1/7 Arkios Italy Sliding Bearings Producer – Blind Profile Transaction Outline Our Client is a global Manufacturer in the Dry Composite Sliding Bearings market for applications both in Light Mechanics and Oil & Gas, where it is one of the main 5 global players, thanks to its Worldwide presence in: Europe (2 Manufacturing Sites in Italy + 1 Commercial in Germany), North America (2 Manufacturing Sites in US, near Chicago), South America (2 Manufacturing Sites in Brasil) and India (1 Manufacturing Site). Consolidated revenues for the Group are € 22 Mio, with Ebitda around 10% The client entrusts us with the task of seeking a strategic partner who may be able to join the entrepreneur in the group growth, through a Capital injection in order to accelerate the internationalisation process already started. The Company needs some growing capital, in order to overcome shortness of liquidity (caused by a bank restructuring debt at the Parent Company’s level in Italy in spring 2012), and in order to finance its Net Working Capital. From an economic point of view the business is performing well, but the shortage of financial resources al the Parent Company’s level in Italy, is undermining Group’s ability to growth. The Company The Group, composed by a Holding which controls 3 Italian operational companies, 3 production subsidiaries in US, Brazil and India, as well as sale branches in US and Germany, is among the top 10 players specialised in the Rubbing Bearings sector, and among the top 5 global players (of which 2 Italian) in the Composite Dry Sliding Bearings segment. The Group was born in 1986. Thanks to the continuous research and innovation of product and to the capability in developing new and innovative solutions ad hoc for new markets, the Group successfully became one of main global players in the Sliding Bearing (or Bushings) niche, and in particular in the Composite Dry Sliding Bearing segment, part of the wider market of Bearings (bearings in general, including ball bearings). The Sliding Bearings 100% 100% 100% 100% 100% 100% 100% 100% Special Contract Work Operational 3 (Italy) Holding Production South America (Brasil) Commercial Germany (Germany) Commercial North America (United States) Commercialization for North America Production North America (United States) Production South-East Asia (India) Production & Commercialization Europe Production Oil & Gas Segment Production for North America Production & Commercialization for South-East Asia Production & Commercialization for South-America Commercialization for Germany Production 1 (Italy) Production 2 (Italy) * Dry Composite bushings are dry sliding plain bearings intended for radially loaded bearing arrangements and require a minimum of radial space. They permit oscillating or rotational movement. They are appropriate for all applications where freedom from maintenance is required or where lubricant starvation can occur
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1/7
Arkios Italy
Sliding Bearings Producer – Blind Profile
Transaction Outline
Our Client is a global Manufacturer in the Dry Composite Sliding Bearings market for applications both in Light
Mechanics and Oil & Gas, where it is one of the main 5 global players, thanks to its Worldwide presence in:
Europe (2 Manufacturing Sites in Italy + 1 Commercial in Germany), North America (2 Manufacturing Sites in US,
near Chicago), South America (2 Manufacturing Sites in Brasil) and India (1 Manufacturing Site). Consolidated
revenues for the Group are € 22 Mio, with Ebitda around 10%
The client entrusts us with the task of seeking a strategic partner who may be able to join the entrepreneur in the
group growth, through a Capital injection in order to accelerate the internationalisation process already started.
The Company needs some growing capital, in order to overcome shortness of liquidity (caused by a bank
restructuring debt at the Parent Company’s level in Italy in spring 2012), and in order to finance its Net Working
Capital.
From an economic point of view the business is performing well, but the shortage of financial resources al the
Parent Company’s level in Italy, is undermining Group’s ability to growth.
The Company
The Group, composed by a Holding which controls 3 Italian operational companies, 3 production subsidiaries in
US, Brazil and India, as well as sale branches in US and Germany, is among the top 10 players specialised in the
Rubbing Bearings sector, and among the top 5 global players (of which 2 Italian) in the Composite Dry Sliding
Bearings segment.
The Group was born in 1986. Thanks to the continuous research and innovation of product and to the capability in
developing new and innovative solutions ad hoc for new markets, the Group successfully became one of main
global players in the Sliding Bearing (or Bushings) niche, and in particular in the Composite Dry Sliding Bearing
segment, part of the wider market of Bearings (bearings in general, including ball bearings). The Sliding Bearings
100% 100% 100% 100% 100% 100% 100%
100%
Special Contract
Work
Operational 3
(Italy)
Holding
Production
South America(Brasil)
Commercial
Germany(Germany)
Commercial
North America(United States)
Commercialization
for North America
Production
North America(United States)
Production
South-East Asia(India)
Production &
Commercialization
Europe
Production Oil & Gas
Segment
Production for North
America
Production &
Commercialization
for South-East Asia
Production &
Commercialization
for South-America
Commercialization
for Germany
Production 1
(Italy)
Production 2
(Italy)
* Dry Composite bushings are dry sliding plain bearings intended for radially loaded bearing arrangements and require a minimum of radial space. They permit oscillating or rotational movement. They are appropriate for all applications where freedom from maintenance is required or where lubricant starvation can occur
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Arkios Italy
are used in the most varied industries, like: Renewable Energies, Oil & Gas [which represents 25% of its sales in
hydraulic pumps, machine tools), Heavy Mechanics (transmission tools, heavy equipment, etc.), Automotive and
Agricultural Machines.
With more than 220 employees all over the world and a
consolidated turnover of €21 million in 2011, today the
Group is the only Italian player in the sector, with
competitors mainly German and US, in a market which is
in continuous evolution, where the factors like the
technological research, the customisation, the capability
of offering very high solutions in short time, as well as
the availability of a varied stock, are the success drivers.
The structure of the Group, meets a precise requirement
of the market and it is composed as follows:
Production unit Italy 1
o Production and sale of “standard” and special Dry Composite Bearings for the European
and Italian market.
o Production of semi finished products (so-called straps), thanks to its own production technologies, for the production of bearings in the subsidiaries in USA, Brazil and India.
Production unit Italy 2
o Production and sale of special bearings and slewing rings (Dry Composite Stainless Steel) for clients from the Oil Gas and Renewable Energies sectors.
o Production upon request of special components, generally in composite Stainless
Steel/Nickel-Chrome Inconell-625/Teflon in few pieces (up to 5-10 pieces) with large dimensions.
Production unit US
o Production and sale of “standard” and special Dry Composite bearings in North America for the American and Canadian Market.
o The Company – with the exception of productions for the Oil & Gas market – imports the semi finished product (strap) from Italy and executes the ending phase of the process.
o The segment Oil & Gas, between the US production branch and that commercial one, counts for circa 20% of sales.
Production unit India
o It operates in the Dry Composite segment, where it is one of 2 producers directly present in India and South East Asia (competitor of Saint Gobain). Today, the South East Asia produces Bimetal only, now a commodity
o In the Valve (Oil & Gas) segment, which represents 30% of turnover, all the production circle is local.
o All the new line of Polymer Bearings (see below) is produced in Brazil
o In the Mechanics and Automotive segment, which is growing and requiring innovation, there is the need of producing integrally in loco (starting directly from the raw material, no more from the semi-finished product), therefore strong investments are necessary.
Production unit Brazil
o As for the Production US, it produces and sells for the South America market.
Germany Commercial Branch: it is the commercial branch for the distribution in the North European markets
and in particular Germany
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Arkios Italy
USA Commercial Branch: it is the commercial branch which joins the Operational unit USA, due to a different
type of clients (distributors) and direct clients of Oil & Gas.
Furthermore, the Group controls another Operational company, active in a synergic sector as sandblasting, zinc
coating and Teflon coating of different components.
The goal of the Business Plan elaborated by the Group is to have Operational units in USA, Brazil and India which
may be able to produce starting from raw materials (no more from semi finished products), in order to be quicker
in the development of orders/products, to save significant costs of transportation and duties, as well as to be
more independent, especially in Brazil and India which are countries with more potentialities of future
development. For this end, the Group needs additional investments to those already done in last years.
Main Economics
The Company has registered a Turnover of aprox. €21
million in 2011 (+30% vs 2010) and EBITDA of 12%, equal to
€2.3 Mio.
The banks debt (aprox. 40% of sales) are in line with the Net
Working Capital.
The cash flow has been mainly used to finance the
development of the subsidiaries abroad.
The Company has invested on average 3-5% of sales per
year in R&D costs, counting them for the reference year
without capitalising them. Therefore, according to more
correct accounting principles, EBITDA would be higher.
In the EBITDA calculation leasing fees are not separated (ex
IAS 17), penalizing the real EBITDA (or EBITDAL).
(/000 €) 2009 2010 2011 30/6/12 CAGR
Fatt Cons. 15,500 17,000 21,000 11,000 + 19%
EBITDA -400 2700 2250 1.250
Ebitda % -3% 17% 12% 12%
Equity 3,500 3,900 4,200 4,900
Abstract Group Competitive Positioning (see below “Key Investment Rational”)
The Group has a significant competitive positioning in the growing segment of Dry Composite Sliding Bearings,
which has 5-6 competitors in the world, in a Market with strong entry barriers due to Know-How of production
and process, investments in Plants and in R&D, as well as capability of continuous innovation in rapid times, in
order to meet new needs of the market.
Its positioning is consolidated by the International presence in 4 continents, with production subsidiaries
independent from the point of view of production and sale, in Europe, North America, South America and South
East Asia.
Furthermore, the Group is the global leader for know-how and clients in the Oil & Gas sector, which is a sector
rapidly growing with large margins.
Hence, it is a Player – today still with small dimensions - in Europe and US as global leader in the niche of Oil &
Gas market (Valves and Actuators), with great opportunities of development thanks to new applications and
materials that the market requires, and to a policy of continuous research and development in order to meet the
requirements of the market which is rapidly growing, like (additional to that one of Oil & Gas) the market of light
mechanics, packaging, Food & Beverage etc.
-5.000
0
5.000
10.000
15.000
20.000
25.000
2009 2010 2011
15.500 17.000
21.000
-400
2.700 2.250
Sales Ebitda
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Arkios Italy
Products and Applications
Products The Group is able to produce any kind of sliding bearings (cylindrical, conical, flanged and slewing bearings) made of Composite Material (Bimetal + PTFE), Carbon/Glass Fibre, and Polymer, including – sector leader – Polymer for technologically advanced applications and upon request, with large dimensions (also for 5-10 pieces) and as well as with large margins for the Oil & Gas industry and the Renewable Energies market.
Hence, the Group works on technologically advanced products, differentiating itself in the niche of special products, in composite (market value €800-900 Mio) and on specific products upon request.
Here below an example of products and their applications:
Composite Bearings (Bimetal + Modified Teflon)
Self-lubricated
Dry Sliding Bearings in 3 layers of composite material: (A) Coil