Rooms for improvement - IK Investment Partners

COMPANY FOCUS: MACGREGOR
MacGREGOR’s
new port-of-call
MacGREGOR Group is about to embark on a new phase of development after having been taken over by
Finnish engineering company Kone Corporation. Outsourcing, expansion of service offering and structural
streamlining have enabled the company to radically cut costs, boost margins and capitalise on the upturn
in the global shipping industry.
MACGREGOR GROUP (MCG), the marine cargo
handling company, has travelled a long way in
the last few years. From being a traditional,
industrial manufacturer based in northern
Europe it is now a knowledge-based, engineering
company centred in the Far East.
After six formative years in Industri Kapital’s
portfolio, MCG is now about to embark on a
new phase of development following its recent
acquisition by the Finnish engineering
company Kone Corporation for some SEK1.7
billion (€186 million).
“MCG has achieved a remarkable turnaround
over the last three years,”
says Michael Rosenlew, the IK
partner responsible for the
firm’s original investment.
“Growth has been driven by
value-enhancing measures
throughout the entire
operation, management and
organisation of the group, helped by the recent
revival in the shipping industry,” he notes.
IK acquired a 60 per cent stake in MCG –
a world leader in the provision of marine cargo
handling equipment and services to the
shipping and shipbuilding industries – from
Incentive (now Gambro) in 1998.
“A key selling point for IK was MCG’s
resemblance with one of our previous portfolio
companies, Konecranes – particularly the
growth potential on the service side of its
business,” Rosenlew says.
“We planned to reduce costs and convert
what was, essentially, an old-fashioned,
product-oriented, engineering company into
an innovative, close-to-the-customer,
service-driven business,” he says.
Outsourcing to cut costs
MCG is the largest supplier in the world for
maritime transportation parts such as hatch
covers, cranes, RoRo equipment, shipboard
elevators and escalators, galleys for cruise ships
and passenger ferries, cargo securing systems
and refrigeration systems.
However, when IK came on board the
“With extensive industrial experience and
a fresh perspective, Pettersson lost no time
in implementing a radical performance
improvement programme to reduce MCG’s
cost base and refocus the company.”
company was manufacturing from a high cost
base in Western Europe. “There was huge
potential for reducing costs by outsourcing
production to Asia,” continues Rosenlew.
Despite the opportunities, MCG’s initial
progress was slow. “The company was hit by a
downturn in the shipping industry which was
deeper and longer than expected,” Rosenlew
explains.
Gerard De Geer, the IK partner responsible
for MCG over the last three years, observes that
investing in a cyclical industry is always going
to be ‘inviting risk’.
“But calculated risk is what private equity is
all about and shipping industry cycles are
generally quite big and predictable. MCG is
also relatively late in the cycle so it knows what
is coming,” he says.
But as De Geer points out, work at a
company like MCG is booked so far ahead that
it can be difficult to ‘turn the ship’. “Long lead
times force management to plan very rigidly,
so this was not necessarily an easy business to
change,” he says.
Opinions also differed within IK regarding
MCG management’s ability to implement the
planned restructuring. Necessary management
replacements were therefore considerably
delayed and it was not until 2002 that a new
Chairman and a new Chief Executive were
appointed and MCG was able to move forward
with the restructuring plan. “By this time,
however, we had lost three valuable years,”
Rosenlew recalls.
The tide turns
Hans Pettersson (53), the incoming CEO,
had been recruited the previous year to head
MCG’s cargo division, based in northern
Sweden. He had a strong track record,
primarily within the European paper and
packaging industry.
With extensive industrial experience and
a fresh perspective, Pettersson lost no time in
implementing a radical performance
improvement programme (PIP) to reduce
MCG’s cost base and refocus the company.
4 ik news