The Next Phase of Acquisitions?

At the NAED Annual meeting I asked distributors, manufacturers and others who typically hear about mergers / acquisitions what they were hearing.  Not so much about specific companies but more in general … were they hearing of activity.  All said that “the market” was quiet and a few shared that the one of the marketing groups was being a little more “proactive” in trying to recommend potential buyers within the group if a member of the group was interested in selling.  This is to be expected as it’s nice to “keep the revenue in the family (group)” and has been a goal of groups for awhile.

So, with a quiet market comes what could be an indication of the next phase of acquisitions.

While most business are available for “a price”, many of the “acquirable” mid-sized ($100-300M) companies have been acquired. Now comes a strategic expansion connecting two companies that many may not recognize – Power-Flo Technologies and Auburn Armature.

So, who are they?

Power-Flo Technologies is a family-owned “holding company” comprised of eleven companies

• The companies are in the electrical and plumbing industry.
• The electrical side has expertise in the automation sector, strong engineering background and is into switchgear and motor controls
• A key line is Siemens’ Automation group (and at least divisions of ABB)
• Power-Flo also owns United Electric Power
• The company employs, according to a video on its website, about 150 people
• And is located in, and serves, NYC / Long Island
• And is an IMARK distributor

Auburn Armature is in northern NY with 6 locations

• Serves the commercial, residential and industrial markets
• Is a Siemens Technology Distributor
• Has 119 employees
• Had a private equity owner who was seeking to exit the investment after purchasing a majority of the business in 2013 for $7 million which included $3.4 million from the NY pension fund
• Is / was an IMARK distributor.

The benefits become:

• A strategic fit for Power-Flo Technologies / United Electric Power, enabling them to connect the “three markets of New York” (Long Island, NYC and upstate NY)
• Combined the companies will have about 270 employees, making it overall a sizable company.
• Appears to be a nice supplier fit
• And, with both companies currently in IMARK, the revenue stays within the group.

And perhaps this becomes a model for the next round of acquisitions … small / mid-sized companies joining together to form a strategic fit, expand territory reach where, hopefully, 1 + 1 can equal 3 for most of the employees and the ownership.

There are other alternatives than “the large acquirers”.