Volvo, the world's number two truck maker, is buying the road-building equipment business of Ingersoll Rand of the US for $1.3bn (£660m).
Volvo Construction Equipment is the world's oldest company in the field
The deal will include 20 dealerships in North America and distribution arms in Europe and Russia.
Volvo, which sold its cars division to Ford in 1999, already has a large construction equipment division.
Volvo shares were 1.75% lower in early trading in Stockholm, with the market as a whole down 2%.
Ingersoll Rand's road development division is based in Shippenburg, Pennsylvania and has 2,100 employees.
Volvo chief executive Leif Johansson said the acquisition would give Volvo "a world-leading position within heavy road construction equipment".