In industrial manufacturing, OEMs and their dealers usually maintain stable partnerships. For instance, Cat’s largest dealer, Finning, has been their partner for over 90 years. However, as products become increasingly complex and customer expectations become more challenging, we see a changing OEM/Dealer relationship; OEMs are purchasing or replacing dealers. This article discusses five recent changes in the OEM/dealer relationship. Most of the insights were drawn from recent publications or press releases.
In early December 2024, PRNewswire released, “ZEISS Industrial Quality Solutions Transforms its Go-to-Market-Strategy in Canada to Drive Customer Excellence.”
Here are a few extracts that tell the complete story:
- “This strategic shift follows the dissolution of its distributor agreement with Elliott Matsuura Canada Inc., which had previously been the supplier of these technologies in Canada.” Elliot has represented Zeiss since the 1980s.
- “Our decision to move to direct sales for these specific technologies allows us to partner more closely with our customers to resolve their toughest challenges and help them reach their goals.”
- “Earlier this year, the company established a sales and service company in Canada for its Industrial Quality Solutions portfolio to strengthen customer excellence throughout the region.”
- “The company will also provide training, service, and maintenance for its products, and its Toronto facility features various metrology technologies, including ZEISS CMMs and VMMs.”
The ZEISS Industrial Quality Solutions business sells and services highly complex hardware and software products, including precision optical and X-ray sensing equipment and AI-powered software that transforms collected data into valuable information. These instruments are expensive, and the sales process is lengthy before prospects make a buying decision. The current and next generation of products will likely require highly trained sales and service professionals to engage effectively with prospects and customers.
Netherlands-based Sonic Group acquired Auburn, Ala.’s, Sonic Tools USA.
Sonic Group manufactures hand tools and associated storage solutions.
This quote is from Truck, Parts, and Service™.
- “The acquisition of the Sonic Group’s North American distribution partner represents a natural progression in our international growth strategy,” said Remko Papenburg, CEO of Sonic Group.
- “Sonic Tools USA has successfully translated the Sonic go-to-market strategy from Europe to North America, achieving an impressive 4,000% growth in revenue during the past 10 years.”
- Now, as a fully owned entity of Sonic Group, we are excited to help super charge that growth into the next decade.”
The dealership did its primary job of establishing the Sonic Group in the United States and was ready to be integrated into its global organization.
“Hitachi Acquires 90-Year-Old Company to Boost U.S. Service on Large Motors”
As before, here are a few extracts that tell the complete story:
- “Hitachi has acquired Joliet Electric Motors, an Illinois-based company, to boost U.S. sales and maintenance services, particularly in large motors.”
- “Joliet has repaired and rebuilt large motors for North America’s energy and heavy industry sectors for 90 years.”
- “Joliet has been a Hitachi sales distribution partner for the oil drilling industry since 2002, delivering some 1,100 large motors within North America. With the acquisition, Hitachi hopes to enhance its recurring business by expanding the sales of large industrial equipment in North America, strengthening its maintenance service business for existing products, and entering into the maintenance service business for products manufactured by other companies.”
- “The company also aims to provide electrified products to reduce CO2 emissions from energy sources.”
- “Hitachi plans to collaborate with Joliet to provide maintenance service operations for some 7,000 wind farm generators and large motors installed in Hitachi Group products in North America.”
- “Based on the knowledge and data obtained through maintenance services, Hitachi will grasp the potential needs of customers and use AI to propose equipment designs and energy optimization operations.”
Hitachi wanted to expand its American business with new products and services, so it made Joliet an offer it couldn’t refuse.
The Manitowoc Company Expands its Direct-to-Customer Footprint in Georgia, North Carolina, and South Carolina
Manitowoc manufactures mobile cranes and other lifting solutions.
- The Manitowoc Company, Inc. (NYSE: MTW) (“the Company” or “Manitowoc”), a leading global manufacturer of cranes and lifting solutions, announced that through its wholly-owned subsidiary, MGX Equipment Services, LLC, it has completed the acquisition of certain crane assets of Ring Power Corporation (“Ring Power”).
- This transaction expands Manitowoc’s direct-to-customer footprint in the territories with new and used crane sales, aftermarket parts, service, and remanufacturing support to a diverse range of end-user customers.
- MGX will now serve crane customers in Georgia, North Carolina, and South Carolina. Ring Power will maintain its current facilities in Georgia, North Carolina, and South Carolina for its utility and vocational truck operations. In addition, Ring Power will operate its crane business in Florida, representing Grove, Manitowoc, and National Crane products.
In the Manitowoc Company’s 2023 Annual Report (the latest available) they said: “In 2021, we outlined our strategy to shift from being a solely product-focused company to being more service-oriented; our objective was to get closer to our customers and to increase our aftermarket exposure, which provides higher margin, more consistent recurring revenue streams. Coined CRANES+50, our strategy continues to yield results – in 2023, our non-new machine sales grew 12.4% year-over-year to $612.7 million.
This acquisition is another step in a long-range plan to expand their direct-to-consumer service by acquiring existing dealers.”
Olympus Acquires Distribution Business in Chile
Olympus specializes in endoscopic and therapeutic solutions.
- “ …to acquire from Sur Medical SpA (Surmedical) the entity that has distributed Olympus products to Chile since 2013.
- “Direct access to Chile’s growing healthcare market will enable a more efficient distribution of Olympus products and services to meet the needs of healthcare providers and their patients.”
- “Surmedical has further secured a market-leading position for Olympus endotherapy products and created a reliable repair service for medical devices.”
- Jose Gaston, President of Olympus Latin America said: “We are very excited to welcome to Olympus Corporation Chile the talented and knowledgeable sales, marketing, service and training teams who have developed such a successful market for Olympus medical technologies in Chile. Our goal is to do even more for healthcare providers and their patients by creating direct access to the full Olympus portfolio and latest innovations.”
- Patricio Fuenzalida, founder and owner of Surmedical, said, “We welcome Olympus to Chile. I will continue to work closely with Olympus and their new Chilean team to ensure a smooth transition and integration of operations. Our shared goal is to support business continuity for customers and the patients they serve.”
Do not be surprised if you see more of this type of activity in the future.
Legal Advice
I am not a lawyer, but that does not stop me from offering some helpful advice. Whether you’re just starting your business or have an extensive distribution network, you should have an attorney review all your distributor contracts to 1) ensure that you are not violating federal or state laws and 2) make certain that you are not hindering your business from acquiring or removing an existing dealer in the future. Additionally, this is not a one-time task because laws change. Therefore, ask your lawyer how often the documents should be reviewed.
Summary
| OEM | Reason for Change |
| ZEISS Industrial Quality Solutions | Get closer to customers |
| Sonic Group (Global) | Go-to-market strategy |
| Hitachi | Expand product/service offers |
| Manitowoc Company | Get closer to customers & increase aftermarket revenue |
| Olympus Global | Grow by selling the full product line |
These are all strategic reasons aimed at helping OEMs grow. If you own or operate a business as an industrial capital equipment dealer, consider why OEMs acquire dealers. The more your business aligns with the OEM’s long-term objectives, the more valuable it will be if you ever decide to sell it in whole or part to a Private Equity investor.
Recommended resources:
- Unlocking the Financial Reasons to Invest in the Aftermarket
- Prospering in a VUCA World is Causing Industrial OEMs to Focus on the Aftermarket
About Middlesex Consulting
Middlesex Consulting is an experienced team of professionals whose primary goal is to help capital equipment companies create more value for their clients and stakeholders. We continue to provide superior solutions to meet our clients’ needs by focusing on our strengths in Services, Manufacturing, Customer Experience, and Engineering. If you want to learn more about how we can help your organization avoid revenue loss because customers fail to renew service contracts, please get in touch with us or check out some free articles and white papers here.