Prysmian Rep Realignment: Lessons for Sales Agencies

It’s been two weeks since Prysmian announced its newly combined rep network spanning  the Encore and Atkore offerings. This realignment combined the Encore and Atkore networks, reducing the Atkore network from well over 100 reps to 22.

Since August, when the Prysmian / Atkore deal was announced, there was much understandable consternation among the rep community given the prominence of both lines and the total number of reps that would be impacted.

And the concern generated much industry chatter, some of which was shared, some observed.

While all was understandable, some of it, from my viewpoint and confirmed with others, was somewhat unrealistic given Prysmian’s prior history, their stated strategic rationale for the acquisition and Atkore’s prior rep strategy.

But there were other elements of what has occurred over the past few months was “unusual.” And there may be more that has not been shared / said.

There are some takeaways, however, that may be beneficial for reps and perhaps manufacturers.

The “Givens”

By “givens” I mean …

1. When Prysmian acquired Encore, they made their decisions without interviewing the entire rep network of both companies. These were internal discussions based upon knowledge of each firms networks, reviewing financials, and perhaps selected other input. There were three or so markets where they spoke to reps. Then they made a mass announcement. It all happened quickly. The key takeaway … limited rep involvement, quick decision-making, internal decision-making.
2. In announcing the acquisition, Prysmian was clear about their intent of a combined organization to capitalize upon opportunities that they saw with end-users, most specifically data centers. Perhaps they also think there are “leveraging” benefits with distributors given that there are complementary elements to wire and conduit / raceway products. The takeaway … they shared their strategy. Implementing this with a rep agency representing a competitive offering was unrealistic.
3. Atkore’s rep strategy prior to the acquisition was very fragmented. Some markets had a rep carrying all lines. Many others had multiple agencies carrying specific brands, and with some of those brands being competitive (Atkore’s “two bites of the apple” philosophy.) Many have espoused that should have been rationalized over time. To current commercial / sales management credit, this was slowly being done. Takeaway … Prysmian accelerated the process and anyone without the entire offering was going to either get all or none.

The “Unusual”

Some of the unusual is the nature of acquisitions and quiet periods. There are things that are confidential and communications that go on before a deal is finalized that cannot be communicated because the acquirer cannot share, and the acquiree cannot make commitments on behalf of the acquirer.

But how information is shared / telegraphed and, presumably, the “hallway conversations” or “whispers,” or the gray space, is where there can be challenges.

Some things I heard included:

• ABB and Eaton reportedly communicated that they did not support sharing a rep with the new Prysmian offering. There was a rep advisory council meeting, perhaps broader, in late September, where this was discussed and presumably also shared with other pertinent reps.
• Atkore had meetings in late September (Atlanta and Chicago) with its reps, I don’t know how many and/or if it was only ones that had all of the lines, but information was shared that reportedly includes, either to the group or to individuals:
  • It was positioned as a “planning meeting.” A slide was shared with me outlining elements of the discussion and the NEMRA 5 Pillars was integrated into their process.
  • Prysmian was making most of the decisions
  • Atkore was “fighting for / supporting” selected reps that carried all of their lines and apparently had strong local market share.
  • Reps with elements of the Atkore line would all lose the line
  • At least some of the reps would have the opportunity to make presentations
  • And some reps, perhaps three or four, were encouraged to make outreach / merger / acquisition attempts to their Prysmian counterparts as it would help them retain the line. (In my opinion, these could be defined as “shotgun weddings.”)
    • As seen with the eventual announcement, all of these merger suggestions were declined.”
  • There were reports of individuals seeking to recruit personnel from Atkore reps to Prysmian reps, hence telegraphing some moves. According to an individual with knowledge of the Atkore / rep contract, there is a non-solicitation clause which is a one-way clause.
    • Presuming this is “normal” practice for contracts, perhaps it should be a mutual non-solicitation clause?
  • During this time, some Atkore reps, reading the writing on the wall and having done some scenario planning, started reaching out to Atkore competitors to “get to know people / interest in options.”
  • Prysmian had a meeting with its reps on October 10^th, in Texas, where all in attendance received a briefing.

There were reps who expected to have interviews who, perhaps for the first time, started looking, independently, at their market share for the conduit / raceway business in preparation for pursuing / retaining the Atkore business.

And other reps opportunistically reviewed their competitions line cards and personnel to identify where there could be opportunities, all while Atkore competitors were doing the same thing with reps in each territory.

The Done Deal

The deal was then announced on October 19^th, the new rep network was announced that afternoon, and rep termination letters were sent out on the 20^th (probably should have been sent out on the 19^th or planned for delivery on the 19^th via local courier, but …)

This is the text of Prysmian’s notification to the Atkore reps, which was sent on 10/20. Technically, it could be interpreted that there were multiple reps in each territory for one to two days. This was shared by a rep. I do not know if the same letter was shared with every rep. I’ve added some emphasis on what I think are “interesting” areas and will leave open for interpretation.

“RE: Notice of Termination of Sales Representative Agreement

By this letter, Atkore International, Inc. (“Atkore”) notifies you, (“Agent” or “you”) that Atkore intends to terminate the Atkore International, Inc. Agency Agreement currently in place between you and Atkore (the “Agreement”).

As you know Section IX(b) of the Agreement provides that Atkore may terminate the Agreement for convenience upon thirty (30) days prior written notice by registered or certified mail. As per Section X(a) of the Agreement, following such termination notice, Atkore is required to pay commissions due to you on customer orders accepted by Atkore (which, as per Sec. V(b), Atkore may in its sole discretion reject any orders) prior to the Agreement termination date and which ship within sixty (60) days of the notice of termination.

Atkore has decided to offer more than what is required under the Agreement and is committed to pay an amount to you representing ninety (90) days’ worth of commission payments under the Agreement from the date of this notice (the “Commission Payment”). The Commission Payment shall be calculated based on taking the highest monthly amount of commissions paid by Atkore to you during any of the prior three months and multiplying that amount by three.

In exchange for the Commission Payment, which by your acceptance you acknowledge is more than Atkore is required to pay under Section X(a) of the Agreement, you agree that (i) notwithstanding any contrary language in the Agreement, the Agreement shall terminate effective immediately; (ii) you agree to immediately discontinue all efforts to promote or solicit orders on behalf of Atkore and that you will immediately cease to represent yourself as agent of Atkore and shall not engage in any further sales activities, make commitments, provide quotations, or negotiate with customers on behalf of Atkore, shall promptly discontinue the use of Atkore’s names, trademarks, logos, marketing materials, confidential information, and shall return such materials in your possession as soon as practicably possible; (iii) you agree to waive all notice provisions of Section IX(b) of the Agreement; and (iv) you agree that the consideration provided in this offer fully satisfies all obligations Atkore has or may have towards you under the Agreement and you fully release Atkore from any and all liability, including without limitation all liability for unpaid commissions, compensation, costs or attorney fees, under the Agreement and under all applicable laws.

Please confirm in writing your acknowledgement and acceptance of the terms of this notice as soon as possible. If you do not accept this offer within twenty-four (24) hours of receipt, Atkore shall initiate termination of the Agreement as per Section IX(b) and shall follow the Agreement to the letter.

Atkore appreciates your partnership and thanks you for the services you have provided. This was not an easy decision to make. We wish you the best in your future endeavors.

Best Regards,

Brian Moriarty

SVP Industrial & Construction

ATKORE INTERNATIONAL, INC.”

Take Aways from the Prysmian / Atkore Rep Realignment Process

When you consider the percentage of distributor sales that are wire / cable and combine it with their conduit / raceway offering (and I’m excluding Atkore’s endeavor into fittings with its Konkore brand), this could be 25% of a distributor’s sales. In other words, it is consequential, and significant top and bottom line for a rep and why it attracted much industry conversation, but …

In a market that is experiencing much consolidation throughout the channel, from manufacturers and reps to distributors and even the contractor community …

• Change is now a constant and once consolidation is announced in an area that affects your company, scenario planning needs to begin, if not sooner. Change needs to be expected and, unfortunately, this clashes with longevity, “loyalty” and “relationships,” especially when it occurs with a publicly held company involved and/or people are unknown.
• Flexibility, which is a sister attribute to change, needs to become a core competency.
• If you are a rep, “your strategy” may not be “your manufacturer’s strategy.” What is said and done in a quarterly or annual planning meeting is more tactical to achieve objectives. Considering it a long-term strategy, given points one and two, is a challenge, especially given 30 day contracts, changing personnel, and consolidation. Further, the “strategy” of your manufacturer can quickly change if they are acquired, as the acquirer’s strategy then becomes “the” strategy, and hence alignment to that becomes the expectation.
• From a rep perspective, marketing of the agency, and what your “brand” means becomes important. Your brand is not that amalgamation of the lines you carry. You want some level of industry, or at least regional, awareness as it makes you more important at all levels of the channel and, if there is an acquisition, other manufacturers know you … and may covet you.
• Manufacturers “do,” they don’t ask for input, especially when there are acquisitions.
• If your “benefactor” is acquired, listen to the acquirer’s strategy, not acquired sales management. He who as the money makes the decisions. Expect change.

Aside from the mutual non-solicitation clause suggestion, perhaps there should be an amendment to a termination clause, or an additional clause, which relates to “change in control.” This is in a number of contracts where the rep needs to advise the manufacturer. It’s not reasonable for there to be reciprocity but, perhaps, a change of control clause where, if a rep is terminated due to consolidation there is a severance formula based upon longevity, similar to employee buy-outs. For example, 60 days for 5 years and an additional 30-60 days for each additional 5 years to a maximum of X (and the # of days and years is solely for placement only.)

So, the deal is done. Parts were expected. Parts were messy. Many Atkore reps are already announcing replacement lines. Business will go on but perhaps there are some takeaways to consider, especially given … the Hubbell / NSI rep realignment is next with many reps inquiring “when will …”