Invest KOREA

Youngshin Components, Shinheung SEC secure production facilities in Europe through M&As

Asset acquisition emerging as new means of entering global markets as it saves considerable time needed to build new factories

KOTRA has announced that Korean auto parts makers Youngshin Components and Shinheung SEC have recently finalized the process of acquiring production facilities near Budapest, Hungary, with support from KOTRA. Neither the cost of acquisition nor the sellers’ identities can be publicly disclosed.

* Scale: (Youngshin) floor space: 13,250m², land: 32,500 m² / (Shinheung) floor space: 2,154 m², land: 10,000 m²

Shinheung SEC completed the acquisition in late April, Youngshin Components in early May. In both cases, it only took about three months from the moment they decided on a target asset to completing its acquisition. The companies expect to start operating the factories in the third quarter of this year, as soon as they finish the ongoing installation of additional equipment.

Shinheung SEC manufactures battery cap assemblies and battery cans for electric vehicles (EVs). The company made the recent asset acquisition to enter the Hungarian market along with one of its main clients, Samsung SDI, which has completed construction of a factory for EV batteries nearby. With the demand for EV batteries sure to rise, the company decided upon a facility with plenty of room for expansion, in case it has to increase its production volume in the long run.

According to an internal source, "the company's entry into Hungary is meaningful in that it was selected as a strategic partner for Samsung SDI in recognition of its EV battery technology," adding, "depending on the region, Hungary provides a 25- to 50-percent cash grant or tax credit. KOTRA's Budapest office helped a great deal throughout the entire administrative process."

Youngshin Components manufactures air conditioner compressor parts for automobiles. The company has been seeing its revenue double during the past three years, and has decided to make the recent acquisition upon request from two of its main clients in Germany, Mahle and Sanden.

Youngshin Components president and CEO Park Seung Byung hopes "the acquisitions will serve as a good reference point for other Korean companies that hope to enter Eastern Europe," adding that from early on his company "participated in KOTRA's project to help businesses establish foreign branches, and was thereby able to gain a comprehensive understanding of the local environment. The information KOTRA provided throughout the process was immensely helpful."

Source : Invest Korea (May 19, 2017)