GE and ABB – A Done Deal Yet? Almost

Last week Bloomberg News reported that their sources are saying that ABB will be acquiring GE Industrial Solutions.  This seemed to corroborate what was posted by readers on ElectricalTrends’ two stories (GE and ABB … Doing the Tango, GE Industrial Moves to Phase 2 in Sale) on the GE sale. (Note:  Between the two postings on ElectricalTrends there are over 120 comments, many appear to be from GE employees.)

For awhile it has been rumored that ABB “should” acquire GE. Then Jeff Immelt publicly put the division up for sale in an effort to raise funds to pay for pension obligations. After selling GE Water for an aggressive price, it was hoped that the auction for GE Industrial would be similar.  But it looks like it will go for less than expected.

As many know, ABB was joined by Schneider Electric as potential strategic buyers interested in the business (but many felt Schneider either wanted a peek at the books or perhaps to drive up the price for ABB).  A number of private equity firms were involved.  ABB, and others, made it to round two but it appeared that none of the offers met GE’s expectation. The challenge is that GE had publicly stated it wanted to sell … perhaps backing itself into a corner.

Comments on ElectricalTrends indicate that ABB was “recruited” back to the table and that they offered a low number. According to Bloomberg the deal will be for $2.5-3 billion but they also commented the parties “have been finalizing contractual agreements for the supply and services of future equipment” which could be a way for GE to increase the selling price to ‘save face’ with the analyst and shareholder communities.

While the Bloomberg story is based upon “people with knowledge”, according to comments on ElectricalTrends there is a senior GE management meeting schedule in Atlanta for Monday and plants have been advised about a meeting regarding “sale news” for this week.  Additionally, according to individuals, ABB has hired few, if any, GE salespeople over the past few months while at the same time recruiting from other distribution equipment companies. Perhaps ABB HR was purposely not recruiting GE personnel?

Some have asked “why does ABB want GE?”

While GE will need:

• Investment in plants (and maybe there will be some closures due to overlap)
• Investment in product development
• Investment / expansion of the sales organization (and support staff)
• And there will inevitably be rebranding

This is a quick way for ABB to jumpstart it’s North America / US distribution equipment business, fill in some product holes, hire a salesforce, quickly capture 6-8% market share and gain further “share of spend” with many of its ABB Electrification Products (T&B) distributors and marketing groups (IMARK and AD.)

While according to many GE employee comments there may be morale issues as well as other production management issues, a strategic buyer such as ABB who is probably committed to nominal closures (due to overlap or inefficiency) is better than the industry acquiring another distribution equipment company which is what would have happened if a private equity firm purchased GE.

It’ll take some time for the deal to be official (3-6 months?) which leaves time for many questions such as:

• If you were ABB, what would you do with
  • the sales organization?
  • plants?
  • product line-up?
• How will the acquisition benefit ABB Electrification?
• As a T&B / ABB Electrification distributor, what do you like / dislike about this?
• Should ABB integrate GE Industrial into its Signature Service program for mid-2018 or 2019 to compete with Eaton’s multi-divisional initiative? Given the combined volume, does this change the overall ABB / marketing group relationship? Could integrating all of the ABB business into the groups help with conversions?
• How will this impact Siemens, who now appears to have the weakest overall distribution equipment / corporate offering compared to Schneider, Eaton and ABB?
• Rockwell reportedly, historically, expressed concern about distributors doing business with T&B / ABB.  Many Rockwell distributors do also represent GE. Should Rockwell be concerned? (IMHO no distributor would convert from Rockwell to ABB. The only thing they may do is consider ABB for non-Rockwell APRs, so should be a non-issue for Rockwell?)

So,

• If you are a GE Industrial distributor, how do you view the future with ABB?
• If you are a ABB Electrification / T&B distributor and represent Eaton or Siemens, what are your thoughts?
• And if you are Schneider, does it make you think of “where’s the platform” or that you have a “best of breed” approach?

And while this expected transaction comes to completion, what is happening with the sale of GE Lighting?