Published: Jul 07, 2016
Andrew Craig, Partner at Maven
With globalisation and international commerce very much cemented into the reality of current times, one could be forgiven for underestimating the challenges that companies face in taking their business abroad. There are many subtle obstacles that require careful negotiation from a focussed and well-informed management team to avoid disappointment when venturing beyond national borders.
Putting befuddling and intricate tax systems to one side; in my experience perhaps the most pertinent issue companies face on the path to internationalisation is their ability to truly understand, and ingratiate themselves with, the local business culture. Get it right though and it can open up a multitude of commercial opportunities. A notable performer in the Maven portfolio in this regard has been John McGavigan Ltd, a manufacturer and supplier of decorative assemblies and interior parts for the global automotive industry.
McGavigan’s has undergone a striking transformation in the last five years from a single Glasgow-based operation into a leading international producer of automotive and industrial plastic components, serving global clients out of its two manufacturing hubs in Glasgow and Suzhou, China and now employing over 320 full-time staff. Its expansion has been so impressive that McGavigan’s has been included in this year's Sunday Times Fast Track SME Export 100, which ranks Britain’s 100 small and medium-sized companies with the fastest-growing international sales over the latest two years.
At the time of our investment in 2010 China had just overtaken the United States as the largest single market for the sale of new cars, but with only 8 out of every 1000 people in China owning a car the market for specialist automotive components appeared to have plenty of room for continued growth. Those favourable market dynamics proved to be the catalyst for the management team at McGavigan’s to seek Maven’s backing in order to open a new facility in China and take a big step forward in the expansion of their business.
McGavigan’s approach for internationalisation was not to rush into a “go global” strategy, but rather a considered and targeted effort to attain a deep appreciation of the Chinese market, and all the cultural and operational nuance that this implies. Like many situations in private equity this ultimately centred on finding the right people to partner with, providing a platform to cultivate an organisation with local ideas engrained into the fabric of the operation. Of strategic importance to this success was the building of the senior leadership team for the Suzhou facility, and in particular the appointment of a Chinese General Manager who brought a combination of leadership skills and ingrained experience of working with overseas businesses.
In my experience too many companies neglect this when embarking on internationalisation and most often the outcome is not only working against the competition but also the culture of that country. It was the appointment of the right leader with potential to grow further within the global business and a combination of rigorous diligence coupled with a determination to source an appropriate investment partner that enabled McGavigan’s to establish a business that has seen the company prosper and grow impressively since our involvement.
Now, five years on from the opening of the facility in China, McGavigan’s are on the lookout for opportunities to penetrate new international markets and repeat the success they have already achieving in global expansion.