Wire Distributors Being Acquired

Electrical and datacom distributors are used to going to wire and cable distributors as a source for “niche” wire and cable products. These unique products could be for specialty cable, brands they are not authorized to carry or for special lengths.

The mostly widely known companies were Omni Cable and Houston Wire & Cable … until Omni purchased Houston Wire & Cable.

WireXpress, which was a division of Anixter and is now a division of WESCO, is another solution.

There now appears to be a “roll-up” of these companies occurring as Genuine Cable Group (GSG) just completed its acquisition of Allied Wire & Cable, which was announced in November. Allied serves end markets such as aerospace and defense, lighting, manufacturing, data centers, telecom and general industrial.

This follows two other acquisitions that GCG made last year. GCG positions itself as “wire, cable and connectivity solutions”.  The company is owned by Audax Group, a private equity firm that acquired GCG in October 2019.  GCG was previously part of Genuine Parts Company (which owns NAPA).

GCG also owns:

• Cobra Wire & Cable and Electro Wire to serve the Infrastructure and Rail / Transit market
• Connect-Air for low voltage wire and cable for HVAC, security and fire alarm systems
• Seacoast to serve the military and shipbuilding industry
• Empire, which manufactures and distributors custom cable assemblies for automation, cable, electrical, and safety products

And a few other regional companies that focus on specialty electrical and automation products.

Knowing that they are owned by a PE firm, you can expect additional acquisitions. And with copper viewed as a growth commodity due to the growth of the industrial market as well as the electric vehicle / EV charging market, coupled with constrained supply, it is expected that copper pricing will remain “strong.

ADI, a leading security distributor, which is owned by Resideo Technologies, also acquired a wire and cable distributor. They acquired Arrow Wire & Cable. Arrow Wire & Cable, founded in 1989, was a West Coast regional data communications, connectivity and security products.  The rationale for the acquisition is that Arrow provides “an assortment of copper and fiber cabling connectivity, connectors, racking solutions, network equipment and more.”

Resideo earlier in the month acquired the smoke detector company First Alert for $593 million. First Alert sells via retail, direct to consumers, to integrators and to builders and via distributors. First Alert products are marketed under First Alert, BRK and Onelink brands. While it is known for smoke detectors, it “offers a comprehensive portfolio of detection and suppression devices including smoke alarms, carbon monoxide (CO) alarms, combination alarms, connected fire and CO devices, and fire extinguishers and other suppression solutions.”

First Alert’s 2021 sales were $395M with an EBITDA of $55M. Resideo expects $30M in annual cost synergies by the end of 2023.

Takeaways?

• Commodities are consolidating, which, longer-term, can stabilize pricing.
• Niche markets that use complementary products are having these offerings aggregated. This could bring operational efficiencies to the companies.
• Distributors are diversifying via product-related and market segment related acquisitions.
• Resideo’s deals are interesting as they are both a manufacturer as well as a distributor, hence, in some product categories, an integrated company.

Does any of this change distributor habits? Doubtful. Should it generate some ideas? Hopefully. While not expressed, the goal of both Audax and Resideo are the same … increase shareholder value. In both cases there are probably other long-term factors driving acquisition decisions, but, the similarity, is that they are focused on optimizing segments of the market that they see growth … copper, industrial, infrastructure, safety, connectivity.