Winsupply, a Window into an Acquisition Opportunity?
Winsupply, a privately-held multi-discipline distributor with revenues of about $3.5 billion with a unique, decentralized branch-ownership structure and a presence in the electrical industry made an interesting announcement recently.
Winsupply’s model is unique in the sense that its branches, called local operating companies, are individual companies that integrate local equity interests (owners) with a shared services model (Winsupply). In other words, it becomes intertwined ownership with all having a vested interest in success.
With this model expansion historically occurred through local companies either expanding or “sponsoring” a new owner. Corporately it was a challenge to make an acquisition, presumably unless elements of the company being acquired wanted an ownership interest. For this reason the company hasn’t been active in the acquisition market.
It’s recent announcement that it was developing an acquisition company, Winsupply Acquisition Group, should help the company compete for the bevy of acquisitions that are occurring in the plumbing, HVAC, industrial supply, waterworks, fasteners and electrical industries.
Since most of Winsupply’s branches are modest in size, it’s presumed that acquisitions would be comparable, however, the company did acquire Noland years ago, which was a significant deal and acquired Tacoma Electric and Carr Supply.
Of interest, and possible intrigue, is the idea that this could generate for other independent distributors, which is essentially the Winsupply model given the local ownership element.
Consider:
- Edge is an organization founded by eleven Rockwell distributors (now ten given one founder was acquired) to acquire Rockwell distributors in other parts of the world. They currently own distributors in Brazil, Italy and China.
- Vantage Electrical Group, a national account organization, was founded years ago by a group of six regional distributors who decided to jointly fund the endeavor. These distributors were independent distributors, some aligned with marketing groups, others not.
- Vanguard National Alliance, which was eventually merged into SupplyForce, was a product of Rockwell distributors banding together to fund a national account organization.
So, consider …
- Could a group of distributors decide to jointly fund
acquisition vehicles?
- Perhaps distributors within a marketing group?
- Perhaps like-minded-distributors? Or distributors who have common areas of focus (i.e. industrial, lighting, renewable energy, etc)
- Could a small group of distributors approach private equity firms with the idea of “we have the operating knowledge, would you be interested in supporting an acquisition vehicle to help “us” grow in other markets (geographically?)
The acquisition market is perceived as the domain of large companies and it’s presumed that, longer-term, the market will be large company driven. Some question the survivability of small distributors (which I somewhat discount given that small company owners frequently have different goals / ambitions and can survive for at least another generation). Mid-sized companies are the ones that typically have the biggest challenge dealing with others’ expectations.
Perhaps unique operating models (acquisition vehicles, shared services, outsourcing perceived key functions, diversification, ESOPs, etc) are an element of the future?
The Winsupply model is an example of something “different”, and it works. Helping individuals start businesses and maintaining local ownership while ensuring there are “small” business that can nimbly serve customers while also now having an acquisition engine to perhaps pursue other opportunities (and, who knows, possibly the local operating companies all have an interest, albeit probably nominal, in the acquisition vehicle so that more can benefit from the accumulation of funds … maybe they have created, in essence, their own PE vehicle?)
The question is, will others think outside the box? Reportedly there is “lots of private equity money out there” (or so we hear.)