2019-08-26 Bloomberg Businessweek

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Bloomberg

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August

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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


  1. 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

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