AD Expands Its Bearings & Power Transmission Division

Last week AD expanded its Bearings and Power Transmission (B/PT) group through a merger with IDC-USA, a group that was focused on the bearings and power transmission industry.

Tom Gale, our friend at MDM and a veteran of the industrial space, last week shared some parallels with when AD entered the industrial space … first starting a division and then merging with ID One.

Three and a half years ago AD launched its B/PT division with a group of eight distributors, some, if memory recalls, were recruited from IDC-USA. But, according to the MDM article, while the two companies had discussions over the years, AD’s recent conversion to a member-owned group removed the final roadblock to a merger.

Some input from Tom’s editorial:

• IDC-USA was a cooperative with 76 members; AD had grown to 31 members
• IDC has some private label product sourcing lines and has two stocking warehouses
• Over the years other cooperatives have become a part of AD – ID One (industrial supply), CL Watt (plumbing), The Piping Connection (PVF) and Amarok (building materials.)
• IDC has 70+ suppliers
• Arguably, the value proposition of cooperatives over time – providing scale to independent distributors – changes and is challenged to meet what can be increasingly diverse objectives for its members based on their respective size, markets and product portfolios. They have played critically important roles to help sustain a diversity of market competition and choice for customers and access to markets for suppliers.
• The final pieces of the puzzle for this IDC merger to take place interestingly came back to personality and organizational structure change, as in August AD completed a transition of ownership from its chairman and CEO since 1991, Bill Weisberg. Weisberg’s father, David Weisberg, founded AD in 1981. AD is now member-owned. AD’s competitive culture under Weisberg’s leadership over more than two decades has often contrasted with the organizational cultures of its competitors.

So, what is the potential benefit for AD electrical distributors and manufacturers?

The opportunities can be intriguing, for the right distributors and manufacturers.  Consider:

• A number of AD electrical distributors who are also Rockwell distributors have B/PT divisions and those divisions are part of AD (not all originally were, may have converted over time.)
• Industrially-oriented electrical distributors may seek to diversify their business and acquire B/PT distributors … and vice versa. Being under the same umbrella, and with a desire to retain volume within AD, AD leadership may encourage, whenever possible, to sell to someone inside the group.
• For manufacturers, from a prior project we did years ago with MDM, we know that about 10% of B/PT distributor sales, on average, were electrical products, so there could be opportunities for electrical distributors to become part of the B/PT division, just like some manufacturers are part of the electrical and decorative, or electrical and plumbing or electrical and industrial divisions.
• With the enhanced product sourcing / private labeling expertise, at some time in the future could AD expand into this arena for selected products?
• With acquired warehousing expertise, could AD leverage this and expand into bigger warehouses? More warehouses to support its members?

Some interesting, longer-term considerations for a group whose members now generate $37 billion in sales.  And we know that AD continues to reach out to other cooperatives to merge with them to create an even bigger conglomerate.