Friendly Manufacturing Agreement Leads to Amiable Acquisition

A little more than four years ago, Manitou and Gehl struck a deal to sell each other's telescopic handlers to U.S. buyers. Unlike other industry agreements, including Manitou's distribution deal with Omniquip in the early 2000s that enabled Omniquip to become the exclusive U.S. distributor of three Manitou telehandler models, the Manitou-Gehl arrangement proved to be symbiotic, providing mutual benefit to both parties.

For starters, two simultaneous agreements were established. First was a manufacturing and license supply agreement, which allowed Gehl to manufacture under license two series of compact Manitou telescopic handler models, which have been sold through Gehl distribution networks under the Gehl name with its color and insignia. The second agreement was a reciprocal OEM supply agreement, which allowed each company to complete its range of telehandlers distributed in the United States by models designed and manufactured by the other company. Both companies have distributed these products through their own distribution channels and under their own name, color, and brand. Additionally, Manitou purchased a nearly 15-percent stake in the Gehl Co.

At industry events, the camaraderie between the two companies was obvious. Sitting between the Gehl and Manitou product managers last year at a Lift and Access Showcase luncheon, I was in the middle of conversations that included shared ideas about the market and end users and discussions on Manitou's factory in France • dialogue I had not witnessed between competing companies before.

So while the news this week of Manitou's acquisition of Gehl came as a surprise, its “friendly public tender offer” for all outstanding shares of Gehl common stock seemed to make sense. According to Manitou, it developed an appreciation for Gehl over the course of the four-year relationship for its growth strategy, the quality of its distribution networks and products, and the professionalism of its management team and other employees. Manitou intends to retain Gehl's current management team following the transaction.

Manitou has undoubtedly made a commitment to North America since the early 1980s, but pegging a company like Gehl ensures that it will maintain a strong foothold on distribution in this part of the world. To date, the 150-year-old Gehl Co. has more than 650 dealers in North America and 100 distributors in other world regions.

Along with its telehandlers, Gehl brings with it a comprehensive range of compact equipment, such as skid-steer loaders, compact excavators, track loaders, all-wheel steer loaders, and asphalt pavers, that will give Manitou a greater entry into the ag and earthmoving markets. The company also sees these additions as a natural fit for many distributors, and the similar technology will require little investment in training of sales and after-sales service support. On top of additional product categories, Gehl's wholly owned subsidiary CE Attachments will be an additional source of revenue through attachment and part sales.

By optimizing purchasing, research and development, manufacturing, and distribution networks, Manitou also sees numerous synergies driven by this arrangement. It estimates there will be cost reductions for main components due to the more than 60-percent increased volume in equipment and the standardization and use of common components. Cost reductions in research and development also will provide economies of scale for regulatory compliance, such as Tier 3 and Tier 4 engines, and more efficient use of combined R&D resources.

What we don't know for sure is how Manitou intends to brand its product lines. With three popular brands of telehandlers under one umbrella, it will be interesting to see how it will shake out.