31.10.2017

The Switch and Yaskawa: Growing together for wind and marine success

Japanese industrial giant Yaskawa acquired The Switch, a Finnish company specializing in electrical drive trains, for an undisclosed sum in July 2014. Three years down the road, it is clear that the investment is bearing fruit. The Switch’s turnover has grown from below EUR 40 million to clearly above EUR 70 million and the size of its factory workforce has increased. With Yaskawa’s support, The Switch acquired Wärtsilä Drives’ product portfolio, testing centre and manufacturing facilities in Norway in 2016.


“It has been really good for The Switch to get a big industrial owner and partner who can help to take the company to the next level. Yaskawa has invested a lot of time, effort and resources in helping us to grow, to be more stable and to meet future requirements,” says Dag Sandås, CFO and Deputy CEO at The Switch. “Being a Yaskawa company and part of its industrial family has brought us bigger customers and made it easier to handle relationships with both customers and suppliers.”


Solid foundations


There are several reasons why Yaskawa and The Switch have proved to be a successful match, according to Naoki Sato, VP, Strategy and Business Development, who has joined The Switch from the parent company and is now based in Helsinki. The smooth acquisition process is one significant factor.


“The wind energy business was booming in 2009–2010 but it was difficult for Yaskawa to enter because we were already too late. Then we found The Switch which was a very independent technology-oriented company like us, with a strong background as a component supplier,” remembers Sato. “You could say we were competitors – our products were similar but not exactly the same. It was enough to start talking.”
In 2012, the companies signed a cross supply agreement to start selling each other’s products.


“We spent the time getting to know each other better. When Yaskawa decided to go for a 100% acquisition, the offer was accepted by The Switch’s shareholders and its management team. We did not want to change the company’s Finnish management team or push through other changes,” says Sato.


Mutual benefits


Yaskawa has considerable financial muscle thanks to its EUR 3.5 billion turnover, global reach and leading role in the Asian market. The Switch’s position in the European market has helped Yaskawa to access new trends and opportunities from the technology and customer point of view.


“Yaskawa trusts the work that The Switch is doing and listens to its ideas. For example, when The Switch suggested that the acquisition of Wärtsilä’s business in Norway would be a way to enter the marine business, Yaskawa provided the capital investment that made it possible. In the wind and marine business we can say that The Switch is the head office,” says Sato with a smile.


Different business cultures


The business culture of the two companies is very different but they complement each other, according to Sandås.
“Yaskawa has brought a more systematic and structured approach to The Switch, and they get a more flexible business model and a modern way of thinking about doing business from us. For example, we have scalable engineering and manufacturing, and have never invested in walls,” he says.

 

Yaskawa accessed new trends and opportunities from the technology and customer point of view.

From Yaskawa’s viewpoint as a listed company with compliance requirements to fulfil, The Switch sometimes likes to take decisions very fast.


“A big Japanese company cannot follow the same process, so we say ‘could you explain a bit more’! But the discussion is positive because it’s all about what the customers want, and the companies have exactly the same philosophy on this,” says Sato.


Communication is the key


Sandås appreciates the easy access to Yaskawa’s headquarters and hands-on business discussions with the company’s board members. Japanese and Finnish staff members have spent time in each other’s organisations and the companies’ engineering teams are also working together to develop the next generation of products.


“We are good sparring partners and come up with new ideas in a very transparent manner. It has been surprisingly easy to communicate at all levels of the organisation despite the different time zones, languages and size of the companies,” says Sandås, who has received Japanese finance staff to Vaasa to deal with the specific administrative needs of the parent company.


“The detailed audits required by Yaskawa can sometimes feel frustrating for us in Finland but they do give added value and produce better results in the long run. For example in China, there is no need to discuss the quality of The Switch with customers because we have the Yaskawa Group’s stamp of approval.”


According to Sato, Yaskawa is always interested in The Switch way of doing things.


“For example, when we make a mid-term business plan we discuss very openly about what we are going to do next. It’s not that the mother company just decides. The companies’ thinking has equal value,” he says.


Growth ambitions


The well-functioning Finnish-Japanese business relationship is underpinned by a determined strategic push for growth.
“The Switch is aiming to become number one or at least a major player in marine, wind and industrial applications. We are trying to grow both organically and in other ways. Yaskawa will back us up if we find a good investment target,” says Sandås. “Even though Yaskawa is a listed company, we don’t run into the quarterly steering of the business, so we can take a much more long-term approach to what we want to develop.”


In addition to the wind and marine sectors, The Switch and Yaskawa have their joint sights set on the mushrooming energy storage business as well as industrial applications.


“This is a great example of successful long-term investment into Finland with mutual benefits for both the parent and subsidiary company. It also shows the strength of Finnish cleantech know-how especially in the wind power and marine technology areas,” says Sari Toivonen, Senior Advisor, Cleantech, Invest in Finland.