North Canton, OH-based bearings maker Timken is one of the most well-known suppliers in the industrial market, and it's made headlines on Industrial Distribution frequently over the past 13 months. It has announced six acquisitions in that time — couplings maker Lovejoy on July 8, 2016; bearings housed units maker EDT Corp. on Nov. 1, 2016; bearings and mechanical power transmission products maker Torsion Control Products this past April 7; industrial clutches and brakes maker PT Tech on May 5; Dutch automatic lubrication solutions supplier Groeneveld on June 27; and India bearings supplier ABC Bearings on July 5.
Those moves have significantly diversified Timken's portfolio. ID recently spoke with Chris Henson, Timken vice president of business development, to discuss exactly what Timken has gained from its acquisition streak and the impacts each addition looks to have.
ID: Timken has routinely been making acquisitions over the past five years, but has seemed to really accelerate over the last 12 months. What has been driving this recent increase in acquisition activity?
Henson: Timken’s acquisition strategy allows us to better serve our customers by offering a broader, more diverse package of products and services. These recent acquisitions provide ample growth opportunities as we leverage our portfolio to drive growth across complementary markets around the world.
We continually develop relationships with companies that could represent a strong strategic fit. The recent rate of acquisitions is partially driven by availability and the company’s interest to sell. We’ve been fortunate in the last year that a number of great organizations have expressed interest in making Timken their new home. Our strong track record of acquisitions and integration success over the last seven years has gained visibility in the market and has improved seller confidence. They have confidence that they will, in fact, be stronger with Timken.
ID: Looking at the past year specifically, the first four acquisitions (Lovejoy, EDT, Torsion Control, PT Tech) were all domestic, whereas the two most recent (ABC Bearings, Groeneveld) were overseas. How will ABC and Groeneveld enhance Timken’s international presence and capabilities? Is Timken currently looking to add a presence in other global geographies?
Henson: Recent investments support our global growth strategy and long-term demand from distributors and customers in these regions. Both Europe and India have a strong Timken presence. Recent acquisitions support our growth in these proven geographies, and we will continue to expand in geographies where our customers need us.
ID: Both the PT Tech and Torsion Control acquisitions look like they’ll boost Timken’s power transmission product offering. What can you say about how those additions enhance that business segment?
Henson: Mechanical power transmission (MPT) continues to become a more sizeable portion of the Timken solution offering for our customers. In 2016, our MPT sales represented 17 percent of our total revenue, up from 6 percent in 2010. Our acquisitions in the mechanical power transmission space have expanded our portfolio to include couplings, gearboxes, chain, lubrication systems and belts.
The PT Tech acquisition added another new platform — clutches and brakes. This acquisition allows us to offer greater solutions to our current customers. Torsion Control Products enhanced our coupling product line by pairing an engineered metallic torsional coupling solution with Lovejoy’s elastomeric torsional coupling offering. The addition creates more options for our customers and allows the two organizations to leverage each other’s knowledge to generate future engineering advancements.
Similarly, our acquisition of Groeneveld in July expanded our lubrication systems portfolio. The Interlube acquisition in 2013 was our first venture into this space and allowed us gain valuable knowledge before expanding to create additional customer and shareholder value.
ID: Many major industrial suppliers were hit hard by the industrial downturn of 2015-2016, but the market seems to have improved considerably since bottoming out. What are your thoughts on the current state of the industrial bearings and power transmission markets compared to this time a year ago? Do you foresee continued improvement over the next six months?
Henson: The markets have strengthened, and we’re seeing continued improvement. In the second quarter, we saw sales grow 11 percent compared to the second quarter in 2016. Sales were 7 percent higher than the first quarter of 2017. While some of this can be attributed to acquisitions, over two-thirds of the increase can be credited to organic growth and improved market strength. We currently see the second half of 2017 remaining strong and expect total organic growth for the year to be 6 or 7 percent.