In a blockbuster deal that shifts the competitive landscape beyond their core product sectors, Motion Industries announced in December that it was acquiring Kaman Distribution Group for $1.3 billion. I wrote a “behind-the-deal” analysis shortly after that announcement, and the deal closed at the beginning of January.
In this week’s MDM Podcast, Motion Industries President Randy Breaux shares deeper details on how the deal came together (45 days), and the way the companies fit together from many angles – geographic coverage, customer segments, suppliers, products and services, and culture. And plans for integrating the two companies by the end of 2022.
For context, the power transmission/motion control distribution sector, like many others, is still highly fragmented. This sector has been defined historically by the “Big 3” — Motion Industries, Applied Industrial Technologies and Kaman Distribution Group. Their combined revenues in 2020 were about $10 billion, and by MDM’s estimates, still account for less than 20% of the total available market. And that’s not counting broader categories that Motion Industries has continued to grow.
As Breaux explains, there are some nice fits for how the newly combined fluid power and automation businesses. “On the automation side, we each had an automation business that was relatively 225 million in sales, and we did not really overlap from a geography standpoint,” he says. “And we didn’t overlap so much from a supplier or a customer standpoint. Putting those two businesses together really allows us to double our scale in the automation business overnight, and reach new customers with new products and new services. So this is a great opportunity for the automation business to become easily a $500 million business this year and beyond.”
Kaman Distribution Group has also built a strong fluid power business segment with roughly $225 million in revenues. “Motion has a fluid power business that is made up of repair and services, as well as product sales,” Breuax says. “And it was maybe a little bit larger than the Kaman business all in when you throw in the repaired services. So now we’ve got another platform in fluid power that will exceed a half billion dollars in revenue in 2022. So all of that taken into consideration provides us with a very, very nice portfolio of vertical businesses that we can continue to build on as we go forward.”
Breaux also likes the way the deal matches up the customer segments served. Motion traditionally has about half its business focused on corporate or national accounts with multi-site, multi-year contracts in place. “What Kaman did really well is they serviced a lot of the medium to small accounts, where we typically didn’t play as much,” he says. “So now you pull those businesses together. And we cover all of the accounts from the small, medium, all the way up to the large national corporate accounts. So it’s a win for all of us. And then you combine the products and services that Motion offered that Kaman didn’t offer. And now we can make those products and services available to the small and medium customers. And we’ve just opened up the solutions that we can deliver to our customers from A to Z. And I think this is going to be a real win for all of us — Motion, Kaman and the customer as well.