What is the direction of traditional electrical distribution industry acquirers?

A recent post about Sonepar’s latest acquisitions got us thinking.  What have traditional electrical distribution acquirers been up to?

Sonepar – As we saw in a recent MDM posting, and on Sonepar’s website, Sonepar appears to remain true to its core and continues to acquire electrical distributors.  While they haven’t made a major acquisition in the US recently, they did make acquisitions in Canada (an AD member),  Malaysia, Columbia and Costa Rica. So, they are still active in North America.

WESCO – WESCO appears to be taking a different tack and appears focused on expanding its footprint in Canada as well as into complementary product / market offerings. While some of this may reflect on the company’s OneWESCO strategy where they seek greater share of spend within an account, some may also reflect the fact that they are Eaton-focused in the U.S..  Given Eaton’s recent efforts to expand its U.S. distribution with recent initiatives involving Rexel, Wholesale Electric and others in the Southwest, perhaps WESCO hasn’t had Eaton-oriented electrical acquisition opportunities or feels it can get a greater ROI on non-US electrical acquisitions. If you’re not an Eaton distributor, is WESCO a potential acquirer (and we don’t see them being a player for Rockwell distributors.)  Recent WESCO acquisitions have included Hi-Line Utility Supply, Hazmasters (safety in Canada), LaPrairie, Inc (utility-oriented electrical distributor in Canada)…all in 2014.

Rexel -As many know, earlier this spring Rexel was rumored to be a potential acquirer of Anixter. While no deal ensued, it was interesting to see that Rexel was linked to a diversification play (datacom-oriented) which would enable it to more effectively compete vs WESCO with its CSC division.  Anixter does have an electrical offering, however, its business is datacom-oriented. Worldwide Rexel plans on spending approximately 500 million EU, however, they have not been successful with anything in the US or Canada for awhile.  The most recent Rexel acquisitions have been in Thailand, Singapore and France (and one of these was a software company).

CED – CED is historically a “quiet” company and typically doesn’t issue press releases or acknowledge media regarding its acquisitions. We’ve heard of CED being involved in some discussions and possibly of a deal, however, with nothing being published, we cannot confirm. Regardless, the lack of industry communication indicates that if they have made acquisitions they are relatively small companies … if deals have been done.

Diversification can be good and we know others who are exploring comparable strategies within their marketplaces to generate greater sales density and to bring more products, services and overall value to their customers.  There are regional distributors who are making acquisitions of smaller electrical distributors.  Not much is heard from Crescent as it relates to acquisitions. We understand that Border States is open to growing through acquisitions and presume similar could be said of a number of larger, regional distributors but, it appears that there buyers are either diversifying, being more selective, addressing operational issues, growing organically (as Graybar has even though they are not a serial acquirer).

Perhaps the next round of acquisitions will be regionals / larger independents buying smaller distributors to fill-in branch locations as the generational evolution continues in the industry.  Sonepar could continue to be a major acquirer given that they do not have concentration in a number of parts of the country.

Whom are the “key” people on the EW Top 200 that don’t have succession plans and will be in the market for an exit strategy.  Most larger companies have worked this out. The sellers will be looking for the premiums.

What are you hearing in the acquisition market? Have we traded “buying businesses” to generate growth for diversification and selling to take share and generate revenue growth?