The French Buy and Sell

Last week was a busy week for the French.  While the European economy may be having challenges, their is one French-owned company continuing to make acquisitions while another continues its transformation.

Sonepar announced that it’s Irby group is acquiring Treadway Electric, a 14 location electrical distributor in Arkansas.  As many may recall, Elliott Electric acquired 2 Treadway locations back in March.  According to the press release, Sonepar acquired the assets of Treadway, a member of IMARK.  Sonepar, as many know, has been on a buying spree, having acquired Independent Electric (CA) and OneSource this summer.  With these acquisitions (over $800M in electrical distribution revenue), Sonepar is now the largest electrical distribution material distributor in the U.S. – with much of that revenue emanating from acquisitions.

A couple of thoughts on this:

• Given that Sonepar will continue to make acquisitions (there are major markets where they still do not have presence), what percentage of the U.S. market could they conceivably control?  Is this good for manufacturers? Will manufacturers acquiesce to Sonepar demands, especially if they are doing business worldwide with them?
• Sonepar’s current strategy is to operate as “local operating companies”.  Are they gaining all of the potential sales, marketing and operational efficiencies they could? If they did, how would this impact independent distributors?
• With Sonepar growing, does this become the new “threat” to independents and hence distributors in marketing groups? What will be needed in the future from marketing groups to support their distributors – especially if there is no potential U.S. acquirer? (Could larger independents form a separate group (or combine into one of the existing ones) to then either pool resources, or identify a funding source, to acquire strong independents – essentially creating their own “roll-up” / holding company or chain?
• Or is it inevitable that the “Top 200” will quickly become the Top 100, then the Top 50 and consolidation of industry revenues occur pretty quickly – afterall, when it comes time to exit the business, owners have a tendency to sell to much larger companies so that they can ensure a short-term payout.

Secondly, Rexel is closing three locations in southwestern Ohio.  CBT is acquiring certain assets but more importantly taking over the Rockwell APR (area of primary responsibility) for these nine counties.  For CBT, which is already a Rockwell distributor, this is a significant expansion.  Interestingly, CBT is looking at only 12 of the 45 employees that worked for Rexel (probably salespeople or Rockwell-trained personnel).

Some thoughts:

• Could this mean that Rexel is now open to selling underperforming pieces of its business to local distributors?
• Was the hidden hand of Rockwell involved? If these were underperforming branches and Rexel was not performing, or resourcing, the locations as Rockwell thought appropriate, could Rockwell have “encouraged” the parties to work something out?
• Is this the beginning of the “Rockwell consolidation” which has long been talked about throughout the channel?
• Rexel has talked about becoming more industrially-oriented (as have many distributors since this part of the business is outperforming other sectors). Why relinquish the premier automation line in an industrial state versus resourcing and identifying how to grow the business (unless it was untenable due to overhead costs)?
• If Rexel was closing here, where else are they closing?

What do you think about these two moves? What do you think about Sonepar? Rexel? Or that two of the top distributors (revenue-wise) are foreign companies? What impact can this have on manufacturers? On marketing groups? And it’s interesting that WESCO doesn’t appear to be an electrical acquirer (and Crescent is historically a quiet company? Or will sellers sell to the highest bidder?