7 Industry Highlights

The year has started at a torrid pace but there have been some highlights relating to acquisitions, sales models, strategic relationships, POS, ETIM and more.

With COVID driving everyone to online planning it seems like there everyone is on a Zoom / Teams call all the time. In talking with a rep recently he commented that he has spent the past seven weeks in online planning sessions with distributors and manufacturers! And it isn’t any better for distributors with their FMS and other planning sessions. Manufacturers may almost get it triple with distributor planning, sales / rep planning AND accelerated internal online calls. While some think “work from home” may mean less, for most it seems to be “work much more” (or at least login to another meeting!)

So, with that we’ve been cataloging some recent announcements and thought we’d share some highlights over the past 7 weeks to stimulate discussion:

1. Appleton, an Emerson Electric company, is reportedly being considered for divestiture. Reportedly Emerson will seek $1 billion. While we haven’t checked Appleton’s sales, or if it is listed in the 10-K, a $1 billion price tag is significant and it makes one wonder whom the buyer could be. While companies such as Atkore and Hubbell are logical assumptions, the price is probably too high. That then leads to either a new entrant or private equity. And it could be a good opportunity for a PE firm to start a platform company. Looking forward, the oil and gas market will rebound which helps Appleton. Commercial construction will improve which helps O-Z Gedney. The industrial market will improve which helps SolaHD and Appleton. There will be material price increases. So, perhaps a PE firm will “overpay” to seek the upside and then bolt-on some deals before taking it public. Or could someone like NSi’s private equity firm decide to double-down on the industry (even with Bridgeport)?
2. Are distributor acquisitions increasing?
   • 3E, a CED company, purchased Sittler Electric according to 3E’s newsletter.
   • Van Meter earlier made a single location acquisition
   • Guillevin, in Canada, acquired WESCO’s datacom group. Guillevin is a sister company of CED.
   • Rexel Canada acquired WESCO’s utility group.
   • In late December, Rexel USA acquired Utility Supply Group, a supplier of electrical components to RV parks, campgrounds, marinas and mobile / manufacturer homes. Click here learn more about USG.
3. ETIM North America continues to grow. The North American chapter of the international product classification system has recently announced the following new members – YESCO, McNaughton-McKay, Prysmian, Lutron and Trimble. Trimble, perhaps best known in the electrical industry for its TraSer offering (product content and pricing) as well as its contractor estimating systems, sees the potential for ETIM throughout the electrical ecosystem.
   • And ETIM North America celebrated its first anniversary this month with many accomplishments, including over 20 members!
   • Check out this interview of Mary Shaw, ETIM North America’s Executive Director with EFC.
4. NEMRA’s POS initiative gained an endorsement from City Electric Supply.
   • Additionally, during NEMRA’s Annual Conference, which attracted over 1350 attendees, each endorsing national distributor (Sonepar, Graybar, Rexel, City Electric, and WESCO) reiterated that the have endorsed the NEMRA minimum POS standards, that they share POS information, at the zip code level, with appropriate manufacturers and, if reps have issues, that reps can, and should, contact them … and they each shared a senior management contact.
5. SESCO Lighting and supply reps … are they dating before marriage?
   • SESCO Lighting, the largest lighting agent in the Southeast, recently announced two “strategic partnerships” with electrical representatives. The first was with Marvin Bochner, Inc and the most recent is with Electrical Sales Associates. The question becomes, “what is a strategic partnership?”
   • Some have suggested lead sharing for projects and/or joint quotations.
   • It could enable SESCO to recommend electrical material for lighting projects.
   • It bring spec lines to the two agencies.
   • But there could be some conflict if the reps have a few lighting lines.
   • But, could it be the prelude to SESCO wanting to become a full-line agency and the next regional / mega agency? With lighting representing only 15-20% (with controls) of the electrical market, a broader offering could be in the agency’s future.
   • So, is this dating before a courtship and marriage? A model for others to consider down the line?
6. There have also been a couple of manufacturer acquisitions.
   • Eaton acquired Tripp to support its power quality business.
   • Littelfuse entered the acquisition arena and acquired Hartland Controls. Perhaps a little outside of what many may think of as Littelfuse’s sweet spot, however, Hartland increases Littelfuse’s industrial offering and should help its relay business as well as bring additional industrial synergies.
7. Changing sales models.
   • Much has been talked over the past few years about distributors changing their sales models and going to more of an inside sales model and the demise of outside sales. Few companies have embraced for, essentially fear, that outside salespeople were / are needed to retain customer relationships. In many cases this is justified and COVID has proved the value of customer relationships. Now comes MSC who is putting the new model to a major test.
   • MSC is going “all in” on a new sales model. It will be closing 73 branches. To a degree they are taking a page from Jet Blue’s famous decentralized reservation agent model (their agents have worked from home for years) with MSC’s “virtual customer care hubs” with inside sales working remotely (probably code for “home”). They are eliminated their footprint in these geographic markets and will service customers from regional distribution centers (RDCs).
   • It will be interesting to see how this works out. According to the article they will be putting some of the savings into “customer facing roles”. It begs questions of “will work from home employees be compensated for providing home office space (and other expenses)?
   • The company retains tax nexus in these states due to still having staff in these states but saves on rent, property taxes, building maintenance and much more. The change in the model generates lots of business, management and potentially societal impacts to consider longer-term if this becomes a major trend (i.e. those local communities lose property tax revenues which is used to fund local services, change in staff “bonding” to the company and cultural integration) and it will be interesting to see if they retain their market share in those markets.

While many have been in lots of virtual planning meetings over the past seven weeks and salespeople are generating quotes and writing orders (as January was a good month for many, February will probably be “challenged” but due to weather), these were seven highlights that we’ve seen … hence an “industry round-up”.

Thoughts? Observations? Other happenings or highlights you’ve seen?