, many more had that experience. In fact, 79 percent said that a product they used had been rebranded due to an M/A, while only 21 percent did not have that experience. Were the features of these rebranded products retained? Well, 77 percent of the time they were “sometimes” retained, 23 percent of the time they were all retained. No one responded that none of the features were retained.

How often does an M/A result in a surveyor-consumer changing dealers? Apparently, a little more than half the time, as 57 percent had never changed because of an M/A and 43 percent had. Of that 43 percent, 66 percent felt that this change was for the better and 33 percent that it was for the worst. The number of dealers that surveyors can do business with stayed the same for 36 percent of respondents, increased for 21 percent, decreased for 21 percent and was not relevant for 21 percent. A change in either direction was viewed to be a benefit by 7 percent, 29 percent viewed it as not being to their benefit and 29 percent viewed it indifferently.

Product quality seems to stay the same or decline for the most part in the eyes of our respondents with 43 percent reporting a decline, 43 percent reporting no change and only 14 percent reporting an increase in quality. The view of customer support changes are not much better, 50 percent of respondents responded that in their experience support had gotten worse, 29 percent that it had not changed and 21 percent responded that it had gotten better.

Service of instruments is another factor of concern for surveyors. When a company was involved in an M/A, not one response to this poll indicated an improvement in service, 50 percent saw service as remaining unchanged and 50 percent saw it as becoming worse.

In general, 7 percent thought that companies were more beneficial to them because of a M/A they had been involved in, 57 percent were undecided and 36 percent thought the companies were less beneficial to them. A more heartening 43 percent viewed the companies as becoming technologically stronger, while 29 percent viewed them as staying the same; another 29 percent viewed them as getting technologically weaker. As far as the companies being viewed as financially stronger, 43 percent reported that they viewed them as staying the same and 57 percent viewed them as becoming stronger.

Prices, a major concern for every consumer, were viewed to increase by 50 percent (14 percent saw substantial increases and 36 percent saw prices as increasing a bit). The other 50 percent saw no change in price and zero respondents saw a decrease.

Overall, how do surveyors view the large number of mergers and acquisitions as affecting the industry? Responses were very evenly split on this one—21 percent felt they were good for the industry, 21 percent felt they were hurting the industry and 21 percent felt they were not affecting the industry that much at all.

A little over half (57 percent) of respondents reported that they do worry about spreading themselves too thin, believing that soon there will only be a few major companies in the market. Thirty-six (36) percent saw it as “just business” and don't worry about it and 7 percent think that it’s good to have fewer companies. The primary reason that our poll-takers thought companies involved themselves in mergers and acquisitions was to broaden their market for profit, which received 64 percent of the votes. Monetary value was thought to be the main motivator by 29 percent and 7 percent thought it was to enhance offerings for customers.

Respondents were also split on the question of whether or not the industry is shrinking, with 36 percent responding that it is in fact expanding, 36 percent responding that it is shrinking and 29 percent responding that it has stabilized.

Most respondents felt that it was important for manufacturers to diversify in order to stay competitive, with 57 percent backing this idea. Thirty-six percent felt it was more important for companies to specialize, however, and 43 percent responded that they would like to deal with a company that carries one product line. Another 36 percent preferred a multi-line manufacturer and 14 percent were undecided on the issue.

Here are some respondents’ comments on the future of surveying manufacturers:

“Small companies with good ideas should sell out to the large ones for the cash and to get their product mainstream. Most surveyors want a bundle package to care of many different tasks.” -- Stephen Pratt, Illinois Surveyor

“[I think it] will probably settle down to three or four manufacturers with broad product lines.” -- Ken Anderson, Massachusetts Surveyor

“New startups with good products will continue to be acquired by the big guys who exist for the bean counters. Because continued product R&D after acquisition costs a lot, the better products will be cheapened and will eventually disappear, which will lead to the acquisition of big companies by "bigger." So eventually there will only be a few; some good but most just out for the $$ and not trying to maintain customer loyalty. Competition from the cutthroat big guys will hurt us all. Examples: HP EDMs and calculators, HP computers (the old ones were bulletproof - the new HP/Compaqs are junk just like the rest of 'em), SMI, PacSoft all HAD excellent products and support -- they are now gone.” – Dave Tlusty, Wisconsin Surveyor

“We are in part of a cycle much like the economy. In a few years we will have a few monolithic companies offering a wide range of products but poor support and service. This will open up possibilities for smaller companies to break into the market, offering specialized equipment and better support and services. Also advances in manufacturing may make manufacturing opportunities easier to take advantage of. Then we will start to see more companies come onto the scene.” -- Allen Jessup, NY surveyor/engineer

“The number of manufacturers will continue to decline until a point of limited return occurs.” -- Anonymous Illinois/Indiana Surveyor

Of those responding, 57 percent were land surveyors, 14 percent were engineers, 21 percent were both and 7 percent were neither.

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