Getting smaller and bigger all at once

Lately, it seems a month doesn’t go by where I’m not receiving some news about a merger and acquisition in the industry. Sometimes, it’s one small distributor or repair shop acquiring another to expand their reach. And others, it is the big players getting even bigger.

Unless you’ve been living under a rock the past year, you clearly have seen the news about the Danfoss-Eaton merger being fully approved this month. Here, we see one of the oldest hydraulics companies in the U.S. selling off its hydraulics business because it was not clearing the profit margins Eaton wanted. On the other hand, you have Danfoss, who just secured itself as one of the largest fluid power suppliers out there, growing by one-third and doubling the company’s hydraulics operations. One company dumps what it considers a low-growth business while another sees a brighter future.

Eaton Corp. still exists but no longer as a major hydraulics supplier — the company retained its Filtration and Golf Grip divisions. (While we’re at it, how are golf grips a fluid power division in the first place? That pre-dates my work in the industry.)

Funnily enough, on the exact same day Danfoss and Eaton’s deal closed, Parker Hannifin announced it would acquire British aerospace and motion control giant Meggitt for 6.3 million pounds (interestingly, another U.S. buyer has emerged luring Meggitt with 7.03 billion, so this is clearly not a done deal). Of note in this deal, however, is that Meggitt has no fluid power footprint at all — showing Parker, too, sees the need to expand its own footprint into what some may consider a more profitable area outside of fluid power. The deal would nearly double Parker’s Aerospace Systems Segment with complementary technologies.

Parker is known for growing its business through acquisitions. However, the last fluid power acquisition the company made was in 2017, when it acquired Helac Corp.

What does this mean for the industry? The number of players in the industry continue to shrink, just as the bigger players keep getting bigger. While this will allow Danfoss and Parker to invest in more product development, there is less competition. And competition drives innovation. But that doesn’t mean we have to stop innovating.

Danfoss is committed to electrification, and their innovations in this area may be key to their future. Danfoss is also investing in autonomous vehicle research, and those two technological innovations could be the future of mobile machinery. And perhaps Parker will leverage Meggitt’s electromechanical motion control expertise to expand its own electrification expertise. These big moves by the big players open the door for continued investment in that area.

So while our industry keeps getting smaller by number of manufacturers, perhaps we’ll get bigger by building out new technology focuses.

Source: Fluid Power World

Industry News

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.