Constructive Communications
CE Sits Down with the Leaders Behind the Terex Acquisition of ASV
By Keith Gribbins

In early March, Terex Corp. (the third largest manufacturer of construction and mining equipment in the world) announced that it had completed its acquisition of  compact equipment legend ASV Inc. — a pioneer of compact track loaders. The transaction was valued at approximately $488 million, but it means a lot more than dollars and cents to ASV’s and Terex’s brand equity. To better understand the importance of the acquisition, Compact Equipment sat down with Terex president of construction Bob Isaman and ASV president Mark Glasnapp to discuss the evolution of these machine magnates in the small equipment market. 

CE — What attracted Terex to ASV and its products?

Bob Isaman — Looking at our strategies, ASV was an opportunity we were really excited about. They offered key strengths in four areas.  One was technology. They have a patented track system that’s unique in the industry. Second was geographic fit. ASV is very strong in North America and Australia. Terex is very strong in Europe, so it’s a perfect fit from a distributor standpoint. And now we have the opportunity to add Terex production lines in Minnesota and potentially increase employment there. So from an operations footprint standpoint, this is a big win for Terex. The third strength is the segmentation fit. Landscaping, turf, small general contractors, homeowners with land — these markets are just a really great fit with the ASV product. The CTL [compact track loader] business is the fastest growing part of that CTL and skid steer market. The opportunity to add that product to our lineup, with its advanced technology and to access that customer space, which is growing at a compound annual growth rate [CAGR] of 23 percent per year, is just a huge opportunity for Terex. And lastly, and I think the most important thing, is the people. They’re from the same entrepreneurial stock that typifies Terex.

CE — Compact track loaders fill a big gap in the Terex portfolio. Now that you have CTLs, do you see a skid steer perhaps in your future?

Bob Isaman — I never say never. We’re going to take it one step at a time. If you look across our product line, we’ve had a gap in skid steers. Now that we have a CTL line, we need to look long and hard at whether or not we need a skid steer, because the CTL is cannibalizing the skid steer market at a fairly progressive rate. So time will tell.

CE — Loegering Mfg. is a subsidiary of ASV, also purchased by Terex, which allows you to offer a variety of track solutions. Do you see more track integration technologies into the Terex brands?

Mark Glasnapp — Loegering has been focused on developing track solutions for over 30 years. They started out as the first company to offer over-the-tire steel tracks for skid steer loaders. In the late 1990s and early 2000s, Loegering also began to develop work tools and attachments for skid steer loaders. But what really attracted ASV to Loegering in late 2004 was their new VTS [Versatile Track System]. We recognized Loegering’s VTS technology as an ideal opportunity for us to engage the embedded skid steer market by offering a new traction solution to customers that already own a skid steer loader. We knew from our Posi-Track customers that once we put skid steer owners on tracks, they’d never want to go back to tires. It has been a great way to get more and more people to understand the benefits of working on tracks. As we look to the future, we see many other applications for Loegering track systems — from aerial work platforms to trenchers to other construction and agricultural products, through both Loegering’s traditional distribution channel and on an OEM basis. Loegering is very well-positioned to succeed at doing both.

CE — Does Loegering still make attachments for skid steers and track loaders?

Mark Glasnapp — Loegering still sells a line of buckets and they have two attachments. One is called the Eliminator, it’s a rock combing attachment, and they also have a mud bucket. These are very unique and they’re attachments that nobody else sells in the industry, so we’ve kept those on in our product line.

CE — Caterpillar was a large ASV customer. You supplied undercarriages for Cat’s multi terrain loaders and the company had owned 23.5 percent of ASV stock. Cat has sold its portion with this new acquisition. Will you continue to supply Cat with track loader undercarriages?

Mark Glasnapp — Absolutely. ASV and Caterpillar have a tremendous relationship. In fact, I was a part of Caterpillar’s Building Construction Products Division for many years.  We at ASV think of the people we work with at Caterpillar as both friends and business partners. Caterpillar has built five models of multi terrain loaders around ASV track technologies. Obviously, we agree with Caterpillar when they say it’s the right track solution for their customers. And Caterpillar is very supportive of the acquisition of ASV by Terex. They have affirmed to us many times before, during and after the acquisition that Caterpillar will continue to buy track systems from ASV.

CE — ASV also OEMs track systems for companies like Vermeer?

Mark Glasnapp — We build track systems for Caterpillar and Vermeer. We also, through our Loegering subsidiary, make a QTS system for many models of larger Vermeer products. We also continue to see potential OEM applications for our track systems. We really now have, just as a ASV/Loegering group, we really working together toward traction solutions for the future. For instance, the irrigation track system that we now sell through Lindsey Mfg. Co. is a joint development effort between ASV and Loegering. That system uses track systems from some of our products and wheel components, but the rest of the design and technology is from Loegering. We worked very closely together on that one.

CE — At your CONEXPO press conference, with all of the company’s acquisitions over the years, Terex noted that it was really interested in promoting three main brands under its machine umbrella — Terex, Genie and Powerscreen. Will ASV continue to retain its brand identity?

Bob Isaman — We just closed on this acquisition, so we don’t have any decisions on this yet. This is something we’ll tackle in integration. There’s a lot of different ways we could go. I think if you see a Terex-branded ASV product line, it will first be in countries where ASV doesn’t have a presence, like Europe, for example. Before the acquisition, one of ASV’s goals was to become a billion dollar entity. That’s our goal for them too, no matter what color you paint the machines and where they happen to go.

CE — Looking backward, compact track loaders have had explosive growth over the last five years. But in 2008, the dynamics of the economy are wavering. How do you think track loader sales will fair throughout the new year?

Mark Glasnapp — 2008 is obviously going to be a challenging year from the housing standpoint. But you can’t just look at our business as purely housing. We also focus on forestry applications and brush cutting with our bigger machines. Some of our machines also handle golf course and power line maintenance. Despite the fact there may be a slowdown, and people may not be buying or building new houses, they’re still maintaining landscapes on their existing properties. There’s also the area of fire prevention. Forty-eight states in the United States have communities at risk from wild fire hazards. Our PT-100 with a brush cutting package has proven to be the preferred machine to remove those fire hazards. And our ST-50 tracked utility vehicle can be equipped with fire suppression equipment to support firefighters where other equipment simply cannot travel.  So, despite what we see on the housing side, commercial and public spending continues at a pretty good clip. There’s a lot of opportunity out there and we’re going to go after it.

CE — Like skid steers, compact track loaders seem to mostly be a North American machine, aside from Takeuchi’s Japanese product line. With Terex’s global dealer network, do you see trying to expand the track loader to industries in Europe, Asia and other foreign markets?

Bob Isaman — Absolutely. In fact, the number of people at this show [CONEXPO] have asked me about ASV and when they can get it. There’s tremendous pent-up demand already. But what we’re going to do and whenever you go through something of size and merge two companies together, it’s important to be very thoughtful how you not only put together the policies and procedures and facilities and things like that, but also how you do the product strategies and how you look at existing dealer networks. All that’s done through the integration process. That’s probably going to take us three or four quarters to complete and in that interim, really the most important thing we can put out to ASV dealers and Terex dealers is that this is a value creation opportunity for everyone. The rational and reasons behind the ASV merger, were nothing more than that, creating value. So we’re not going to do anything that destroys value for anybody. That’s a really key point to get across to people. And I don’t think it’s just a North American product. As I look across the world, I see emerging markets that go from infrastructure development into urbanization rates that approach 25 to 30 percent; you’re going to see it move from heavy equipment to light equipment very quickly. We’ve constantly been surprised by China and India and other countries that moved faster than we expected, so we intend to be there with the right product on time — in fact, ahead of time. So we’re very excited about this. There’s tremendous opportunity in this thing.

Mark Glasnapp — It comes down to the customer and whoever serves his needs the best is going to be the one that wins at the end of the day. North America just happened to be a skid steer market years ago and has evolved. We effectively started the track business in North America and it was our home ground and we thought we’d want to establish that beachhead first before we branched out in the globalization of our product. It was one of our explicit strategies, but we just didn’t get to that point yet. But with the acquisition by Terex, it opens it all up. There are customers everywhere from Germany to Russia to the Far East that still need traction, flotation and mobility.

CE — When a company is bought or sold, the dealers and the customers they serve are always a little tentative about what’s next. What would you say to a dealer or customer about what’s changing or what’s staying the same with this new ASV/Terex acquisition?

Bob Isaman — I think in the short term, its going to business as usual. Mark now has a business plan that is now my business plan now [laughter]. We’re linked together on this for the foreseeable future going forward. Our job at Terex is support, care and trying to clear roadblocks and obstructions to make sure our companies are successful. We work very hard on that. Again, the integration process takes a little time and we have to accumulate the database to be thoughtful about how you make these decisions. I think what our customers would not want us to do is to rush into anything that’s potentially not going to create value. That’s our commitment to both the ASV and Terex team, as well as to our share holders — who really put the big check down to make this happen.

Mark Glasnapp — This week, on Monday, we have a full-day meeting with our dealer council. These are some of our top dealers from all over the country, including Australia. I will tell you, to a person in that dealer group, they look at this acquisition from Terex as a full-fledged opportunity. They asked the same questions: What can you expect from a Terex acquisition. I said being apart of a global company is going to help from a business process standpoint and help our factories run more efficiently and produce higher quality products. We’re going to get global purchasing leverage that we wouldn’t have for a company our size. That makes us more competitive. It brings international distribution. The big thing they look at is that it brings potential to add products to their portfolio.