Acquisition Observations

Over the past few weeks there have been a few acquisitions that have the capability of significantly impacting the industry’s landscape.

• Hagemeyer – Rexel: While this was a “mega” deal, the resulting spin-off of selected Hagemeyer assets to Sonepar will impact U.S. distribution. Hagemeyer’s U.S. electrical division will be a nice addition for Sonepar, who was seeking opportunities in North Carolina and South Carolina. The addition of the old Tri-State will enable Sonepar to further build out its Virgina, Maryland and Central Pennsylvania footprint. It will be interesting to see what the surviving entity will be called…will it revert to its old names (Cameron-Barkley and Tri-State) or will the CamBar name return and some of the Tri-State assets be integrated into Capital Lighting and Friedman Electric or will a new name be revealed.

While the electrical opportunity represents significant growth, of interest is the opportunity that Vallen represents. Vallen was Hagemeyer’s safety division. Could safety products find their way into other Sonepar locations? It’s a natural fit for industrially-oriented locations and contractor locations could generate some safety sales as well.

• Philips – Genlyte: Very interesting deal, and potentially a paradigm changer. As many knows, Philips is involved in the lighting fixture business in other parts of the world and was reportedly interested in acquiring a fixture company in the U.S. Rumors had been that they were interested in Lithonia (Acuity). Genlyte is a quality, profit-oriented, well-run, progressive company. With Philips’ major entry into the LED market via their Color Kinetics acquisition, it makes you wonder if this isn’t also a play to facilitate fixture design for LED’s. And, how many Genlyte fixtures will now have Philips lamps and Advance ballast??

Philips’ move does raise another question. What happens to Acuity longer-term? Can it remain a stand-alone company? The other major lighting companies all have a “parent” – Cooper Lighting and Cooper Industries, Hubbell Lighting and Hubbell Inc, Juno and Square D/Schneider Electric, Acuity and ??? Some interesting possibilities could include Sylvania/Siemens (doubtful, doesn’t seem to fit their style); GE (if they were willing to invest in their Consumer and Industrial Division, could combine GE Lighting Fixtures, with Acuity, thereby helping a minor division; perhaps Square D would like to significantly grow Juno (or add to their lighting division), or Matsushita (which recently purchased Universal Lighting Technologies. Either way, the odds of them remaining independent don’t appear high. It then generates the question of “how does this change how distributors view their lamp and fixture lines? “ or do they remain independent decisions (and does LED opportunities enter into the equation?)

• WESCO – Monti Electric: While on the surface this is a small acquisition for WESCO, but does it signal that WESCO is back in the acquisition game and willing to acquire smaller, strategically located contractor-oriented distributors? Do they sense an opportunity after the acquisition spree that Rexel and Sonepar have been on? Located in Mississippi, Monti provides Wesco with additional visibility in the post-Katrina commercial construction rebuilding efforts. Wesco’s potential re-emergence as a potential acquirer would provide independent distributors looking to sell due to succession issues another alternative to Rexel and Sonepar, unless they see a strategic fit for their employees with a regional company.

As they say, “the times they are a changing”. Over the next couple of years we may look back and think about how these three deals impacted the industry in 2008 and 2009.

What do you think the impact of these deals will be? What others do you foresee?