Tom Williams, Parker chairman and CEO, said on an April 29 conference call discussing the deal that the two firms were introduced 10 years ago when Lord reached out to benchmark Parker's high-performance team. That process made both companies realize how similar they were in culture, so when the Lord board reached out again years later, Parker knew it was looking at a strong opportunity.
The firms have two very similar business strategies, each centered on four focuses—engaging people, customer experience, profitable growth and financial performance.
"People are the power of any organization," Weeks said. "Similar cultures provide a huge advantage. Aligned cultures enable us to focus on the customers immediately in the process."
Headquartered in Cary, N.C., Lord is a privately-held company founded in 1924 that offers a variety of adhesives, coatings, specialty materials, and vibration and motion control technologies. The firm reported sales last year of $1.03 billion with about 3,100 employees throughout 17 manufacturing and 15 research and development facilities globally.
Lord's $1.03 billion in sales is split relatively evenly between three core markets, according to a Parker presentation disclosing the transaction: industrial (37 percent), aerospace and defense (33 percent) and the remaining 30 percent from automotive. The U.S. and Canada make up 46 percent of its sales while Asia-Pacific accounts for 25 percent; Europe, Middle East and Africa 23 percent; and Latin America 6 percent.
Once Lord is integrated, Parker's combined portfolio will remain balanced throughout four primary areas, based on 2018 sales figures: filtration and engineering materials accounting for 34 percent, flow and process control 28 percent, motion systems 23 percent and aerospace systems 15 percent.
Regionally, North America will account for 62 percent of the combined company's sales, EMEA 22 percent, Asia-Pacific 14 percent and Latin America 2 percent.
"It's a very complementary merger," Auslander said. "Where we're strong, they're weaker, and where they're strong, we're weaker. When you bring it all together, both companies will be stronger in the marketplace. We'll have more products to offer and be able to provide more content per vehicle. We'll also have more synergistic capabilities to provide value to our customers."
Right timing
The last year or so has been a big period for Lord. The company crossed the billion-dollar mark in sales for the first time in 2018, inked the biggest contract in company history in 2018—a deal with Boeing to produce an auto-throttle module for cockpit control within its aircrafts—and secured contracts with many global electric vehicle platforms.
Those automotive deals have inspired significant investments so the firm can further capitalize on E-mobility trends. In May 2018, the firm disclosed plans to invest $80 million to expand and upgrade operations at its 250,000-sq.-ft. plant in Saegertown. During the next five years, Lord will add 75,000 square feet to the building, which sits on a 67-acre plot and employs 235.
The firm also repurposed space at its site in Indianapolis to add more production.
Most recently, Lord began construction in March on an expansion to its Hueckelhoven, Germany, facility—a $15.8 million investment to build a 35,000-sq.-ft. addition adjacent to the current 70,000-sq.-ft. facility. The project will create more than 20 additional jobs and is expected to be operating by mid-2020.
Auslander said that despite its growth Lord remains a mid-sized player and one of the smaller Tier 1 automotive and aerospace providers. Parker will help Lord accelerate its growth within the Tier 1 arena in both industries.
"They're already there," Auslander said of Parker. "They have systems-level capability in both aerospace and automotive. This will help us move up the curve to be a Tier 1 supplier much faster, and that's something our customers will appreciate."
Strong products
The deal represents a significant product expansion to Parker's Engineered Materials unit. Lord's portfolio contains Chemlok adhesives for rubber-to-substrate bonding and has a presence on virtually every vehicle in the world, according to Parker. Its CoolTherm-branded thermal management solutions provide a broad range of chemistries—acrylic, silicone, urethane and epoxy—and will have a presence on more than 1 million electric vehicles by 2019. The firm also produces structural adhesives under the Versilok, Fusor, Maxlok and Lord brands; electro mechanical systems for active vibration control; and passive vibration control systems used in engine management, elastomer mounts for vehicles and high capacity laminate bearings for helicopters.
Parker said Lord's presence in adhesives, coating science and thermal management will be significant additions to its portfolio. Lord also brings new areas in vibration isolation and passive/active damping solutions.
"The fit between Lord and Parker is very pronounced relative to the complementary nature of their portfolio, both in terms of markets and product and technology platform offerings," said Dale Ashby, vice president of innovation within Parker's Engineered Materials Group. "Both companies are material science-based companies that have a foundation of providing solutions via advanced material technology, polymer chemistry and predictive engineering. They fit very well with the history of Parker Hannifin as well."
On the other side, Lord aims to benefit from Parker's cockpit controls, sealing technologies, EMI/RFI shielding and thermoplastics areas. Both have a very strong presence in the elastomers arena.
The combined unit will have a strong foothold in the automotive, aerospace and defense, construction and agriculture, and general industrial markets, while maintaining a solid share in the energy and process and telecom/information technologies arenas. Parker said aerospace, lightweighting and electrification are the primary growth accelerators for the combined business.
"It's a wonderful synergistic combination where we have similar technologies that are complementary in nature," Ashby said. "We're very excited about the combination of our technology portfolios."
