Nidec, based in Kyoto, Japan, has expanded rapidly by acquiring many of the world’s major manufacturers of motors, large and small. Established in 1973 by the current CEO and chairman, Shigenobu Nagamori, now a 71-year-old billionaire, and three colleagues, they had the objective of ‘becoming the world’s No. 1’, and designed small precision motors (fractional HP motors for small fans). In 1979, Nidec became the first company to commercialise a direct drive spindle motor for HDDs that used a brushless DC motor, and subsequently established a position as the world’s biggest maker of precision motors for hard-disk drives, acquiring part of the Seagate Corporation in Thailand, and achieving a claimed market share of around 80%. Based on this success, between 1989 and 2007, Nidec invested in the acquisition of 27 companies, mainly based in Japan. Some of these were on the edge of bankruptcy, including units cast-off by Toshiba and Hitachi. Then there was the financial crisis of 2008, and at the same time the personal computer growth shifted away from disk drives to solid-state storage modules for the new top-selling computer tablets and smartphones.
As a result, Nidec started a new international acquisition strategy in 2010, when their group sales were quoted at $8 Bn. One of the largest deals was a major move into the North American market with the purchase of the Commercial and Industrial Motors and Appliance Controls businesses from Emerson Electric: combined these businesses accounted for more than $0,8 Bn in sales. This was, in fact, the founding business of the Emerson Electric Manufacturing Company, started by John Wesley Emerson, a Civil War Union veteran, in St Louis in 1890.
Overall, Nidec spent $2,9 Bn on acquisitions between 2010 and 2016. In its 2016 FY Nidec Group annual sales were quoted as $10,5 Bn, which some analysts consider shows a lack of any organic growth over the six year period, the sales figures being enhanced by the acquisitions. Employees in 2016 were approximately 100 000, apparently 20% lower than two years earlier: this lower number still only results in sales of $105 000 per employee. More recently quoted figures have mentioned 140 000 employees.
Fractional motors market
A different, outside view (possibly European biased) was provided by IMS Research (now part of IHS) in 2012. In this view, driven by the multiple acquisitions made in the fractional HP motor market by major groups like ABB, Regal Benoit (of the US) and Nidec, Ametek of the USA spent $270 million to acquire Dunkermotoren of Germany, a consolidation of two of the top ten manufacturers of such motors in the world, particularly concentrating on factory automation and medical markets: Dunkermotoren had sales of $170 m. According to Bryan Turnbough, market research analyst with IMS, “Since the [2008] downturn, larger companies have been finding new areas of growth through acquisitions, while smaller companies are struggling to keep up. This is changing the competitive dynamics of the industrial fractional HP motors market, which has a low growth of between three and four percent annually.” Ametek and Dunkermotoren were considered amongst the market leaders in fractional HP DC motors, particularly aimed at rotary and linear motion applications, and the combination was seen as a threat to the dominance of the top two suppliers, Maxon and Faulhaber.
Nidec markets in 2016
The Nidec 2016 FY report shows small/fractional HP motors now represent only 38% of total sales: the rest is automotive motors 23%, appliance and commercial motors 24%, plus 14% in instruments, factory automation, robots and switch components. Chairman Nagamori said, “Nidec has expanded its range from small precision to supersized motors of all kinds, and from motor peripherals to application products. These components are widely used not only in IT products but also in a wide range of fields including home appliances, automobiles, office equipment, industrial equipment, and environmental energy equipment. We strive to become the world’s No.1 comprehensive motor manufacturer, based on everything that spins and moves.”
The Nidec $1,2 Bn acquisition
So in 2016, Nagamori negotiated his largest ever acquisition, a $1,2 Bn cash deal to buy two further Emerson businesses, Control Techniques of the UK and Leroy Somer of France. Emerson had been looking at the ‘strategic alternatives’ available to them for their motors and drives, and power generation and storage businesses for over a year, and there were several parties interested in the acquisition of the motors and drives companies – from Europe, Asia and elsewhere: both had been acquired by Emerson in the 1990s, and employed 9500 people, producing combined sales of $1,7 Bn in 2016.
Control Techniques manufacture variable speed drives, servo drives and motion controllers, targeted at industrial applications. Similarly, Leroy Somer produce alternators for power generation, diesel generators (at the Kato factory in the USA), and higher power motors and drives for industrial markets. Nagamori has visited the two European HQs, to meet and greet the staff following the acquisition: his normal approach is to look for dirt and grime, walls to paint, anything that can be cleaned up – hopefully he did not find any walls to paint. Whether the staff were reassured by his exhortation to “Look at the expansion in the use of robots, electric vehicles and drones” [as new markets for their motors and drives] is not certain. Nagamori had a very successful acquisition of Sankyo Seiki, a robot company in Japan in 2003, turning in a profit of $180 m inside 12 months: Nidec also sells drone motors for the Amazon fleet. They were maybe happier with his statement that Nidec “put great emphasis on research and development”.
Time will tell. Nagamori has a history of setting ambitious targets, and sometimes missing them: his latest revised group sales target is 2000 Billion Yen by 2020, which equates to $18 Bn, or 70% up on the 2016 figures. Consolidating the Emerson acquisition he has already added 16 of the required 70 points ... but as the company logo says ‘Nidec ... All for dreams’.
Nick Denbow spent 30 years as a UK-based process instrumentation marketing manager, and then changed sides – becoming a freelance editor and starting Processingtalk.com. Avoiding retirement, he published the INSIDER automation newsletter for five years, and then acted as their European correspondent. He is now a freelance Automation and Control reporter and newsletter publisher, with a blog on www.nickdenbow.com
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