Partnerships are all the rage these days. Not a week goes by where there aren't at least a couple of deals signed in our industry.
Many are based on new technology, often aimed at developing know-how to tackle the issues arising from the march toward future automotive technology. Others look at ways to successfully reach long-term goals centered around zero-carbon emissions and sustainability, front-burner topics for nearly every manufacturer.
Michelin, for instance, recently acquired U.S.-based intelligent mobility start-up RoadBotics. It also has placed some substantial bets in hydrogen technology and tire recycling, the latter with Sweden's Enviro System. Michelin's also leading a European consortium that aims to chemically process hard-to-recycle post-consumer waste.
Goodyear, in 2020, established Goodyear Ventures, a strategic investment fund intended to build relationships and gain expertise in the fields of mobility and autonomous vehicles, sectors the Akron-based tire maker believes are keys to its future success.
Bridgestone likewise has been busy, investing in and partnering with a trio of up-and-coming automotive technology companies—May Mobility, Yoshi and Tyrata. It also formed a partnership with LanzaTech NZ Inc. to pursue end-of-life tire recycling technologies.
Bill Niaura, Bridgestone Americas' director of sustainable materials and circular economy, said sometimes the easy part in these ventures is inventing the new technology. What's difficult is developing a viable business around the know-how.
Scott Shane, managing director of the Comeback Capital Fund and a professor of economics at Case Western Reserve University, said in a recent Rubber News M&A Live discussion that when businesses make investments in venture capital, a financial return is only part of the picture. He estimates that in 75 percent of cases, access to potential future technologies is a focus of many early-stage investments.
That may be for a variety of reasons. All businesses become commoditized at some point and face cost pressures. Companies, he said, are looking for "that next big thing," something that can allow them to sell products at a premium price. But the overwhelming majority of early-stage investments don't pan out, Shane said.
When there is a positive outcome, two factors drive an investor to acquire the firm boasting the new technology. First, it wants to bring the technology to the market. Secondly, it wants to deny competitors access to the technology.
While the majority of these new-horizon deals involve large companies, Shane contends that small- and mid-sized firms can and should take similar investment steps. Smaller firms have fewer hoops to jump through, and that agility gives them an edge in accessing start-up technology related to their own businesses.
Even better, when small- and mid-sized companies take advantage of these opportunities, they gain access to R&D projects they might not have the capability to handle internally. If the technology hits, the partnering company can become the "best first customer."
And having a built-in customer is the first step toward clearing what Niaura said is the highest hurdle—building a viable business around new technologies.
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