The $3.3 billion deal that saw the hydraulics business of Eaton Corp. sold to Denmark's Danfoss Co. wasn't one of those acquisitions that closed nice and neat, delivered like a well-wrapped Christmas gift. Instead, the two firms took nearly 19 months to close on the acquisition, having to meet a number of requirements to gain the approval from U.S. and European regulatory agencies.
In retrospect, a quick process shouldn't have been expected for such a complex deal. When first announced in January 2020, not long before the COVID-19 pandemic took hold, the Eaton hydraulics business was said to post $1.8 billion in sales. More than 10,000 Eaton employees will transfer to Danfoss, along with 30 global locations.
Both the European Commission and the U.S. Department of Justice forced the two companies to divest certain units for antitrust reasons, saying that without these sales the market would have seen higher prices, lower service and a drop in innovation.
In the end, however, the patience of the leadership of both Eaton and Danfoss should pay off, as it appears that Danfoss will be a better home for the hydraulics business. For Eaton, it was seen as a mature business that didn't fit well with the company's desire to become a "higher growth company with better earnings consistency."
Danfoss, though, sees the purchase as a key part of its own growth strategy. Mobile hydraulics has been a core business for Danfoss for more than 50 years, and the Eaton unit will roughly double the size of its Danfoss Power Solutions segment and significantly boost its innovation capability.
Danfoss also said the Eaton hydraulics addition gives it the broadest selection of mobile and industrial hydraulics solutions on the market, and a significantly larger distribution network.
Another plus for Danfoss is the addition of Eaton's significant fluid conveyance business, an important piece of the puzzle that Danfoss officials acknowledge they couldn't have built on their own. Eaton itself didn't become a big player in the hose field until its 1999 purchase of Aeroquip-Vickers Inc., supplemented by a long string of subsequent acquisitions over the years.
Danfoss officials don't anticipate making major changes, instead calling the purchase a "growth story."
And an opportunity that they feel was well worth the wait.