By Edward C. Gregor, Editorial Advisory Board Chairman, International Filtration News
The Filtration Group of Parker Hannifin Corporation acquired CLARCOR Inc. in March 2017 for $4.3 billion (17.4X EBITDA), a multiple on par with several of the filtration companies sold over the last few years. Does this change the paradigm of valuations for acquisitions of multiple divisional companies sold in the future, and what does this mean for the valuation of filtration companies? Only time will tell. It’s not too far-fetched to believe the landscape has changed in global filtration. CLARCOR has had a highly diversified aftermarket product line, whereas Parker Filtration has been strong in industrial and transportation original equipment filtration with a larger global reach. As a result of combining these complementary positions, the Parker Hannifin Filtration Group may well be among the most diversified industrial filtration businesses in the world. With a broad line of product and market offerings, there are few major market filtration segments that Parker Filtration does not touch. Parker’s Filtration business is a leader in most industry areas in which it participates and is backed by considerable financial muscle. Does this mean Parker Filtration will be a leader in all industrial filtration segments? Not quite yet. However, a greater presence surely will be felt throughout the industry as the companies unite.
By way of background, the parent company, Parker Hannifin, is based in Cleveland, Ohio, and reported $11.4 billion in revenue in fiscal year 2016, and CLARCOR reported sales of $1.4 billion in 2016. Rob Malone, president of Parker’s Filtration Group, agreed to an interview and gave us his perspective on the acquisition.
Ed Gregor: What attracted Parker to CLARCOR and what are your future expectations for the combined businesses?
Rob Malone: There were many reasons Parker was attracted to CLARCOR, beginning with a similar culture of innovation and entrepreneurship. Along with CLARCOR’s strong aftermarket presence and complementary product lines, we have also added proprietary medias and industrial air and process filtration products and technologies that we believe will be ideal additions to the Parker portfolio. While CLARCOR has a very solid domestic presence, we liked the prospect of being able to globalize CLARCOR’s products with our strong international presence and distribution channels, with outlets serving over 100 countries. Parker’s newly acquired product brands will benefit both distributors and end customers in those countries.
This transaction also strengthens Parker’s ability to serve customers’ systems needs and enhances the rest of Parker’s technologies, enabling the company to provide even better motion and control systems solutions to customers.
Another additional important benefit that CLARCOR brings is an Innovation Center located in Columbia, Tenn. This facility is engaged in breakthrough innovation research for the design and proliferation of new media and manufacturing process technologies.
Ed Gregor: Now that the CLARCOR acquisition has been completed, briefly describe how Parker expects organizationally to manage such a diverse business?
Rob Malone: As the global leader in motion and control technologies and systems, Parker provides precision-engineered solutions for a wide variety of industrial and aerospace needs. Parker can be found on and around almost everything that moves, and filtration is a critical component of this charter. We manage and carry an impressive breadth and depth of products that fall into nine core motion and control technologies that include aerospace, climate control, electromechanical, filtration, fluid and gas handling, hydraulics, pneumatics, process control, sealing and shielding. Adding CLARCOR’s products and talented workforce deepens our filtration expertise and is a natural fit for Parker’s strong operational business model.
As our Win Strategy™ outlines, engineering your success is our guiding vision, which has meaning on several levels. CLARCOR, like Parker, prides itself on its entrepreneurial and innovative history, and we believe that the combination will position both our customers and our employees for even greater success.
For our customers, they will continue to receive the top quality and timely support they’ve come to expect from their trusted partners from both legacy organizations – with streamlined access to a wider supply of solutions to meet their filtration needs. These include added complementary technologies and product lines in end markets like gas turbine air inlet filtration, low pressure industrial air filtration, natural gas coalescing and a broad range of aftermarket filter solutions. Customers also gain a direct link to Parker’s entire motion and control technology platform, creating new opportunities to enhance productivity and profitability.
For employees, this combination expands opportunities for career development through Parker’s increased size and scale.
Ed Gregor: What do you see as the principal challenges and responsibilities, once the two companies are fully integrated?
Rob Malone: We’ll be looking for both organizations to leverage the complementary areas of our business while cross-selling globally. We want customers to view us as a continuation of a strong, engaged and innovative partner offering strong lines of both OEM and aftermarket products on a more diversified platform than in the past.
During the early days of the integration, we’ve been very impressed with legacy CLARCOR products and people. Their teams are very customer focused and have demonstrated great attitudes and strong leadership. Together with the outstanding team from Parker’s legacy Filtration Group, we are well positioned to deliver a premier customer experience while maintaining strong operational efficiency. We are committed to a smooth integration of our businesses, and customers can anticipate even better quality and service than they have come to expect. Any changes that result as we continue through the integration journey will be communicated with transparency and timeliness. As you might imagine, there are many elements that need to be reviewed and considered to help ensure we combine our two organizations in a way that best supports the business and our customers.
Ed Gregor: If you were to place Parker Filtration going forward into market buckets what would they be?
Rob Malone: We are operating in a large, diverse industry that we see is in excess of $32 billion annually, serving customers’ industrial filtration needs that include: industrial air for manufacturing plants, process and water filtration, hydraulic and aerospace filtration, gas filtration and separation, mobile and off-road transportation and engine filtration.
Ed Gregor: Anything else you would like to add?
Rob Malone: Yes, I want to emphasize that Parker Filtration has engineered its business and products for customer success. Whether it’s total systems integration, original equipment markets or the aftermarket, we have worked diligently to build meaningful relationships with customers around the world. Our combined organization makes Parker a premier provider of filtration solutions.
One final point I’d like to make before we close: We are no longer two separate organizations, but a single entity with a common purpose, which is to protect and purify for our customers’ applications. We will accomplish this by being the safest place to work, delighting our customers and providing next generation filtration technologies. Our values are based on the long-standing Parker Hannifin values of maintaining a winning internal culture, supporting passionate people, and serving valued customers with engaged leadership.
Ed Gregor: Thank you for your time and hoping for your continued success.
Rob Malone: Thank you.