CED, Van Meter, Allied Wholesale and Wesco Complete Deals

The acquisition market heated up in November, following a number of deals that we previously reported on.

Four More Distributor Deals

In addition to last month’s five distributor deals, four more deals were announced:

CED Acquires Bayou

CED acquired Bayou Electric on November 18^th, according to a source. In CED style, the announcement was “quiet.”

Bayou, a single location distributor based in New Iberia, LA. According to another source, the company was about a $60 million company.

The power of CED’s brand facilitated this deal. A source familiar with the market noted that “the family” decided it was time to exit the business but wanted to take care of its employees and its customers. Rather than go through a competitive process, they called someone at CED and simply said “we want to sell, would you be interested in buying us.” And a deal was done.

Bayou was a member of IMARK and hence now AD. The website did not work today and may have been disabled.

Allied Wholesale Acquires Midland Electric Supply

Allied Wholesale, a four location, Indianapolis-based, contractor-oriented distributor, acquired Midland Electric Supply. Midland was a small, single-location distributor and is now being operated as a “division” of AWESI.

AWESI is an AD member (and formerly an IMARK member), as was Midland. It is assumed that Midland would now have been classified as an Associate member due to its size.

This deal is another example of a recent run of small distributors being acquired by local independents and seemingly is “the next round of acquisitions.” While it is unknown for this acquisition, many of these types of deals are “asset-only” deals or, if more traditional, for a low EBITDA multiple as the prior owner either recognizes the challenges of competing in the current and future environment or are at an age where they are looking to retire from the business.

This acquisition was brought to our attention by Inside.Lighting.

Van Meter Expands Minnesota APR

Van Meter’s Rockwell APR

When is an acquisition not an acquisition but the company expands its territory and gets exclusive responsibility for a market and an opportunity to broaden the offering into that market? When you are a Rockwell distributor, and you “acquire” the APR for a new territory.

While it is unknown if money changed hands (hopefully so but don’t know due to Rockwell’s authorization policy), Van Meter, Rockwell’s sixth largest distributor, has “acquired” the APR in the greater Duluth-Twin Ports, Minnesota market from Mielke Electric Works.

Mielke was the smallest Rockwell distributor. They are a single location business with its core being a motor repair, services and sales company.

Given Rockwell’s expectations of a distributor, the divestiture could be a profit improvement opportunity for Mielke while enabling customers to be more fully-served by one of the most progressive distributors in the industry..

Van Meter already had a location in Duluth to service electrical and solar contractors, hence this becomes a low-cost market segment expansion opportunity for Van Meter.

Goes Downstream with Ascent LLC

In late October Wesco acquired Ascent, a provider of data center facility management services.

Ascent focuses on data center facility and property management services. While its revenues, given the size and growth of the data center market, is seemingly small ($115 million) the company is growing at 30% and the acquisition price ($185 million) was 160% of revenues, indicating its potential and that it probably has good margins, which will make the business accretive to Wesco.

More importantly, this deal should be an idea, and a concern, for a number of competitors.

Coupled with Wesco’s other recent acquisitions (entroCIM, Storeroom Logix), Wesco is diversifying, however, in a a different way. The company is acquiring companies that serve its customer base / desired customer base. They become a built-in lead generation system and provide a barrier to entry to competitors.

Essentially, they have gone “deeper and wider” within their account base.

And if a competitor is already serving that customer with electrical and/or data communications material? What do you think will eventually happen? This is another definition of “cross-sell” but with the caveat that they do not have to be the lowest cost distributor.

Further, they can bundle their offerings, if so desired.

And this is much different than a distributor acquiring a contractor given that the companies Wesco is acquiring provide a service which is value-add to the customer.

While Ascent will be part of Wesco’s Communications and Security Solutions group (CSS) there inevitably will be many benefits that can accrue to the ESS (electrical) side of the business, helping them win additional non-data communications-oriented data center business. It’s a different way to compete.

Wesco is taking the definition of value-added and productivity support to the next level.

Takeaways for distributors

1. In considering your acquisition strategy, don’t limit it to other distributors, especially electrical distributors. Give thought to customer solutions.
   • Wesco has done that with its acquisitions of Storeroom Logix, entroCIM and now Ascent. Border States did it when they acquired Winston Engineering. Kirby Risk’s acquisition of CIM Robotics differentiates them. How can you “change the game” to create other value-added reasons to help you earn electrical material sales … while benefiting your customer?
2. Aside from Ascent, these acquisitions are relatively small. Perhaps this is the next leg of the acquisition cycle?

At the end of this month, we’ll be updating our annual acquisition report which will aggregate all of the deals from 2021 and tally them by acquirer as well as aggregate volume by acquirer. The report will be available for purchase. Inquire if interested.

Your guess of the number of distributor acquisitions that will be announced in 2024? Share your thoughts and the winner will receive a free acquisition report or 2 hours of free consulting time.