Recent Acquisition Thoughts

• First is yesterday’s announcement that Hajoca, the sister company of CED, acquired HD Supply’s plumbing and HVAC group.  It wasn’t much of a surprise that HD divested of the plumbing group.  Their “contractor” groups have underperformed since HD was created as an amalgamation of acquisitions. And bringing in someone from Ferguson to run it was a signal. It begs the question of “when will HD Supply sell its electrical group?”  They did sell their Canadian electrical group to Sonepar.In thinking of potential acquirers that make sense … there could be some synergies for Sonepar (as well as some new territory expansion); CED given that Hajoca knows the right people and CED is always an acquirer at the right price; Rexel ????.  It doesn’t make sense for HD Supply to sell the parts piecemeal (too many legal expenses).  We wouldn’t be surprised to see something happen this year as the outlook for resi / commercial construction remains dismal.

• Secondly, Cree purchasing Ruud Lighting, which also sells to distributors under the BetaLED name.  Interesting that Cree is expanding into the fixture business.  Gives them 2 sets of reps selling LEDs, at least for now, and a business that is known for selling direct to contractors (Ruud). Will this put any more pressure on the major lighting companies to expand their LED offerings? Does Cree think it can accelerate LED sales? Is the fixture business more profitable than being an OEM supplier? Or did Cree think that competition for the LEDs is increasing and it needed its own fixture manufacturer to ensure its business?  With other electronics companies entering the LED space, are there more OEMs out there?  Click here for an interesting interview with Cree and Ruud but the question of “how will this impact the distribution side of your business” wasn’t asked.  As a distributor, would you prefer to purchase from a BetaLED, owned by Cree, or purchase from one of the leading fixture manufacturers (Cooper, Lithonia, Philips Lumieres (Thomas Lighting, Lightolier, etc), Juno) or is the name of the game “value-engineering”?

And according to sources, we should expect more distributor and manufacturer acquisitions by the end of the year as there is a drive for market share and diversification at the right price.  As the market is changing, are you having “what if” sessions within your company?  What do you think of these acquisitions?