SEMA Lashes Out at Analysts Over Salmat’s Bid for HPA
SEMA Lashes Out at Analysts Over Salmat’s Bid for HPA
July 27th, 2007: SEMA claims analyst reports on the $318 million takeover bid of Business Communications company HPA by competing group Salmat are ignoring the existing competition.
Salmat, HPA, and SEMA are all major players in the Business Process Outsourcing (BPO) market, encompassing the likes of Direct Mail, Catalogue distribution and Business Communications. BPO is a major market in Australasia, so it’s no surprise that it’s receiving so much attention.
Announcements with large mutli-million dollar takeovers like Salmat’s bid for HPA last week often send analysts into a flurry of hyped up forecasts. According to Alexander van der Laan, CEO of SEMA, this approach often overlooks existing industry bodies; the result of two major players becoming one doesn’t mean other key industry competitors suddenly disappear.
Such is the case with SEMA, the operators of the largest 100% privately owned direct mail operation in Australasia, alongside other competitors like QM Technologies who have been overlooked in the analyst hype surrounding the Salmat bid. The reports on these events often overlook the fact that significant industry competitors already exist, and may not be pushed out as is being implied.
It’s “Business as usual” says Van der Laan. “Analysts are gaga over the bid because of a seeming increase in pricing power.” The problem seems to lie in the fact that what is being reported and what the ACCC are saying aren’t matching up./p>
In fact the Australian Competition and Consumer Commission (ACCC) found the exact opposite to be true, with existing competitors like SEMA and QM Technologies expected to be able to compete more effectively. “Document delivery services are relatively scaleable” the ACCC report said, stating existing competitors would be able to “expand capacity to compete with the merged entity, including competing for high volume customers”.
Analyst reports have focused single mindedly on Salmat and HPA, with not enough focus on existing competition, Van Der Laan has asserted. ABN-Amro analysts reported that they believe the takeover would lead to “significant value creation over the next three to five years” Bell Potter reported that they believe the impendingacquisition of HPA by Salmat will “significantly change the competitive landscape in this industry”.
Just last month the ACCC said it is likely “the merged entity would face effective competitive constraints” and did not propose to intervene in the acquisition.
Van der Laan urges analysts to “recognize that there are two other ‘at scale’ national competitors” also playing in the Australian market.
When a takeover bid in the hundreds of millions is announced, Van der Laan says analysts need to remember that the existing competition doesn’t just disappear. This is especially true when the expected strength of existing competition is expected to continue, if not expand.