Given the dramatic decline in industry revenues over the past 18 months, many have wondered when consolidation will occur and are surprised that they haven’t seen more than a few.
We agree, and from talking with a number of potential distributor acquirers, we understand that the issue in many instances is lack of “viable” companies to acquire. There has been much tire-kicking, however, when companies have declining sales, high inventory (much of which is obsolete), no profits, and unrealistic expectations of what their business is worth, there is little reason for an acquisition to occur. Yes there are some that have occured for strategic reasons (i.e. buying into a geographic area such as Schaedler YESCO did with Service Electrical to get into the Pittsburgh market), but these are few and far between.
We’ve heard of a some small distributors who have decided to close their doors and walk away from their business. In fact, a distributor in New York, Direct Electric Supply, has a unique way of disposing of their inventory as they prepare to close … post it on Craigslist!
Will more closings occur? Do you see acquisitions where both parties profit occuring? And if closings occur, how will inventory be disposed of (and will this further depress local markets or should manufacturers buy some of it back to keep it off the street?
Trending Now
The Right Inventory, and Pricing, Drives Sales and Profits
