You may have noticed a lot of merger and acquisition activity lately in the power transmission industry. In this issue alone, weâ€™re reporting Danaâ€™s plans to acquire Oerlikon Drive Systems; Timkenâ€™s purchase of Cone Drive and Rollon, and SKFâ€™s plans to sell its linear motion division to Triton Partners (see Industry News, page 50).
Earlier this year weâ€™ve seen other large deals as well. Rexnord purchased Centa Power Transmission. ABB Purchased B&R Automation, Altra Industrial Motion announced it would be merging its business with the motion control portfolio of Fortive (including Kollmorgen, Portescap & Thomson); Sumitomo Heavy Industries announced the acquisition of the Lafert Group. SEW-Eurodrive and GEâ€™s Automation and Industrial Controls business announced a partnership wherein theyâ€™re going to sell each otherâ€™s products.
And those are just the highlights. Itâ€™s been a busy year in our industry.
So what does it all mean?
Often, in bad economic times, poorly performing companies get scooped up by larger competitors at bargain prices. But thatâ€™s not whatâ€™s happening here. Manufacturing is booming, and none of the acquired businesses appears to have been suffering. In fact, in every case that weâ€™ve seen, these corporate moves are being viewed as additive to each organizationâ€™s overall offerings and business.
In many ways, this is good news for you, the buyers of mechanical power transmission and motion control products. Itâ€™s clearly more efficient for you if you can deal with fewer suppliersâ€”but only if those suppliers maintain the level of expertise you require, and only if fewer suppliers donâ€™t automatically mean higher prices.
The supplier base for power transmission components and systems has traditionally been very diverse, and it remains so today, despite the fact that the big seem to keep getting bigger. There are still thousands of companies manufacturing gears, gear drives, electric motors, couplings, belts, clutches, brakes and the like, many of them specializing in specific industries or groups of industries, and many of whom have unique technologies or expertise.
Developing relationships with all of those suppliers is a lot of work. In some cases, that work is justified. For example, if a geared transmission is critical to your productâ€™s success, youâ€™re probably not ordering gears from a catalog. You need a custom gear manufacturer, and you need to find one you can trust. Other times, though, a standard gearbox is just fine, and if you can get that gearbox from the same place you order your bearings or electric motors, youâ€™re more efficient. Thatâ€™s why industrial distributors like Grainger, Motion Industries and Kaman have long been such a large part of the power transmission industry.
What I think is best about many of these high-profile consolidations is that weâ€™re seeing a concentration of expertise among experts. The big arenâ€™t just getting bigger. Theyâ€™re getting better. Hopefully this makes your job easier. Let me know what you think at email@example.com.
The article "Purchasing Efficiency" appeared in the September 2018 issue of Power Transmission Engineering.