Reinvention is secret of Sanhua's success

"Sanhua's acquisition of Aweco gave workers at that company hope. They had feared that the company might fail because of financial losses," said Gerhard Teschl, chief executive officer of Aweco. He said that cost controls and increased research and development will drive Aweco's growth.

Mo Yang, assistant president of Sanhua Holding Group, Zhejiang Sanhua's parent company, said that the organization is clear about the goals of its M&A deals. It assesses the risks and draws up worst-case scenarios before making a move.

The integration of an acquired company should be taken step-by-step, and the key factor is the steady transition of markets and management officials. After the initial transition period, more changes can be introduced, said Mo.

Zhang said: "We are seeking other assets in the same or related sectors to acquire, and they should have technology or market resources that can make a contribution to Sanhua's technological upgrading or market expansion."

Sanhua is spending $37 million to build a factory in Mexico for microchannel heat exchanger production for clients in the US and Europe. Microchannel heat exchangers are more efficient, environmentally friendly and easy to use than traditional heat exchangers.

It said that three production lines will be built and put into operation by 2017, and annual revenue is forecast at $153 million by that year.

"Sanhua's principle of setting up overseas factories is to provide comprehensive services to clients," said Zhang. "We choose sites that are close to our main clients or are cost-competitive."

The company is studying Thailand for setting up a new factory.

Sanhua's main business is air conditioner valves, but it is moving into commercial refrigeration and cold chain logistics components.

The main air conditioner valve businesses accounted for 58 percent of revenue last year, Aweco for 13.5 percent, commercial refrigeration and cold chain components for 15 percent, variable frequency inverters for 1.5 percent and microchannel heat exchangers for 12 percent.