Graybar’s Acquisition; Benefit for SQD Automation Distributors

This week’s news that Graybar made an acquisition was a surprise to many.  The words Graybar and “acquisition” have not gone together for many many years (according to a reader, who’s been in the industry for “many” years, he recalls Splane Electric in September 2003 and Frank A Blesso in 2002 – here’s an article in Electrical Wholesaling. There is also an interesting history of Graybar on Wikipedia.)

And then the second part of the surprise was that they bought a Square D automation distributor, Advantage Industrial Automation.  According to www.manta.com, Advantage is a $10-20M company (don’t know how accurate, but it’s a starting point).

Some thoughts and/or suppositions:

• We had been hearing that Graybar was in the acquisition market.  We know some distributors that have been contacted and, according to some people we know, had heard that they were looking at a (and a few) industrially-oriented acquisitions.
• Graybar also owns another automation company that operates under another name, Commonwealth Controls Corporation, based in Richmond.
• Given Graybar’s relationship with Square D it can be assumed that they will acquire Square D distributors and/or automation houses.  Square D is known to want to increase its automation and industrial business … both are segments that Graybar wants to grow.
• Could the valuation of Square D automation houses increase with this deal? The reason is that there are now two potential acquirers for Square D automation houses … Graybar and Kaman (who has grown their Square D business nicely according to sources.)
  • Will Kaman accelerate its search for acquisitions?
• Some may say Graybar isn’t an industrial distributor, however, consider:
  • If the automation houses begin to support the regions with more control support
  • If the automation houses create MRO opportunities
  • Graybar does have other control specialists (people) in “standard” Graybar locations as well as in sales offices (so we’ve heard)
  • Reportedly 20-25% of Graybar’s electrical sales (exclude Datacom, Utility and Government) is of industrially-oriented electrical material.
• Could Square D be actively “encouraging” Graybar’s acquisition trail and/or further diversification into the controls space?
• If Graybar makes more automation acquisitions, how does this change their perception in marketplaces … especially if they have a strategy to gain synergies and cross-market?

And if you’re a Square D distributor, should you be looking for local Square D automation houses to acquirer (especially if you are in, or looking to get in, the industrial market)? For that matter, should ABB, Eaton or Siemens distributors be looking likewise?

What was your reaction when you heard Graybar 1) made an acquisition and 2) acquired an industrial control distributor?