Recently, Guangdong Dongfang Precision Science & Technology Co.,Ltd. (hereinafter referred to as "Dongfang Precision”) announced its third quarter report which shows that the company's gross sales from January to September of this year amounts RMB2.337 billion, an increase of 115.46% year on year, and the net profit is RMB205 million, an increase of 182.62% year on year. At the same time, it is expected that its annual net profit will increase by 190% to 240% year on year.
Since its establishment in 1996, this private enterprise located in Nanhai District of Foshan has ranked among the world top 3 in the industry segment of intelligent automatic corrugated carton packaging equipment.
Going public in 2011, Dongfang Precision has constantly enhanced its core competitiveness and achieved significant cooperation with six famed enterprises, such as Italian Fosber, by means of continuous acquisition and investment at home and abroad in only a few years, thus creating the Group’s strategic blueprint of dual-core business of "intelligent packaging equipment" and "high-end core parts".
From a “Hidden Champion” to the “M&A Master”
The announcement shows that the Dongfang Precision’s gross sales amounts toRMB2.337 billion from January to September of this year, a year-on-year growth of 115.46%.Compared with those equipment manufacturing enterprises with a scale of tens of billions of yuan, Dongfang Precision is not a large enterprise and the corrugated carton packaging equipment industry, in which it is engaged in, is not large in China and even the world. However, Dongfang Precision has made its own way of the "industry leader".
Starting from the aqueous printing press, the printing slotting and die-cutting machine with the kick bar feeder and the printing slotting and die-cutting machine with lead edge feeder, Dongfang Precision has frequently set the No. 1record among the domestic counterparts by relying on research and development.
In recent year, compared with traditional equipment, the intelligent automatic corrugated carton packaging equipment produced by Dongfang can save about 60% of the manpower for domestic carton factories; Its product design and management standards are all benchmarked against the standards of Europe and America. Dongfang is the first enterprise in its industry in China to obtain the CE certification of European Union, its products are exported to over 30 countries and regions in Europe, America, Southeast Asia and India and so on, and its comprehensive strength ranks third in the world.
In addition to being the "Hidden Champion" in its industry segment, Dongfang has been dubbed as “M&A Master”, a nickname more familiar to the outside world.
Since completion of the M&A of Fosber in Italy in 2014, Dongfang, guided by its "Dual-Core Business" strategy, has carried out six mergers and acquisitions within three years, with the fields involving intelligent packaging, intelligent logistics, intelligent warehousing, new energy vehicles and so on. Presently, Dongfang Precision is not only the flagship of the domestic industry in China, but also a prestigious Chinese national brand in the world.
■The International Layout after "the Snake Swallows an Elephant"
Over the development course of Dongfang Precision in the past 21 years, 2011 is rated as a milestone.In this year, Dongfang Precision was successfully listed in the A-share market of China and commenced to implement the strategic transformation of "international development" and "extension to the whole industrial chain".
In 2013, Dongfang Precision initiated its first cross-border merger and acquisition, which was aimed at the upstream enterprise of its industrial chain -- Fosber Group of Italy. At that time, the sales of Fosber of Italy had reached RMB1 billion, ranking the second in the global industry segment, while the sales of Dongfang Precision only amounted to over RMB300 million.
But in the eyes of Tang Zhuolin, Chairman of the Board of Directors of Dongfang Precision, the new world-level enterprise in the corrugated carton packaging equipment industry will definitely appear in Asia, China to be exact, if there is such an enterprise.“So, why don’t we do it?”said Tang Zhuolin.
And there was another opportunity driving the two sides to cooperate. "Fosber's founding shareholder was over 70 years old, but there was no successor. Meanwhile, Fosber had an urgent need to expand the Asian market," he said. Yang Yali, Secretary of the Board of Directors of Dongfang Precision, recalled, "The two sides can be said to happen to coincide with each other on this point."
As expected by the top management of Dongfang Precision, the merger of "the snake swallows an elephant" proceeded smoothly: Dongfang Precision spent only 8 months concluding the process from the start of the merger in July of 2013 to the completion of the delivery of 60% of the shares in March of 2014.
Subsequently Dongfang Precision initiated its global "explosive shopping" mode. No matter it was aimed at equity participation or equity controlling, or occurred at home or abroad, such acquisition closely centered around the strategic transformation based on “international” development and extension to the “whole industry chain” all the way.
Yang Yali said that Fosber of Italy and Dongfang Precision were close upstream and downstream enterprises in the same industrial chain. However, Jaten Robot, Ferretto Group of Italy and EDF Europe, which were acquired by Dongfang Precision later, manufactured the intelligent automation products that the clients used for their Industry4.0 configurations. This means that the carton factory can complete the "one-stop" procurement of intelligent automation equipment, including the equipment for intelligent automatic production, intelligent automatic warehousing and logistics, etc., for the whole factory merely in Dongfang Precision.
Given the fact that the main business listed by Dongfang Precision belonged to the special equipment industry and the bottleneck for the market segment was obvious, Yang Yali said that the Company had chosen the layout of "high-end core parts" as the second main business sector in terms of the strategic direction.
At present, Dongfang Precision has completed acquisition of the controlling stake for Suzhou Parsun Power Machine Co., Ltd.(marine power equipment) and Beijing Pride Power (power battery packs for new energy vehicles) , its strategy of dual-core business having begun to take shape.
■Initiate the “Dongfang +” Mode by Establishing Joint Ventures
Following the dazzling M&A cases, how to vitalize these acquired enterprises has always been afield explored by Dongfang Precision. Dongfang Precision believes that vitality of these companies is related not only to the consensus the two sides reached before, but also to the equally important integration and synergy following the acquisition. Establishing a joint venture with the overseas partners has become an important approach for Dongfang Precision to absorb the increment and values of M&A.
In 2014, after the acquisition of the Italian Fosber Group, Dongfang Precision and one of our partners co-founded Guangdong Fosber Intelligent Equipment Co., Ltd., a joint venture located in Foshan; Before taking a stake in EDF, Dongfang Precision had set up a joint venture – Foshan Nanhai Oudefu Intelligent Equipment Co., Ltd. -- with its partners.
Many reasons account for why Dongfang Precision established joint ventures in China. "Mergers and acquisitions are just ‘going out’ while our aims also include' bringing in'. Digestion of international advanced technologies needs the carrier of the joint venture. By jointly establishing the management teams of R&D, production, sales and so on, we can literally make foreign technologies serve China so as to better enhance the indigenous technology strength, Foster a batch of industrial workers and form efficient styles of work and work habits." said Xie Weiwei, Vice-President of Dongfang Precision.
Nowadays, more and more foreigners can be found in the headquarters of Dongfang Precision. In the eyes of Tang Zhuolin, learning and application of foreign technologies is the only way for local enterprises to grow, but blind imitating cannot sustain long-term development of enterprises. "A brand can be successful only by constant analysis and summarization as well as repeated verification and improvement."
Dongfang Precision constantly develops and grows in the way of "industry + capital". In June of this year, Beijing Pride, a subsidiary of Dongfang Precision, received a large order worthRMB3.689 billion from BJEV. With rapid growth of the high-end core parts business sector, the mode of "Dongfang +" will open up more possibilities.
■The Counteroffensive Behind the “Snake’s Swallowing an Elephant”
Transnational merger and acquisition has become a craze in the recent two years. For well-known European companies, Chinese companies have changed from previous "pursuers" to current "buyers". Such a counteroffensive was staged by Dongfang Precision as early as several years ago.
In 2003, as the manufacturer firstly engaged in corrugated carton printing equipment in China, Dongfang Precision started to gain popularity overseas by virtue of its product quality benchmarked against the European standards.
In 2011,Dongfang Precision was listed in the A-share market of China, which also meant the beginning of a "second startup". TangZhuolin, Chairman of Dongfang Precision, recalled, "When I was preparing for the listing, I thought we must make Dongfang Precision bigger, not just stronger, if the listing is successful."
After the listing, under the guidance of the development strategy of "industry + capital", Dongfang Precision boldly launched a merger and acquisition, which was called a "snake’s swallowing the elephant" by the industry, of Fosber, the world's second largest well-known company of Italy in the industry segment. Looking back, Dongfang Precision carried out six mergers and acquisitions at home and abroad within three years and now has strode from "M&A investment" towards a deeper level of "group control". The strategy of "Dongfang+" is propelling Dongfang Precision to leap from "a small enterprise" to "a global corporation".
■Words of Wisdom of Dongfang Precision
Learning and application of foreign technologies is the only way for local enterprises to grow, but blind imitating cannot sustain long-term development of enterprises. A brand can be successful only by constant analysis and summarization as well as repeated verification and improvement.
--by Tang Zhuolin, Chairman of Board of Directors of Guangdong Dongfang Precision Science & Technology Co., Ltd.