Emerson has agreed to buy Aventics for €527 million in cash. The smart pneumatics technology player should strengthen Emerson’s global presence in fluid automation packages.
Emerson has been on quite the buying spree, and it’s not done yet. Even as it works toward final close of its acquisition of Textron Tools & Test, the automation supplier has announced agreement on another purchase—this time Aventics, a key player in smart pneumatics technologies, particularly within factory automation. Emerson has agreed to acquire Aventics from private equity firm Triton for a cash purchase price of €527 million ($621 million).
“This is an acquisition that we’ve looked at for many, many years,” said David Farr, Emerson’s chairman and CEO. “And fortunately, the private equity owner decided to allow us to buy the company.”
It’s been a little more than a year since Emerson completed its acquisition of Pentair’s Valves & Controls business. It then completed its acquisition of Paradigm at the end of last year and Cooper Atkins in January this year. All of these help Emerson to fill out its technology pyramid—shown above, spanning across process, hybrid and discrete industries and layered with devices/instruments/sensors, control technologies and data management.
Referencing the pyramid chart during a conference call, Farr explained how Aventics fits into the company’s existing technologies. “As with the tool acquisition we just recently did, this one fits right in with the technology pyramid—fits right down in the device/instrument/sensors area, fits in with the hybrid/discrete marketplace,” he said. “It really ties in nicely with our Asco and all-hybrid business that we have today. It really goes to the whole solutions package and fits in actually with the smart Plantweb strategy that we’ve embarked upon as we bring the Industrial Internet of Things to our customers.”
As a key player in smart pneumatics technologies that power machine and factory automation applications, Aventics plays firmly in the discrete space, which accounts for 66 percent of its business. Another 23 percent goes to industrial applications, and 11 percent hybrid industries. Already a leader in fluid automation technologies for process and industrial applications, the Aventics acquisition significantly expands the Emerson’s reach in that growing $13 billion market. “It is very complementary,” Farr said. “It fits nicely with our $1.5 billion business that we have in this space right now.”
Aventics builds upon Emerson’s capabilities and offerings in key discrete and hybrid automation markets, including food and beverage, packaging, automotive assembly and medical equipment. “We both have a nice little piece in the hybrid side, and I think over time we’ll move them even further into that process hybrid marketplace,” Farr said. “It’s a good growing market. As we look at this automation space, it’s around 3-5 percent market growth. I firmly believe that, with our technologies and global reach, that we could add a point of incremental growth in this.”
Farr expects that the addition of Aventics will take Emerson to No. 3 in the global pneumatics marketplace—behind SMC and Festo. “The difference is we actually have more capability around this pneumatic and control piece than anybody else,” Farr said. “We’ll have a great position because we’ll have so many sensors around this space, we’ll have control around this space. Those two players do not have that.”
Mark Bulanda, senior vice president of planning and development for Emerson, added more context. “There’s also a trend towards more of a combination between the fluid control and the pneumatics side. Asco is such a global franchise, and their strength in fluid control really will play to providing more of a package to the customers,” he said. “So that’s where we see we can continue to grow above market against the SMCs, the Festos and the rest of the competitors in the market.”
With central offices in Laatzen, Germany, more than a third of Aventics’ business comes from Germany, another third coming from the rest of Europe. “With Aventics, we will gain a valuable footprint in Germany, a key market for automation technology and investment,” said Mike Train, executive president of Emerson Automation Solutions.
Emerson’s Fluid & Motion Control business currently holds just 6 percent of its sales in Germany. Half is based in the Americas. Combining Aventics with Emerson provides a much better geographic balance for both companies.
Triton purchased Aventics (at the time called Rexroth Pneumatics) in December 2013 from Bosch, where it was a non-core endeavor within Bosch Rexroth. Triton has invested in its growth during that time, and Aventics acquired Vector Horizon Technology a little over a year ago. Aventics serves more than 25,000 customers globally, including Bosch, Volkswagen, Volvo, Caterpillar and Siemens.
"We would like to thank the management team, the employees and all other stakeholders for their contributions to Aventics’ successful development during Triton’s ownership. Triton has been the owner of Aventics for more than four years, and we view this as an appropriate time for a long-term industrial owner to continue the development of Aventics,” said Peder Prahl, director of the general partner to the Triton fund. “This partnership will open new opportunities for both companies.”
The acquisition is expected to close in the fourth quarter of fiscal 2018 subject to regulatory approvals, Aventics’ necessary consultations and other customary closing conditions.
Though Farr said all hands are on deck right now to close the Textron Tools & Test acquisition and get Aventics approved and closed, Emerson isn’t nearly finished with acquisitions yet.
The remaining boxes on the pyramid chart give an indication of where Emerson still plans to spend more of its available balance sheet capacity. “I’m not going to tell you names, but clearly we’re giving you an idea of where we’re trying to aim our guns at this point in time as we move forward here,” Farr said, noting again later in the call that Emerson will continue with more bolt-on acquisitions. “Some obviously won’t be as large as this one, but we’re going to continue up and down that righthand side of the pyramid.”