GOING UP
After ups and downs, Thyssenkrupp sells its elevator business at a top-floor price
Thyssenkrupp, the German engineering giant,announcedlast week that it would sell its elevator business to a group of private equity companies for $18.9B -- more than 2x the value of the entire parent company.
The sale was a last-ditch attempt to turn around years of declining profits.
But it was also the largest private equity deal in Europe since the 2008 financial crisis.
Wait a second: How did elevators get so valuable?
Simple: The market is dominated by an elevator-gopoly that keeps prices at the top floor.
Four companies command more than60%of the elevator market:
But even oligopo-vators couldn’t lift Thyssenkrupp’s load
After years of declining revenue in a struggling German economy, even Thyssenkrupp’s moneymaking elevators could no longer hold up its other businesses.
Thyssenkrupp’s debt got so heavy --$7.1Bon its latest earnings statement -- that activist investors began to call for the company to sell off its elevator business to pay down debts.
And so they did... for $18.9B, or about 2.8x the entire parent company’s market cap of$6.7B.
Next stop? Elevators-as-a-service
The elevator market is expected to remain strong thanks to increasing construction of tall buildings, particularly across Asia (more than60%of new elevator installations occur in China).
And as elevators become more complex, giants like Otis have begun to sellsubscription-basedmanagement services.
That service revenue is going up… and fast. In 2018, Otis raked in $12.9B in revenue. The company says 45% of its revenue comes from the sales of new equipment and 55% comes from service.
After ups and downs, Thyssenkrupp sells its elevator business at a top-floor price
Thyssenkrupp, the German engineering giant,announcedlast week that it would sell its elevator business to a group of private equity companies for $18.9B -- more than 2x the value of the entire parent company.
The sale was a last-ditch attempt to turn around years of declining profits.
But it was also the largest private equity deal in Europe since the 2008 financial crisis.
Wait a second: How did elevators get so valuable?
Simple: The market is dominated by an elevator-gopoly that keeps prices at the top floor.
Four companies command more than60%of the elevator market:
- Otis
- Kone Oyj
- Schindler
- and Thyssenkrupp
But even oligopo-vators couldn’t lift Thyssenkrupp’s load
After years of declining revenue in a struggling German economy, even Thyssenkrupp’s moneymaking elevators could no longer hold up its other businesses.
Thyssenkrupp’s debt got so heavy --$7.1Bon its latest earnings statement -- that activist investors began to call for the company to sell off its elevator business to pay down debts.
And so they did... for $18.9B, or about 2.8x the entire parent company’s market cap of$6.7B.
Next stop? Elevators-as-a-service
The elevator market is expected to remain strong thanks to increasing construction of tall buildings, particularly across Asia (more than60%of new elevator installations occur in China).
And as elevators become more complex, giants like Otis have begun to sellsubscription-basedmanagement services.
That service revenue is going up… and fast. In 2018, Otis raked in $12.9B in revenue. The company says 45% of its revenue comes from the sales of new equipment and 55% comes from service.