Building the Group
All companies who want to grow have a choice between growing organically or through acquisitions – or both. For the Atlas Copco Group, buying other companies has been key to the company’s expansion strategy. Acquisitions have helped the Group to complement existing products and technologies, take on new segments, and enter new markets. Over the years, there have been hundreds of acquisitions – and more will come.
Text by the Centre for Business History in Stockholm
“Today, we buy many family-owned businesses, often when the owner is about to retire. It’s normally a moment when Atlas Copco’s size and strong corporate culture speak in our favor. We can credibly tell the owners that we will build further on what they already created and that their life’s work will be incorporated into a well-thought-out structure.”
Ivano di Bari is Vice President Acquisitions and Business Development in Compressor Technique’s Service Division. A native Italian, he has worked within the Atlas Copco Group since 2004, currently from Rome since his wife moved there for her work.
Easy travel access is of course key for Ivano, since his real workplace is the road, visiting companies that could potentially join the Group. The company wants to grow more, not least within the Compressor Technique business area, and does so by complementing bigger acquisitions and by buying distributors – the companies that sell and offer service for Atlas Copco machines. Such companies are usually small, often not more than some ten employees.
Growth is attractive
From 2019 through 2022, despite the pandemic and the shutdowns, the Group acquired almost 80 companies.
“A company must grow to attract employees,” says Ivano. “They have to know there will be room for development.”
Acquiring companies is part of the heritage at Atlas Copco. During its 150 years, the Group has made numerous acquisitions, large and small. Some were to add new product areas, such as when Atlas Copco acquired Edwards in 2014 and Leybold in 2016. Through these two acquisitions, Atlas Copco became a major player in vacuum technology. With other purchases, the Group has expanded on existing products, such as with the extremely strategically important acquisition of the Belgian compressor manufacturer Arpic Engineering in 1956.
From the mid-1970s, many acquisitions were made in France and the USA in both compressors and tools, an expansion strategy endorsed by President and CEO Tom Wachtmeister and later by President and CEO Michael Treschow. The strategy applied to closely related products and brands and was aimed at expanding into new markets.
The purchase of the French company Mauguière in 1976 meant adding small compressors. In 1980, a series of acquisitions within compressors strengthened the company’s presence in the USA. By buying the Chicago Pneumatic Tool Company in 1987, Atlas Copco became the largest manufacturer of pneumatic tools and assembly systems in the world. This was followed by a series of tools-related acquisitions in France, Germany, and the USA. In 1983, the conquest of the Chinese compressor market began, first with licensing agreements, then joint ventures.
Acquiring – and divesting
A global actor such as the Atlas Copco Group is in many ways a living organism, which cannot survive on additions alone. Divestments are also often needed. Typically, the Group has let go of businesses if they have underperformed, such as when the diesel engine business was handed over to AB Nydqvist & Holm in 1948. Other times, parts of the Group have been divested when they turned out to no longer fit the business or live up to expectations.
This became the case with the company’s rental business. It was first built through purchases of American Prime Service Corporation in 1997 and North American Rental Service Corporation in 1999. The purchases turned rentals into the company’s fourth business area. But in 2006, standalone rental operations ceased. North American Rental Service Corporation was sold while Prime Service Corporation was integrated into another business area.
The spinoff of the longstanding mining and drilling business into a separate company in 2018 was due in part to the nature of the mining business being quite different from the rest of the business areas. Epiroc, the resulting company, is now listed under its own name on the Stockholm Stock Exchange.
To focus operations even further, after the divestment of Epiroc, changes were implemented in the Construction Technique business area. Among those were the selling off of Dynapac, a company that manufactured machines for road construction, which Atlas Copco had acquired in 2007. To better reflect the product range and customer segment, the business area changed names to Power Technique. In 2018, the Atlas Copco Group also divested its concrete and compaction business to Husqvarna Group.
Different drivers for acquisitions
The compressor business in which Ivano di Bari works has in recent decades been characterized by two connected acquisition strategies. One builds on increasing market share by acquiring other brands. Sometimes the Group incorporates the acquired brands into Atlas Copco’s own brand, and sometimes the purchased brand continues under its own name. This flexible brand strategy was launched when Ronnie Leten was heading the Compressor Technique business area, before later becoming President and CEO. From 1990 until 2010, numerous such acquisitions were made. Nowadays, the compressor portfolio includes some 60 brands, from Italian ABAC to Chinese Shanghai Bolaite Compressor.
Ronnie Leten also laid the foundation for a second type of expansion strategy: to grow through acquisitions, specifically of service providers. This is what Ivano has been focusing on for many years. Today, all of Atlas Copco’s business areas have their own service division, putting more attention on service but also on making it easier to evaluate the service business itself.
According to Ivano, a major advantage for Atlas Copco when buying companies is the Group’s decentralized organizational model. This means that once a company is bought, the staff is motivated to help the newcomer integrate successfully.
About 90% of distribution acquisitions are made in Western Europe and North America, with only a few in other regions of the world so far. In particular, China, South Korea, and many other Asian countries, there is still potential to grow.
Sustainability is the Atlas Copco Group’s other big value proposition as a buyer. “We are strong when it comes to diversity, ethics, emissions and other sustainability factors," says Ivano. “Since the Atlas Copco Group is so big compared to the companies we buy, we can help the companies we acquire to achieve greater results in these areas.”
There is still plenty of room for further growth. Often Atlas Copco also acquires adjacent technologies to increase the offering and create platforms for growth to complement the Group’s own efforts in R&D.
“When we close an acquisition, it’s the start of a journey. When we welcome new members to our family, we learn from new perspectives and competences and grow together to reach our full potential. But it also marks the end of a long process that started with an idea on how we can drive development and increase our ability to create value for our customers”.