Tom Gross is vice chairman and COO for the Electrical Sector of Eaton Corporation plc.
On November 30, diversified industrial manufacturer Eaton Corp. completed the biggest acquisition in its history when it purchased electrical equipment supplier Cooper Industries for $13 billion. Combining the results of the two companies, the new Eaton Corporation plc would have had revenues of $21.8 billion and EBITDA of $3.3 billion for the four quarters ending September 30. The combined firms have approximately 100,000 employees and sell products in 150 countries. Eaton CEO Alexander Cutler said the integration of the two firms will take two to three years. For tax purposes, the company will be incorporated and headquartered in Ireland. This will have no impact on Eaton’s Cleveland area or regional offices.
We caught up with Eaton Vice Chairman and COO for the Electrical Sector Tom Gross a few days after the acquisition was completed and asked him about the deal and the company’s outlook for 2013. Gross, an engineer by training, joined Eaton in 2003 after a manufacturing career spent with Danaher, Xycom Automation and Rockwell Automation.
You’ve just complete the acquisition of Cooper. How does it change Eaton?
It makes the electrical part of Eaton substantially bigger. It didn’t quite double it but pretty close… We are currently organized into the electrical sector and the industrial sector. Electrical has been growing quite quickly. This turbocharges that growth. If you look at Cooper and Eaton’s 2011 revenues, it makes Eaton’s electrical sector about $12.6 billion. We aren’t quite done with 2012, but you can anticipate it will be bigger than that.
Why is the electrical market so good? Why has Eaton focused on it?
The usage of electricity is becoming more and more pervasive. We all are instinctively aware of that. If you think about investments in electrical infrastructure and that is what our electrical business satisfies, market growth is coming from a number of different areas. Demand continues to grow. There are upgrades in infrastructure. As we just witnessed on the east coast, infrastructure is quite old and frail. There are investments in energy efficiency, because in addition to it being fragile, it is pretty inefficient. And then investments in safety. If you look at all of that together, the electrical market growth rates have been very strong, so it is a large market that is growing disproportionately for all those reasons. We have been a significant player in the market since about 1978.
What are some of the issues facing you in terms of integrating the two companies?
We assembled an integration team to begin looking at that quite early. We’re now having some deep discussions on what it means to integrate these two companies. It is amazing how there is virtually no overlap. Two large electrical businesses grew up serving primarily the same segments and have virtually no product overlap. We are calling it transformational because it makes us a much broader solutions supplier to exactly the same customers that both of us have been serving independently for a long, long time. Integration will take on different forms. It will include all the normal things that you look at like brands and the sales force… We are mostly excited about taking this out in the marketplace and becoming an even more relevant and more trusted supplier to our customers. That will be the primary focus of the integration because that is the primary opportunity with the deal.
Does Cooper run its plants in a fashion similar to Eaton?
All the basics are very similar. There is a focus on innovation, a focus on end users and channel intermediaries – very strong on both. Quality of products is impeccable in both. The companies look alike. If you go to a typical distributior, Cooper and Eaton - each of us would be in top five suppliers for each of the major channel partners. That is because we have conducted our businesses in similar ways. We tend to have more of an integrated operating philosophy. We call that the Eaton Business System and it is best understood as wherever we find a best practice, we deploy it across the company. We are relentless in our discipline of deployment. That creates another opportunity for us in applying that integrated operating model to the Cooper environment.