Editor's Comment: Sany's latest deals in Europe

Last month I wrote about Chinese construction equipment manufacturer Liugong's acquisition of HSW. This month I will be sticking to a similar theme and focussing on the striking news that has emanated from its compatriot Sany over the last few weeks.

Sany has long been recognised as one of the most ambitious and aggressive Chinese equipment manufacturers when it comes to both domestic growth and overseas expansion. The last year has seen it open factories in both Germany and the US, adding to manufacturing capacity in India and Brazil and complementing its 21 overseas sales subsidiaries.

In terms of overall sales, in 2010 it had revenues of US$ 5.1 billion, which put it 7th in our Yellow Table ranking of the world's 50 largest construction equipment makers. It is the largest Chinese manufacturer by revenues and was placed in the table ahead of such household names of the global industry as Terex, Deere, JCB and CNH. As an aside, the company's success has made Sany founder and chairman Liang Wengen the richest man in mainland China, with a personal wealth put at between US$ 8 billion and US$ 11 billion.

The last few weeks have seen Sany's expansion plans change up to another level entirely with the acquisition of German concrete pump manufacturer Putzmeister. This is very much a marriage of two giants - Sany is reckoned to be the largest concrete pump manufacturer in the world in volume terms, and Putzmeister is the leader in revenue terms.

It looks like a cute strategic move for Sany. It now has a premium brand to sit alongside its own machines, so it should be able to hit all customer segments around the world. It also inherits Putzmeister's extensive and long-established distribution network to help it achieve this.

In a separate deal, it has signed two joint-venture agreements with Austria's Palfinger, which will see loader cranes manufactured in China and Sany's mobile crane range distributed in Europe and the CIS by Palfinger's network. Again it looks like a smart move, particularly the distribution side, which will give Sany near instant access to major markets - good dealer networks take decades to build organically.

These deals, along with the company's own organic growth could well see it take a place in the global top five of the construction equipment industry over the next two to three years.

So you certainly have to hand it to Sany for its ambition and growth to date, but the curve has been so steep that I think you also have to ask how sustainable it is. Even by Chinese standards, Sany's ascent has been remarkable. The company was only founded in 1989, whereas most of the domestic competitors it has overtaken have roots as state-owned enterprises established in the 1950s and 1960s, if not earlier.

Indeed, many of the incumbents in the wider global industry trace their roots back to the 19th century, so Sany's rise from zero to probably finding itself in the global top five in just 25 years or less is quite an exception to the industry rule. It is to be hoped this remarkably steep growth curve won't turn out to be a bubble that bursts.