Titan Machinery, a major Case IH dealership in North America with businesses through Europe is confident its venture in Australia will pay dividends both for the business and its customers.
Six months ago Titan bought O'Connors, Australia's largest Case IH group of dealerships, with a footprint of 16 branches across Victoria, NSW and South Australia.
Titan's chief executive BJ Knutson said there were a number of similarities in the Titan and O'Connors stories.
While Titan, with over 100 branches globally, was significantly larger than O'Connors, Mr Knutson said there was a shared background.
"Similar to what the O'Connor family has done here in Australia Peter Christianson and Dave Meyer set up as small dealerships in North Dakota, before partnering together and growing the business," Mr Knutson said.
Six months into the Australian venture, Mr Knutson said he had been pleasantly surprised with how the acquisition was panning out.
ACM Agri grains industry reporter Gregor Heard caught up with Mr Knutson and O'Connors chief executive Gareth Webb to find out how the move was panning out, the challenges and the opportunities in the Australian agricultural machinery industry over coming years.
GH - It's six months since the deal went through, how are you both feeling about it now?
GW: For me it was a big change and I'll admit I was definitely unsure about how it was going to pan out but it has exceeded all expectations.
We weren't sure whether we'd be in a position to make our own decisions, but the Titan management team is young and energetic and very similar to our own so we're hoping the only changes customers notice are positive ones.
For instance, clients will now be able to access 24 hour support for a lot of products, if its 2am and the sprayer is down someone on the other side of the planet will be available to provide support, those synergies are going to work out really well for us.
BK: Things have moved along really well, we're also hoping that the buying opportunities we are able to leverage as a large group will be able to deliver savings we can help pass on to the growers.
GH: BJ, what do you guys do in the states and where is your footprint?
BK: The history of Titan goes back to Peter Christianson and Dave Meyer, they both went out and borrowed money and started up their own dealerships in their mid to late 20s, before building their businesses across the Minnesota and North Dakota areas.
They were neighbours and rivals with their branches before eventually getting talking and deciding to merge, to take advantage of all the back office efficiency gains.
There was then a rapid expansion in the early 2000s where we bought a lot more branches through the US and decided to go public.
Ultimately the owners wanted to go down this path to keep the management team in place, private equity often sees these opportunities as a means to extract maximum value and then sell the business, whereas they wanted to keep the business as an ongoing concern.
In 2007 we listed on the NASDAQ exchange, since then we've also launched into the European market in 2012 with businesses in Germany and Ukraine.
We saw very similar equipment being used to the US, similar soil types and cropping practices and it was the same here in Australia, there was so much in common with what O'Connors were doing, we got to know the O'Connors team through a Case IH advisory board and started talking and things got serious and then we completed the deal last year.
GH: What attracted you to the O'Connors model in specific for your first foray into the Australian market?
BK: We'd been watching the Australian market for quite some time,
Dave and Dennis (O'Connor) had connected at one point, exchanged emails and phone calls, they met up and we found a real alignment between the two businesses.
We didn't want something we had to fix up, we wanted something that would hit the ground running and the two companies have a really similar customer-focused mentality.
It had the footprint in the part of Australia we had identified as where we wanted to be, it ticked all the boxes.
GH: Within that, you obviously were happy to have a plug and play model, with few changes needed but will there be any restructures in line with your broader business?
BK: It is such a compliment to the management team - there really aren't plans to do too much.
I've been part of 73 acquisitions now, every one has come with some level of surprise, none are exactly the way we modelled - but we've been really pleased with what has happened as we've taken over the O'Connors business.
The honesty and transparency from both teams during the due diligence process has really paid off.
Both of our teams have management from a farming background, and we'd like to think that stops us from making dumb top-down decisions that don't resonate with the customers.
GH: What are some of the differences you've noted in the machinery markets in North America and here?
BK: There is a little longer window down here compared to North Dakota, where the season is very short, there is a longer sowing and harvest season which has its own pros and cons, we're looking to see how we can leverage that and add value for all.
Secondly, the portfolios of equipment is much narrower, O'Connors definitely sits in the high horsepower category, the broadacre dealerships don't have the orchard or vineyard equipment.
In the US there is also probably more tillage equipment with a stronger focus on no-till in Australia.
GW: We've probably got a real advantage here in Australia in that we seem to be able to train competent tech staff quicker and younger, which is a real credit to those in that side of the business.
BK: You certainly see differences regarding turnover rates, in Australia people are much more willing to go to a different job, the turnover rates in the US are around half here.
GH: Where do you see opportunities for Titan in Aus and opps more broadly within the machinery sector both here and internationally?
BK: Basically, we want to continue what O'Connors have started and pour gasoline on it, really get it going.
We think with the centralised back office efficiencies the company will really be able to focus on seizing the opportunities that present.
From our viewpoint, we don't want to be standing hovering over anyone's shoulder, it's about identifying good people and let them do what they do.
GW: It's great to be working with a team that has been there and done it, they've worked the front line so we're comfortable can bounce ideas off them.
BK: Basically, we're going to approach things very simply, it's a do no harm approach, don't screw up a good thing!
GH: Do you think you have the sweet spot right in terms of the number of dealerships - is there a thing as too much or will you look to grow as opportunities present?
BK: We're looking for managed growth, we're not into growing for growth's sake but there are a lot of opportunities out there and we're mindful of organic and acquisitional growth, we're open to taking a look at what comes our way and whether it has a fit for us.
At present we're fairly happy with the geographic footprint we've got in Australia, it allows a lot of synergies between the branches, but we're always looking at what is out there.
GH: What are your views regarding machinery sales trends?
BK: Farmers are looking to address things that are out of their control at present, such as labour shortages, so things like ag-tech or more efficiencies of scale make sense on that front.
People are after equipment that can help them save costs, increase yields and address their labour challenges, and technology is going to play a big part in that.
GW: Productivity is a key driver, people want to see some boost to their productivity when making big ticket machinery purchase.
GH: Within the industry in Australia there is a lot of debate about the right to repair farm machinery, what is your perspective on that and is it as big an issue in North America?
BK: Unfortunately this has become an issue for the politicians rather than for those out there in the industry, we're very supportive of our customers and their right to repair their equipment and get back going as soon as they can.
You can see that with 70 per cent of our parts sales going out the front door to farmer customers, however there are some areas we need to be mindful of.
Basically, its a case of us supporting farmers' right to repair but not the right to modify, things where they are chipping engines and overriding speed limits or emissions saving features, we can't support that happening.
We think we are providing good value for our customers, we're providing the electronic service tools where it is appropriate and links for them to do what they need to do, but we're not comfortable providing source codes that can allow them to do things to the machines that potentially aren't safe or aren't environmentally sustainable.
GH: What are some future trends you reckon we should look out for in the machinery space?
BK: We're very interested in AI and are starting to dabble with that, we see some good opportunities, on our websites in some instances you can chat with a used equipment specialist, except they're not actually a person, they're an AI bot.
From the parts and service side there are some great insights to be gained using AI to analyse data, there are parts analytics, using historical sales together with trends that can help with ordering predictions that will be really useful to us.
On the service side - every time we lose a technician the knowledge leaves the scene of the accident, with AI we hope to retain some of it and help us into the future.
The 3D printing space is also developing rapidly, it could play a real role in helping us with parts in more isolated regions if we can just get it printed out rather than having to freight it.
Telematics are also obviously huge, that real-time data is proving invaluable in a range of applications