As reported in trade publications late last month, a group of 11 independent Rockwell distributors have formed a separate organization, called EDGE, to enable them to compete more effectively for global opportunities.
The endeavor, under development for well over a year (with surprisingly no leaks!), is reportedly focused on making international acquisitions. It sounds like, essentially, that since the North American Rockwell distributors are Rockwell’s “cream”, the distributors, with Rockwell’s blessing (after all, the #1 employee is an ex-Rockwell executive), are going to export the Rockwell knowledge base by acquiring distributors globally. They’ll keep local management but integrate best practices. Reportedly they are already looking at some opportunities.
It’s coincidental that Rexel recently announced that a key component of its strategy through 2015 is pursuing international accounts (cross border opportunities). While EDGE reportedly is not soliciting those opportunities, nor has the systems for it, it will be able to collaborate between EDGE owned companies and the distributors who are its investors.
While reportedly not complemented, one wonders if there wouldn’t be the opportunity for an international opportunities developed by EDGE / its owners / its acquisitions to utilize the national account processing system of Vanguard National Alliance (a national accounts organization comprised of Rockwell distributors.)
And, since there in an acquisitive mood, perhaps they may acquire some US based Rockwell distributors? After all, RA distributors that want to sell are dependent upon Rockwell approving the transference of the authorization agreement to maximize the value of the business. Few industry observers think that Rockwell will approve many, if any, additional territories for Rexel, WESCO or CED (but they conceivably could for Sonepar as evidenced by the OneSource deal). Another bidder for a business can only help a seller.
The EDGE members represent significant volume. The 11 distributors represent multiple billions of dollars in sales. The question becomes, where are they finding the incremental resources to invest into EDGE to make acquisitions? Is it a diversion of cash flow from their existing business? Fresh funds? or some other vehicle?
It’s a unique strategy that could become a model for other distributors that want to diversify their businesses while limiting their exposure … perhaps a group of non-competing businesses acquiring distributors in complementary product offerings (i..e safety or industrial supplies or power transmission or bearings or plumbing or maybe even a trucking company to reduce expenses)?
2 Comments
Wonder what the upper limit of # of APRs or percent of Rockwell sales limits CED form more AB acquisitions? I can understand Rexel as they are challenged to manage anything and AB probably figures they would run it into the ground. WESCO has done a good job in some markets. Wonder if AB is worried about Eaton. To us, CED is just changing banks for my management team. Could be a good acquirer for us if AB let them keep the line
What limits CED is their model of autonomous P&L centers. While this empowers local profit generation (good for CED), they are incapable of delivering a consistent execution model natioanally and driving initiatives across the organization. An independent confederation of local profit centers doesn’t deliver much value to a company like Rockwell. CED is only as good as the local profit center manager. Not questioning the model, just its attractiveness strategically to a global manufacturer.
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