I just listened to Cadeler’s call on the topic, and I have somewhat mixed feelings about this acquisition again.
Let’s start with the positive side: the margins (~50%) and growth projections for that business look very good (20% CAGR in the medium term). BTW, I will add that the hammer business accounts for over 80% of the company’s current revenue; granted, it is more related to O&G drilling and such, but the volume for these is currently quite low. And apparently, that drilling equipment will also be used for wind turbines.
But when I listened to the analysts’ questions, especially the last ABN AMRO analyst who seemed to know the competitive landscape better (Boskalis and their corresponding hammer manufacturer—that’s how I understood it). It seems there are new technologies coming there too, so are Menck + Cadeler really in the best possible position here?
In a way, one could think this reflects strong customer demand to find solutions for the goal set by the North Sea countries last year to increase wind power capacity. Because of this, there is now pressure to find solutions on the market to be able to offer customers the realization of projects in a fairly competitive environment.
And on the other hand, this is exactly what worries me a lot. Solutions made under the pressure of intense competition are not always necessarily very successful, and is it possible that, for example, the personnel at the acquired company see other opportunities? Another concern is their own experience base in offering broader solutions to customers. I understand that these large projects work a bit differently than more standard product business, but it still worries me how the market as a whole will receive such a concentration.
In short, this means to me that I will be monitoring the development of things much more critically from now on, and if I get the feeling that things are not progressing as desired, I am prepared to reduce or even completely divest my ownership in this company.
And the market’s initial reaction seems to be in line with my own thoughts.