2019-08-26 Bloomberg Businessweek

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Parker-Hannifin Corp., maker of

motion-controltechnologyforplanes

andfactories,isn’ta householdname.

Butat$20billion,itsmarketvalueis

biggerthanthatofNordstrom,Harley-

Davidson,andTripAdvisorcombined.

Foundedin 1917 inCleveland,it waited

almosta centurybeforedoinga deal

biggerthan$500million.Butinthe

almostfiveyearsthatThomasWilliams

hasbeenchiefexecutiveofficer,Parker

hasannouncednotonebutthreelarge

takeovers,eachover$1billion.

Firstcamethe$4.3billionpurchaseoffiltrationcom-

panyClarcorInc.in2017.ThisApril,Parkerannounced

the$3.7billionacquisitionofadhesivesandcoatings

maker Lord Corp.

ComeJuly,Parkerwas

backintheM&Anews

with the$1.7billion

purchase of Exotic

MetalsFormingCo.,

which makes high-

temperatureengine

components and

exhaustmanagement

systems for aircraft

includingBoeingCo.’s

737 Max.

The Clarcor deal

is the only one that’s

◼ LAST THING

With Bloomberg Opinion

ByBrookeSutherland

An Old Company Buys

New Tricks to Spur Growth

20%

● STILL ROOM TO IMPROVE

Parker has said it can achieve a

20% Ebitda margin by fiscal

year 2023. Its recent deals may

help it get there.

● BIT BY BIT

Already, since fiscal 2016,

adjusted Ebitda marginshave

climbed from 14.7% to about

18% in the year ended June30.

closed, but all three are part of Williams’s

push to make Parker’s finances less vul-

nerable to swings in the economy by

bolstering its margins and growth pros-

pects. So far, it’s worked: Cost savings

are tracking ahead of the initial target,

and Parker is squeezing more profit

from its revenue. But while Clarcor gets

a higher share of its revenue from less

volatile repair and maintenance work, its

business, like most of Parker, is still tied

to cyclical machinery markets.

Afteradjustingfortheimpactofcur-

rencyswingsandM&A,salesgrowthatParkerturnedneg-

ativeinthethreemonthsendedJune30, the first time

that’s happened in two and a half years. The company

expects sales at best to be little changed in fiscal 2020,

but the prolonging of the U.S.-China trade war puts even

that downbeat guidance at risk. Against this backdrop, it’s

understandable that Williams sought a shot in the arm.

While Clarcor wasn’t screamingly cheap, Parker

bought it just as the company’s sales growth was starting

to recover from the manufacturing recession in 2015 and

2016. With Lord and Exotic Metals, Parker is paying rich
      price tags for businesses that are arguably near a peak with
      less obvious opportunities for cost cuts and margin gains.
      It’s also loading up on debt, causing Standard & Poor’s to
      downgrade its credit rating in July.
      The buying spree could transform the company.Butana-
      lysts and ratings agencies agree: Parker has muchtoprove.
      �Sutherland is a deals columnist for BloombergOpinion