The Changing Face of the Equipment Industry

Acquisitions. Mergers. Consolidations. Joint ventures. Partnerships.

These have been the defining words of the scrap recycling industry in the past few years. And while scrap firms have been busy transforming their industry, a similar but quieter evolution has been occurring among manufacturers of scrap processing and handling equipment.

The factors driving this evolution are varied, with firms seeking to benefit from economies of scale, synergy between related lines of equipment, access to new markets, and infusions of capital from publicly traded parent companies or partners. Manufacturers are aggressively pursuing the benefits to be had by offering a broader array of equipment and complete systems. And the whole recycling equipment industry is becoming more and more international with every acquisition and partnership.

So whether you’re in the market now for a new piece of equipment or will be in the near future, it’s a good idea to know about these changes in the manufacturing industry because all signs suggest this trend is here to stay.

Combining Strengths

One of the forces behind the consolidation of the recycling equipment industry is the desire to offer a complete line of equipment—in short, to become more of a one-stop shop for customers.

For an analogy, look at supermarkets, which grew out of the desire to make more products available to customers than they could get at their corner grocery store. In the same way, many recycling equipment companies are becoming supermanufacturers. Their goal? To provide a full complement of processing and/or handling equipment to scrap recyclers.

In some cases, manufacturers that make different machinery have combined forces to offer complete equipment systems. For one example, look at Wendt Corp. (Tonawanda, N.Y.), a manufacturer and distributor of various scrap processing equipment, which started marketing a complete automobile shredding system for the first time in 1998. Until last year, the firm manufactured every component of a shredding system except the shredder, including its infeed and downstream sorting systems, notes Thomas Wendt, president.

Wendt Corp. wanted to offer a complete shredder package. In fact, it was nearing final development of its own shredder. Then it saw an enticing opportunity to acquire the marketing and production rights to the shredder manufactured by Sunbelt Technologies Inc. (Dallas). The marriage between the two companies was a natural. As Wendt notes, “Sunbelt made only the shredder, we made everything else. The people and the products fit together perfectly. So the relationship just made sense and fell into place.”

By combining forces, both companies benefit from the other’s technological and industry expertise without overlapping efforts. In short, they’ve combined ingenuity to their mutual benefit. Could each have developed complete shredding systems on their own? Sure. But this way both firms win by joining forces and sharing know-how without spending capital or research and development time creating products independently. The arrangement enabled Wendt to fulfill its aspiration to offer a complete shredding system, while giving Sunbelt access to Wendt’s list of established customers and rounding out its shredder with Wendt’s infeed and downstream components.

For an international example of the one-stop-shop trend at work, look at baler manufacturer Scanrec AB Group (Malmo, Sweden). In recent years, the company has purchased several firms in the baler, briquetter, and granulator manufacturing niches to build a stable of companies that can serve a broad range of processors that handle a variety of materials and offer complete systems rather than single pieces of equipment.

Today, the firm encompasses Presona AB (single-ram horizontal balers), Scandinavian Recycling AB (specialized machinery for recycling electronics scrap, wire/cable, and plastics), Franz Arnold’s Sohne (briquetting presses, shears, and balers), Morinders AB (the Brickman line of small high-pressure balers for paper, plastics, and aluminum), and Eleicko AB (recycling systems for high-rise buildings and systems for sorting bottles and cans).

Scanrec says its goal in amassing these firms is to “make full utilization of recognized quality European recycling equipment designs” while providing “comprehensive solutions for a broad range of recyclable materials” and extending “the range of offering beyond just equipment to working, economically viable solutions.”

Branching Out

Another notable trend has been the horizontal integration of manufacturers who make equipment for other heavy industries into the recycling equipment business because it’s similar to their core industries.

Svedala Industri AB (Malmo, Sweden) is a perfect example. The firm has long been a world leader in the manufacturing of equipment and complete systems for the construction and mining industries. Mining and construction machinery must withstand harsh working conditions and typically requires considerable wear parts. The same can be said of scrap processing equipment such as shredders and guillotine shears. So it was a short and logical leap for Svedala to diversify into the recycling equipment niche. “Moving into recycling was a natural extension of what we were already doing, so it made good sense to make and market equipment for processing recycled metals,” says Bill Tigner, vice president and general manager of Svedala Industries Inc., Recycling Division, North America (Cedar Rapids, Iowa). 

Beginning in 1995, the company began acquiring recycling equipment manufacturers, including Pettibone Corp.’s Universal Engineering Division (shredders, industrial crushers, feeders, and conveyors), Lindemann Maschinenfabrik GmbH (shredders, ferrous balers, and shears), ORT Oberlander Recycling Technik GmbH (metal recycling equipment), and foundries in Birmingham, Ala., and Brazil, that make wear parts for the roster of Svedala machinery.

By acquiring these firms, Svedala gained instant access to the recycling equipment market. Its acquisitions created the potential for synergy between its current manufacturing operations and the new companies’ technological expertise and broad manufacturing base. And by working under the Svedala corporate umbrella, these firms expanded their market access, not to mention the potential to increase efficiency and share knowledge. Tigner believes the benefits also extend to Svedala’s customers in that all equipment and wear parts are produced in-house by Svedala.

It’s a Small World After All

One result of the changes in the recycling equipment industry is this: Manufacturers in this niche are becoming more international in scope.

The recycling equipment industry’s globalization isn’t unique, of course. Just about every facet of the business world is becoming more international by necessity—and thanks to technological advances that have truly made the world smaller.

The international focus of recycling equipment suppliers is a reflection of the scrap recycling industry, which is likewise becoming more global.

As one equipment manufacturing principal asserts, by being international his company can provide across-the-board products and service to the international scrap companies it serves. “By dealing with us,” he says, “all of the equipment they buy for their plants around the world is the same, and someone in the United States is familiar with the equipment operating at the satellite branch in Europe. It just makes it easier—like speaking the same language, but with equipment.”

Harris Press & Shear (Peachtree City, Ga.) is one U.S. recycling equipment manufacturer that has grown rapidly in the international arena. Founded in Cordele, Ga., more than 100 years ago as a machine shop, the firm has become a preeminent producer of balers and shears. Over the past 10 years, it also made a number of acquisitions, augmenting its equipment line with Selco balers and other compacting equipment.

But most dramatically, the company has undergone a major growth spurt since 1995 when it was purchased by FKI plc (West Yorkshire, England), an international manufacturing firm. As a member of FKI’s material handling group, Harris has increased its access to global markets and benefited from the infusion of capital made possible by being part of a publicly traded company. In fact, since FKI purchased Harris, it has invested more than $6 million in the firm’s two manufacturing plants in Georgia and has opened a distribution facility in the United Kingdom. In addition, Harris has formed distribution alliances with other companies and is poised to grow its international presence by leaps and bounds.

Thanks to these moves, Harris’s international business has soared from 10 to 25 percent of its total business, and its goal for 2000 is to reach international sales of approximately $50 million, says Michael Tryon, president. Plus, while Harris is expanding the markets it serves with its shears, balers, and more, it’s also adding a new line of automobile shredders. The purchase by FKI has clearly changed the face of Harris. Could the company have otherwise taken such monumental steps into the global equipment market? Perhaps. But there’s no denying that being backed by a large public company has given Harris a boost it would have been hard-pressed to achieve on its own.

Another type of international alliance is the tried-and-true distributorship. Wendt Corp., in addition to its acquisitions, has formed a number of alliances under which it serves as a representative and distributor for foreign-built equipment, sold under Wendt International. “I think the foreign companies really need to partner with an established company in the United States because the recycling business is such a close—and, to a large extent, closed—business,” says Thomas Wendt.

His thoughts are echoed by others who say it’s difficult for even a well-known European equipment maker to crack the U.S. market without the networking power and reputation of an established U.S. company. And, despite the scrap industry’s recent dismal market conditions, prospects are still better here than in Europe or Asia, making foreign manufacturers eager to tap into the American market. “It’s still the best market in the world,” Wendt says, “and the best way to get into it is to partner with a U.S. company.”

In his opinion, it’s best to focus on distributing complementary equipment lines. Last year, for instance, Wendt Corp. started distributing nonferrous and wire processing equipment made by Eldan Recycling A/S (Faaborg, Denmark). This opportunity came about when Eldan’s long-time distributor—Jorgen Warrer of J.W. International Corp. (Charleston, S.C.)—retired. Wendt was a natural to assume the distributorship since it was already the North American distributor for Eldan’s tire recycling equipment. Now Wendt is the exclusive North American distributor of the entire Eldan product line.

Service Still Matters

While the benefits of “going international” are undeniable, it’s important for manufacturers not to become so big as to lose focus on providing localized service to individual customers, advises Tigner.

To maintain personalized contact with its customers, Svedala operates decentralized—and, to a large extent, independently operated—marketing and service offices around the world. Through these service centers, customers get regional assistance from Svedala staff who communicate and deal with them on a more personal basis than would be possible from a distant office, he explains.

In theory, this allows each office to focus on the needs of its customers, know them personally, and operate according to the norms and expectations of the country and culture in which it’s located. In Svedala’s case, this dedication to local service is crucial to its success: more than 40 percent of its annual revenue comes from selling wear parts, and the company expects this will always be a big part of its business. “With this system, we have the best of both worlds—local ‘companies’ that can serve customers with a personal touch, but backed up by the financial and technological strength of a large multinational company,” Tigner says.

An Enduring Trend?

The companies mentioned here represent but a few of the strategic acquisitions and partnerships that have been reshaping the recycling equipment industry.

You don’t have to look far to find other examples:

 Outokumpu Technology Oy (Tornio, Finland), a supplier of technology to the global minerals and metals processing industries, purchased Carpco Inc. (Jacksonville, Fla.), a manufacturer of physical separation technology with operations in the United States and the United Kingdom.

Spectrometer manufacturer Spectro Analytical Instruments (Kleve, Germany) acquired Asoma Instruments Inc. (Austin, Texas), which specializes in X-ray fluorescence spectrometers.

Forklift maker Clark Material Handling Co. (Lexington, Ky.) bought Samsung Heavy Industries Co. Ltd.’s worldwide forklift business headquartered in Changwon, South Korea.

And Columbus McKinnon Corp. (Amherst, N.Y.), a producer of tire processing equipment, purchased Univeyor A/S (Arden, Denmark), a designer and manufacturer of material handling systems.

And the list goes on. If nothing else, these examples illustrate the consolidation and globalization trend that’s sweeping through the recycling equipment business. And more can be expected, say industry executives. As one principal puts it, “We’ll consider just about any type of acquisition or partnership that helps us concentrate our efforts, cover locations better around the world, and ultimately become more competitive.”

The consolidation in the scrap industry—and the subsequent creation of larger and larger scrap conglomerates—will be one factor driving further consolidation in the recycling equipment industry, says another equipment expert. As he explains, as scrap companies increasingly extend their reach around the world, they’ll want to work with equipment providers that are also international in scope, both to provide similar equipment to all the facilities they operate and to serve these plants from regional offices.

So the next time you’re in the market for your next recycling equipment or system, keep these trends in mind and don’t be surprised if you feel you’re in the aisle of a supermanufacturer store, one that offers one-stop shopping and has an undeniably international character. •