Calling it a “once-in-a-lifetime opportunity”, Danfoss announced Jan. 21 it had acquired Eaton’s hydraulics business for $3.3 billion. Danfoss officials said in a press release the complementary cultures and operating styles, and the opportunity to move into the industrial hydraulics business that Eaton now serves.
“Today, we take a significant and transformational step in creating a global leader in mobile and industrial hydraulics. It is a once-in-a-lifetime opportunity to combine our largely complementary portfolios and geographic footprints,” said Kim Fausing, Danfoss president and CEO in the press release. “Eaton Hydraulics is a highly respected player in the global industry, recognized for its dedicated people and strong brands. By combining the knowledge and experience of the two businesses, our customers will benefit from unmatched expertise from a single partner.”
Eric Alström, president of Danfoss Power Solutions, discussed the acquisition and its implications for customers with Machine Design:
Q: Congratulations on the acquisition of the Eaton Hydraulics Business. What makes this business move such a good fit for Danfoss at this time?
Alström: Hydraulics has been a strong core business for Danfoss for more than 50 years, and will continue to be for decades to come. The exciting combination of Eaton’s Hydraulics business with Danfoss Power Solutions will further strengthen what we consider to be the core of the core for Danfoss. Danfoss and Eaton Hydraulics have a great deal of mutual respect and share very similar cultures, with the customer at the center of what we do.
Eaton Hydraulics is a very strong player in the industrial market. This combination will enable us to not only gain a solid industrial product portfolio and market access, but also take an immediate leadership role in the fluid conveyance business, which increases the value we can bring our customers through our extended product portfolio.
Combining our two businesses not only doubles our sales force, but also doubles our engineering and innovation headcount and manufacturing footprint. In addition, it strengthens local application support and distribution channels, while extending our product portfolio to be an even stronger partner for our customers.
We see this as a true win-win situation, with benefits for our customers and employees on both sides, and we are looking forward—following the closing of the transaction—to learning from the very talented members of the Eaton Hydraulics team and incorporating the overall best processes and ideas from both businesses going forward.
Q: Assess the global hydraulics market. What are some of the key growth drivers that make this acquisition so important both for Danfoss and for the industry?
Alström: Global megatrends have a strong influence on how our world is growing and evolving. Urbanization, for example, creates increased challenges for the construction industry as new cities and infrastructures emerge. Plus, the agriculture industry is faced with the challenge of meeting an increased food supply to feed our growing population. Increased needs for energy-efficient and innovative solutions to address these challenges will drive market growth and continued high demand for hydraulics.
For Danfoss Power Solutions, this combination enables an even greater global reach. We’re bringing together two businesses that already have, in parts of the market, strong positions in the U.S., which is where many of our major customers are based. Plus, it increases the reach of Eaton Hydraulics products and solutions by making them more accessible to customers in Europe. Combining these two businesses will also double our presence in Asia.
We strive for a significant global footprint so that Danfoss can be local everywhere. That way, we can meet our customers’ needs faster and serve them wherever they are.
Q: How about some of the opportunities in the domestic U.S. market? Where are the strengths, and the opportunities?
Alström: Our growth story is certainly focused, in part, on meeting the needs of our U.S. customer base. As a global manufacturer based in the U.S., Eaton Hydraulics’ distribution network will be a great asset for Danfoss to reach more customers, and Danfoss is excited to bring Eaton solutions to our existing customer base. We can combine our complementary strengths to improve sales and aftermarket service through a stronger distribution network.
Combining our two companies is a great match, providing additional opportunities—including increased engineering expertise and capabilities, doubling our local application support, and extending the value of our Application Development Centers and digital design tools.
Q: What should the current Danfoss customers—and the current Eaton Hydraulics customers—expect to see from a combination of these two organizations? What are some of the complementary markets that will now be served under the Danfoss umbrella?
Alström: First, doubling the size of our sales and engineering teams will enable us to support our customers better and faster than ever before. By bringing together two strong hydraulics businesses with complementary portfolios and market reach, we are creating a real global leader dedicated to innovation.
We can offer our customers a broader range of products, proven and robust distribution channels, and a tremendous geographical reach. We will offer unparalleled customer support as a result of the combined businesses, which will positively impact our collective customers.
Of course, until closing it is business as usual; we will operate as two independent companies. Between signing and closing, both companies are focused on serving our customers with as little disruption as possible. We will be transparent with our communication and consult with our customers and partners throughout our planning process. Our goal is to make this as seamless as possible.
Q: The announcement talked about combining sales and revenues, but a major area that wasn’t talked about initially was research and development. What are some of the new opportunities for innovation in this market that will be possible following the acquisition?
Alström: The Danfoss Power Solutions and Eaton Hydraulics are both industry leaders and have many organizational similarities. This includes company culture, customer focus and product quality, as well as R&D.
Providing leading-edge, innovative solutions has always been an integral part of Danfoss’s heritage. Combining our strengths with those of Eaton Hydraulics will allow us to double our innovation capacity. We’re bringing together more than 600 industry-leading engineers together from each company, and by aligning our R&D roadmaps over time, we will develop and introduce new innovation at an even faster rate.
We will also continue our growth story by investing in new technologies in hydraulics, as well as digitalization and electrification. Eaton is an integral part of this story, due to its strong market position, wide industry recognition and overall professionalism. We are very excited to grow in new ways by adding the great employees of Eaton Hydraulics to our Danfoss family.