What’s Going to Happen to the Service Market?

Source: Business Week, “GE Said to Covet Alstom Business Servicing Power Plants”

GE considers buying Alstom but so is Siemens. What’s going to happen to the service market?

Currently Alstom covers 25% of the world’s service market and is the world’s third largest provider of equipment and services for power generation. (Source: Alstom)

Power plants are aging as we speak, so the service market is attracting the attention from different service providers.

If we can follow recent trends from the last 3-6 months, several big activities took place that consolidated service providers. Remember the joint-venture between Siemens, Wood Group, Turbocare and MHI and Hitachi? These were very big transactions.

Consolidations not only cut costs, but create stronger players in the market. Because of this, competition will increase. It will be interesting to see what will happen in the next 6-12 months from prospects of fighting for service contracts.

Here are my observations: If General Electric were to purchase Alstom, we would see some additional service capabilities added to the GE team since Alstom is so strong in the service market.

If Siemens purchases Alstom, they would consolidate the service group of Alstom with the joint-venture between Turbocare and Wood Group. This would significantly increase market coverage for Siemens, adding at least 30-35%!

Either way, this will be a powerful merger between two strong organizations. Who do you think will win the deal?

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