Welcome Robert. What are the main reasons behind Mycronic’s recent acquisition of Axxon Automation?
First of all, we liked the company very much, what we saw. It is a very young company, they started out in 2008, and has come, in a very short time, very far and have made a very big impact and inroads into the China SMT market with their dispensing equipment primarily. We found a very rich and wide product performance, ranging from tabletops all the way up to in-line systems, smartly designed with pretty sophisticated technology, actually, including several different levels of accessories and valves that go to the dispensing systems.
We also liked the culture, attitude and values at the company. We were more impressed than we expected with the closeness with their customers they were working with. They had a very high determination and commitment to serving their customers. We liked the whole company and I think their performance really proved that they are doing quite a lot right. I think this a fundamental business reason or rational for us to look at them.
Of course there is a very nice and good match in terms of specific fit to our company, our business and them. There is a clear connection between what we have been doing ourselves for quite sometime and what Axxon Automation is doing. What they want to do in the future also aligns very much with our line of thinking. There are a lot of opportunities.
There are a lot of synergies there and I think that culture is very important, that you have a symbiotic culture that you work with in any type of acquisition. Axxon Automation has a very big footprint in China, with the standard dispensers. It that something that you going to be able to exploit in the west? Are you going to bring that into the United States and Europe?
We certainly think so, and this is one was one of the synergies that was mutual for both companies. Let me start from the Micronic side, we had the MY500 jet printer for a very long period of time, then we launched the MY600 two years ago. These have dedicated for solder-plate jet printing. In 2015 at productronica, we introduced the technology for a general dispensing purposes and now that product is available with a dispensing head.
With that first product we launched, we have a much wider ambition to go into the dispensing market with a broader product folio based on the MY600 program first and foremost. From that perspective, the acquisition of Axxon Automation is a really nice fit because overnight, we basically get access to a complete product line – applicators and so on. So now we are covering everything from tabletop all of the way up to solder jet printing on the high-end level of sophistication.
There is quite a portfolio of values in there.
That is correct. Axxon Automation in itself, at the time we started to talk to them, was very interested to launch their products internationally outside of China. With our presence already in place, in Europe, the U.S., Japan and Korea, we could, obviously, shortcut that journey and take their products much faster to market outside of China. That was, of course, part of the strategy.
I must say that I am very impressed with this acquisition. There is a lot of synergy there and very little cross-over. As you say, Axxon Automation needs access to the international market and you want to, presumably, strengthen your footprint in China. So it works both ways.
You are exactly right. When you look at any acquisition, you will find yourself with a product overlap, but in our case, there is virtually none. It is almost like a perfect match actually, from a market and profit standpoint. We are very happy about that.
Will Axxon Automation China continue to operate on its main site in Shenzhen, or will you moving it onto the Micronic site?
Axxon Automation has about 245 people, I believe, to date, in place. They have a production site also in Shenzen, whereas our representation in China, is basically only sales and services, so we have about 40 people in place, right now. There will be no changes. We will operate initially as separate entities. We are, as you have seen maybe in the press release, not 100% owners. We will be 80% owners of the company, so per se, we will operate Axxon Automation as a legal entity still for another three years.
Mr. Chen, the owner of Axxon Automation, will stay in place with the company?
He will, yes.
Your press release seems to indicate that this could be the first leg of expansion by acquisition. What other technologies would you be looking to add to your portfolio?
Axxon Automation is actually the second acquisition we have done this year. In the first quarter, we acquired our partner Royotech for the intelligent storage solution, the towers. That is another example of where we are expanding our reach and portfolio. In the case of Royotech, we were already marketing a product in our channels worldwide since 2009. Nonetheless it is a good way for us to secure long-term business. It is not just about collaboration, but a way for us to have control of the IP from that perspective, and with that, you also control your own destiny in terms of profitability and growth, etc.
When we look ahead, we are coming into a very sensitive area for us strategically – what we can say and not. There is no secret that we have communicated to the market a growth standard that is quite ambitious and we have also said that, even though the growth will come organically, we do not believe we can reach our financial targets only through organic growth. We need to compliment our growth journey with selective acquisitions and so on.
We have a very strong balance sheet, so we are ready to acquire more companies if we come across them and they have a steady fit with our current business and fulfill a strategic rational for us. At this point, I would rather not go into specific technologies, but we look at growth potential for the future, whether it is a mature business, what is the level of competition, what kind of innovation does the company have?, etc.
In the end, it boils down to, obviously, valuations and the willingness for two companies to merge on a personal level almost. Everything needs to get in place. Who knows who will be the next target of acquisition we will be able to announce, but we are certainly active and looking for more opportunities.
Well, we will certainly be watching with interest, Robert. Thank you for joining us today and we wish you every success with your latest acquisition of Axxon Automation.