Teams from IMAP India and IMAP Czech Republic recently collaborated to advise NEI Limited, a leading tier-1 automotive and industrial bearings supplier in India, on their acquisition of Slovakia-based bearings manufacturer, Kinex Bearings.
NEI Limited is a leading tier-1 supplier of automotive and industrial bearings and part of CK Birla Group, a USD 2.4 billion Indian industrial conglomerate, with whom IMAP India had formed a strong relationship. The group has a rich history of mergers, acquisitions and alliances with several renowned global companies, employing 20,000+ staff, across its 24 manufacturing units around the world.
Across the globe, IMAP Czech Republic had also built up a solid relationship with HTC Investments, to which Kinex Bearings belonged. HTC Investments was keen to sell Kinex Bearings through a bilateral process to a strategic investor, so the IMAP teams presented the acquisition of Kinex to NEI highlighting its synergies and the benefits it would bring once incorporated into NEI’s larger operations. Following Board ratification, IMAP India and IMAP Czech Republic were awarded the buy-side mandate and together initiated the transaction on behalf of NEI Limited.
“The Kinex acquisition equips NEI to enhance its scale and further diversify its portfolio with a much stronger position to provide best-in-class products to both new and existing customers,” said C.K. Birla, chairman of the group.
This acquisition includes two production plants in Slovakia, with the capability to produce bearings for various sectors such as railways, industrial segments and textile, and has an annual turnover of €60 million. It also manufactures bearings for aerospace and water pump bearings for the automotive sector. Kinex exports its products to over 80 countries and employs around 1,000 workers.
IMAP teams helped identify synergies and bridge pricing gap
The acquisition process took approximately two years, which is not unusual for a deal of this type and scale. Discussions regarding valuation were lengthy as the initial difference between the asking price and bid was quite wide. In cases such as these, it was important that IMAP identified the synergy benefits for the buyer, attributing accurate values to the post acquisition synergies, which were then included in the financial model. This proved key in increasing the bid price, which was achieved following several subsequent rounds of discussions.
IMAP teams helped client navigate challenges in cross border transaction
The IMAP partners from both countries worked in close collaboration to ensure seamless execution support for the client through all the transaction phases, including submission of a non-binding offer, due diligence and a binding offer and the subsequent signing of the definitive documents. Early in the process, IMAP recognized the inefficiency of conference calls due to language and cultural barriers. Therefore, it was collectively decided that any SPA negotiations would be undertaken face to face. To this effect, IMAP organized at least 5 visits from India to Europe during the documentation stage. In cross-border transactions, with counterparts of different nationalities and cultures, face to face interactions really go a long way to bridging the communication gap.
Holistic approach – with multi country transaction support
The documentation and definitive documents required involvement of various agencies from both countries. Various risks involved in such multi geography transaction had to be factored. IMAP teams and their network ensured that client was able to absorb such cross border transaction smoothly. Eventually, the share purchase was completed through NEI’s overseas investment company based in Zurich, Switzerland and financing was part equity and part debt from international banks.