The Spaniards are coming

Do the Big 4 have to get ready for expansion? A company transaction largely unnoticed by the public now points to this.

M&A expert Dr. Lars Watermann analyzes the dynamics created by the deal and explains why medium-sized elevator companies are benefiting. This insightful analysis is exclusively featured in LIFTjournal.

One of the fixed principles of the German lift sector: the Big 4 – i.e. Kone, Otis, Schindler and TKE – dominate the market for mergers & acquisitions (M&A). An unchanging quartet. However, a company takeover that has gone almost completely unnoticed by the public until now indicates a turning point.

Acquisition made for strategic reasons

AK Aufzüge from Rheinstetten changed hands at the end of 2023. What is remarkable about this deal is not so much the company that was acquired - after all, AK Aufzüge does not have many employees, a high turnover, or a four-digit number of maintenance contracts, nor does the company have its own production facilities. Rather, it is the buyer who makes this transaction special.

This is because it was the Spanish Orona Group that cut a cheque. The group is aiming for one billion euros in turnover for 2025. But why was the Spanish giant interested in the comparatively small specialist from South Germany? What does AK do that Orona can’t? The fact is: it doesn’t matter. The acquisition was made above all for strategic reasons.

Direct market entry

The fact is that Orona lifts have previously been distributed in the German market but only via partner companies. The Spanish company has now entered the market directly. Just as in twelve other European countries, where Orona has successfully concluded over 55 transactions, the company aims to engage more actively and intensively in the German market. And for this the company needs a platform - which has been found within AK Aufzüge.

However, AK Aufzüge will probably not be enough for the Spaniards to implement their strategy. Further acquisitions are likely to take place in the coming years. Instead of the Big 4, five interested parties will be bidding for companies in the future.

This could be good news for all those who are thinking about selling their elevator company. The Big 4 will certainly try to prevent additional breaches in the dam wall and outbid the Spaniards in purchase negotiations. Perhaps at any price! As a result, the recent noticeable cooling-off in purchase prices has probably reached its end for the time being.

German customer wishes

But the truth also includes another factor, which will probably lead to company values shrinking in the medium and long term: thanks to the AK service team, the Spaniards will soon have a much better understanding of German customer preferences. A cultural rapprochement that will strengthen organic growth, without undermining current partner companies. Because a deal in Rheinstetten will not jeopardize existing business in other regions – but at the expense of all other market participants. After all, the Spaniards - according to their own information – already account for every tenth newly installed system in Europe.

Thanks to the economies of scale achieved in this way and the impressive depth of added value, the Iberians can offer extremely competitive prices for standard elevators. Consequently, the question in future will be how much will remain of the pie for everyone else, since, due to the (international) political and (construction) economic macro-situation, it will probably not grow much larger for the foreseeable future. At the end of the day, the formula is pretty simple: lower new lift turnover x lower service turnover = lower company value.

One thing is clear: the Spanish giant is here to stay. Hence, the question is not, whether the German lift market will undergo lasting changes, but rather how fast. Good news for all those who are correspondingly prepared.

The author is Managing Director of Watermann Agens GmbH and specializes in corporate transactions in the elevator industry.

More information: watermann.ag

The Orona Group: The Orona Group has been in existence for 60 years and began its business activities in the field of boiler construction. In 2022, 5,700 employees were producing and servicing around 30,000 elevator systems, according to the company. Orona is active in around a dozen countries and has sales partnerships in around 100.

The Group's consolidated turnover grew by around eight percent to just under 900 million euros in 2022. The company is based in Hernani (Basque Country), Spain, and is part of the Mondragón cooperative conglomerate.