Graybar Acquires, Diversifies. Platform Opportunity?

Graybar Acquires Valin

Graybar announced possibly the most “unique” acquisition that it could make with the acquisition of Valin.

The California-based company has a unique model and takes the term “diversification” to another level. An article in MDM described the company as a “distributor of technical products in the technology, energy, life sciences, natural resources and transportation markets.” The company has divisions focused on process control, process heat, filtration, and motion control and automation. It also has an Engineered Solutions group.

According to its press release, Graybar states that Valin has 12 locations operating in the western and southwestern United States. The deal is expected to close on May 1^st.

While Valin is a privately held company, in 2022 it was on Industrial Distribution’s Big 50 list, reporting 2021 revenues of $125 million. This was prior to its October 2022 acquisition of  Jensen Instrument. Given the Jensen acquisition and 2022 growth, it’s possible that Valin could be a $150-200 million business (a guesstimate.)

In the press release, Graybar’s Kathy Mazzarella stated that this acquisition “expands Graybar’s industrial automation platform.” She also commented that it “provides a foundation for growth into new markets.”

The “new markets” could mean lots of things …

• Graybar could keep Valin as a standalone company, which it will be in its Graybar North American Subsidiaries business.
• It could add “bolt-ons” to Valin to expand its reach under the Valin name.
• It could look at the diversified Valin model as a new model and integrate some of its other automation businesses into Valin.
• It could seek to export the Valin model to its other automation businesses and have them acquire other complementary businesses.

While the North American Subsidiaries division was a “unique” model for Graybar and some of the businesses it has acquired under this structure have been outside of the traditional Graybar model (especially Metro Electric), the Valin acquisition is very different. It’s outside the box thinking that creates many opportunities … to learn, to diversify, to build from.

And for our distributor acquisition count, this makes #13 as Valin was an automation distributor.

What could this mean for others?

Throughout its history Graybar has evolved the business and has made some “big” plays. When they moved to SAP many questioned “why” at the time. Graybar felt it would provide them additional insights into their business to take it to “another level.” Its model refinement to put “non-Graybar branded businesses” into a separate business, and these acquisitions, is taking providing the business with new tentacles to grow from.

What could distributors take away? A couple of things:

• Investment in accessing information can pay dividends.
• Diversification could be a major differentiator going forward … especially to serve the industrial segment.
  • Consider … Motion Industries is “more than electrical (but still $500.M+ in electrical).” Applied Industrial is acquiring automation distributors.

One of the 10 Growth Concepts we shared at the beginning of the year was diversification. Perhaps distributors should consider. Graybar could be ahead of its time for the industrial segment. Acuity’s recent K2 Therm acquisition could generate some ideas for construction-oriented electrical distributors given the entre into the building automation / HVACR market.

Congrats to Graybar and Valin.

Is diversification a valid strategy? How could it change “your” business? What’s the hesitation to consider it?