March Closes with 7 Acquisitions

March closed with a rash of acquisitions or perhaps many were ones that were going to occur at the end of the year.

The following acquisitions occurred recently:

Manufacturers

• NSi acquired Metallics
• Littelfuse acquired C&K Switches
• Southwire acquired Novinium

Distributors

• Inline merged with Williams Electric, creating a 19-branch distributorship
• Win Supply expanded in Tennessee by purchasing Williams Wholesale
• Elliot Electric moved into the Kansas City market and acquired KC Electric Supply
• Electric Supply, Inc confirmed its acquisition of Phosco Electric Supply

What do some of these mean?

• Manufacturer Deals

  • Littelfuse / C&K – while C&K Switches will be added to Littelfuse’s Electronic division, a legitimate question becomes “what is Littelfuse’s long-term commitment to growing its electrical business?” C&K, which had revenues in excess of $200 million and was sold for $540 million, is a “designer and manufacturer of high-performance electromechanical switches and interconnect solutions with a strong global presence across a broad range of end markets, including industrial, transportation, aerospace, and datacom. The company sells over 55,000 products through a rep and electronic distributor network to OEMs.
  • NSi acquires Metallics – this is a nice pick-up for NSi as Metallics is a fastener company , hence the product offering is an extension of NSi’s contractor offering and helps capture more counter space at a distributor. Further, in many instances, this is probably an opportunity for the Metallics product offering to be supported by a stronger sales organization which can provide more resources. Metallics fasteners are also sold in the HVAC and other building technology industries, which NSi also serve through its recent non-electrical acquisitions
  • Southwire continued its string of acquisitions with the purchase Novinium. Novinium is “a cable rejuvenation solutions provider focused on electric utilities”. The company has 350+ customers worldwide and owns 35 patents. The acquisition is an interesting expansion and diversification of Southwire. While Southwire served the utility market with cable, this is a broadening of Southwire’s services offering and provides the company with an additional offering to sell directly to utilities. With the interest in grid modernization coupled with the need for more energy due to renewables and electric vehicles, the utility market is a stable, yet growth market.

• Distributor Deals

  • Win Supply’s acquisition of Williams Wholesale Supply added three locations in eastern Tennessee to the Win Supply The business will continue to operate under the Williams Supply name. Williams Wholesale and Win Supply are both IMARK Electrical members. Williams Wholesale serves the electrical and plumbing markets. While Win Supply is a multi-billion company, its independently-operated operating companies are traditionally smaller “businesses.”
  • Two more IMARK Electrical members paired up when Elliott Electric acquired the assets of the two branches of Kansas City Electric Supply. According to a note on Kansas City Electric’s website, the deal with $1.5 billion 170+ location Elliott Electric will close in April. Kansas City Electric had been in business for 95 years. This marks Elliott’s expansion into the eastern Kansas market. Kansas City Electric is a Siemens distributor whereas Elliott is primarily an Eaton distributor.
  • The Electric Supply / Phosco acquisition, again two IMARK Electrical distributors, was confirmed. This deal was learned at last month’s NAED South-Central Regional Conference.
  • 17 location, Huntsville headquartered Inline Electric Supply acquired two location, Tennessee-based, Williams Electric Supply. In a press release the company shared “It is with great excitement that we announce the acquisition of Williams Electric Supply by Inline Electric Supply Company of Huntsville, Alabama. “Over the last 18 years, I have dreamed many times of converting Williams Electric Supply into an employee-owned company.  This merger with Inline Electric Supply, which operates as a 100% employee-owned ESOP, achieves that goal,” said John Hannah.

The combination of Williams Electric Supply and Inline Electric Supply will create a new company that will have significant strength and the resources to enhance our ability to serve our customers and continue our rapid growth in the middle Tennessee area.

“Both our companies share similar visions of doing everything possible to service our customers every day and with Williams Electric Supply employees now becoming employee-owners they will be more equipped than ever to provide that service to every customer,” stated Bruce Summerville, President.

Michael Wagoner, the Columbia Williams now Inline branch manager, shared his excitement with the merger with a posting on LinkedIn that highlighted customer benefits.

Further, recognizing the opportunity, and challenges, of expanding outside their traditional territory, as it integrates operations Inline is evaluating NEMRA’s POS Minimum Reporting Standards to ensure rep support (something that all distributors that cross rep territories should adopt.)

Some of these deals were inevitably planned to be closed in December but where delayed when the capital gains tax revision was defeated / delayed. There is some commonalities, however in the sense that all were small distributorships that had generational management issues and needed to make significant investments to grow or remain small, lifestyle businesses in a more competitive market. For IMARK, with all of the deals being members selling to members, this strengthens the acquirers and positions them for greater market growth (penetration or market expansion) and enables them to leverage investments that have been made.

Further, all of the acquired companies will become more competitive with lower cost structures, better purchasing capabilities (and hence probably a little better pricing) and can either improve their net profitability (at least in the short term.)

Given that all of the distributors that were sold are small companies, it shows there is a market for these companies. The multiples, however, are unknown.

Many expect the distributor acquisition trend to continue.

On the manufacturer side, the deals are similar, albeit different. Metallics was a family-run business. There are becoming fewer and fewer companies that are reasonably sized privately-run non-lighting companies in the electrical industry. The Southwire deal is a services / market growth opportunity. Littelfuse’s acquisition helps them grow an area of their business that is their focus.

What’s next in the acquisition market? There is still much money on the sidelines … even with interest rates rising. With the outlook “uncertain”, the deal market could become more active with smaller companies wondering “is now the time?”