Strong investment growth in the world’s highways was a key driver in John Deere and Wirtgen coming together

John Deere’s recent acquisition of the Wirtgen Group was driven by the way in which two leading equipment manufacturers could come together with no product overlap and target strong investment growth in the world’s highways sector

According to the group’s new leader, 257 John Deere senior vice president for construction and forestry Domenic G Ruccolo: “Spending in the area of transportation infrastructure is expected to continue growing all around the world.” He is keen to see his new business cash in.

“In fact,” he added, “it is likely that it (investment in the global highways sector) will grow faster than the construction industry overall. Deere’s strategic plan is driven by several macro trends and one of them is the rapid urbanisation that is taking place worldwide. As the 364 Wirtgen Group and John Deere join forces, we will be well positioned to help meet the need for contractors building and rehabilitating (the world’s) highways and roads.”

For the outgoing owners, Stefan and Jurgen Wirtgen, the handover will help Wirtgen make the next step: “We firmly believe that a company of this size and significance in the market has to be able to make its way into the future independently of a single owner family,” they said in an interview about to appear in a special edition of Forum magazine.

“This is especially true in our case, because we would hardly be able to hand over the company to our own children, given their young age. We have therefore carefully weighed up all of the options for the future leadership of the Wirtgen Group and looked for a strong and stable partner that not only shares our company’s cultural values and practices a similar corporate philosophy, but is also prepared to work with our entire team to continue along our growth path. We also wanted to see a sustainable plan for the future in which our new partner’s range of services optimally complements our own, resulting in a new, larger, and even more stable entity with lasting benefits for both sides.”

Speaking publicly in detail on the multi-billion mega-deal for the first time, the Wirtgen brothers were keen to emphasise that they are handing over a business that is in good shape: “In 2017,” they tell Forum magazine, “we are continuing to build on our outstanding performance of last year. The factories of our five product brands are operating at full speed. The Wirtgen Group’s order books are up by 58% compared to the same time last year, and we have again hired new employees at all sites. After our record-breaking year in 2016, when we generated revenues of €2.59 billion, we are now heading for the €3 billion sales mark. It therefore looks like 2017 will also be, by far, the best year in our history, with growth once again in double percentage points.”

John Deere has made a long-term pledge to maintain jobs and to continue marketing the group’s products under its five leading Wirtgen brand names. Also, Stefan and Jurgen will stay in place until the end of 2017 along with, “…our proven management team. This means Rainer Otto, Dr Günther Hähn and Frank Betzelt will have taken over management of the Wirtgen Group by the end of 2017 and, after this period, the company will be under the leadership of John Deere’s Domenic Ruccolo.”

In the future, Wirtgen hopes that it can benefit from John Deere’s bigger financial clout. John Deere has a “very strong international position through its own financing company John Deere Finance,” say the brothers. “In this respect, the Wirtgen Group will benefit especially in markets where our current partner Deutsche Leasing is not yet present.”

The acquisition has been on the agenda of Max Guinn, President of John Deere’s worldwide construction and forestry division, for some time. Wirtgen said that it has received at least one serious takeover offer every year, but John Deere stood out and Guinn is keen to explain why: “Deere has respected the Wirtgen Group for a long time. The Wirtgen Group’s products and employees have a superb reputation and strong customer relationships. This is similar to John Deere. So, when the Wirtgen family was interested in finding a partner and ensuring a continued future for the group, we came together immediately. We believe our companies have similar values and both want to serve customers with high-quality products in the heavy equipment industry.”

For Guinn, “The Wirtgen Group is a high-quality business with exceptional intellectual property, engineering, manufacturing, customer support and brand image. There are opportunities for the combined company to benefit from the purchasing of direct materials such as steel, investment in research and development, and in other areas such as machine technologies and enhanced operations.”

Ruccolo agreed, adding that “it is rare that two companies can join forces and not have any product overlap.” He wants to lead the new business to a truly dominant position in the market. His background is that of a long-term John Deere manager having joined the company in 1990 to work in field product support and sales. In 2002, he was named director, 233 Hitachi construction and mining division, and prior to his current position he was vice president of John Deere agricultural equipment marketing for the US and Canada. He has a bachelor’s degree in commerce from Concordia University in Montreal, Canada, and an MBA from the Fuqua School at Duke University.

He is about to take over a business that is growing fast through five brand headquarters in Germany, three local production sites in Brazil, China and India, 55 own sales and service companies, and more than 8,000 employees worldwide.