Expanding Organically and Contiguously

New locations are popping up everywhere.

Over the past month we’ve noticed an interesting phenom this year that hints that companies are seeking contiguous growth.

While shutting branches is talked about and seems to focus on selected distributors, this year there are a number of distributors (and we are confident that there are many more, and would like you to add to the list) that have opened new branches.  Companies include:

• Winlectric (Bangor, ME)
• Electric Supply Center
• State Electric (New Philadelphia, OH)
• Womack Supply (Harrisonburg, VA)
• Shealy Wholesalers (Kernersville, NC as well as some others since they acquired EDI)
• CED (a couple in the Dakota).  Did you know that CED is now has a physical presence in 48 states?
• Graybar (close to a handful this year)
• HD Supply (2 plus a refurbishment – Midland, TX, Durham, NC and Salt Lake City … Midland and Durham are new, Salt Lake City is expansion / refurbishment.  According to industry sources part of the reason is petrochem and utility focus (most don’t think of them as much in the electrical space, especially with Charlotte and Atlanta reportedly their 2 largest locations))
• Mayer (in Houston, which we’ve previously commented on)
• Scott Electric (click here)
• Schaedler Yesco (southwest PA)
• Rumsey (Atlantic City and Malvern, PA)
• Colonial Electric (Brooklyn, NY)
• Crescent Electric (Montana)
• Gexpro (opening in Boise, ID)

and we’ve heard of some more that are planned

While some are focusing on expanding territory, others are in pursuit of specific market segments (most notably the petrochem and shale market)

Some thoughts …

• As an industry there has been much discussion re: people.  Are these companies:
• redeploying existing staff, hence saying something about depth?
• Or are they hiring “experienced” people in the marketplace (and maybe poaching good ones or hiring “tier 3” talent)?
• Or are they bringing new blood into the industry and training them?
• In at least 3 cases we know of, the distributor that opened a location recruited a “team” from a local competitor (in a couple of cases 7 people left at the same time!)

And there are some acquisitions that have helped companies expand their reach:

• Turtle & Hughes purchasing Mid-Island (great move for Turtle to build upon their NJ presence and it says something about limited acquirers for some Rockwell distributors … only national chain is Sonepar while other regionals / super regionals have the ability.).  This was a natural evolution for Turtle.
• Buckles-Smith purchasing Plough Electric, which was a 1 location distributor.  Gives Buckles-Smith more visibility into the San Fran marketplace
• Kriz-Davis expanding by 4 locations with the acquisition of Russell Belden.
• and HD Supply’s upcoming IPO will generate cash.  While it’s reported that the funds will be used to pay down debt and other general expenses, there could be funds that could be used for acquisitions (and they’ll be able to use the stock as a currency also.)
• and Rexel and Sonepar are always in the market.  Reportedly Crescent is still on the hunt and WESCO is open to opportunities inside and outside the electrical space.
• and WinWholesale has been making some acquisitions in plumbing, one of which was in the electrical space (Lloyd Graves Electric in Houston).  For a quite company, they are stretching their wings.