ABB Completes GE Deal … Now Work Begins

Last week ABB announced the completion of its acquisition of GE Industrial Solutions.  The division is now part of ABB Electrification and is called ABB EPIS (Electrification Products – Industrial Solutions).  The $2.6 billion deal was announced last September and had to go through a number of governments’ approvals due to the global nature of business.

Some key aspects of the press release:

• The deal is expected to be accretive to ABB earnings in year 1
• Offers substantial value creation potential within ABB, including growth opportunities to be leveraged from coupling ABB’s digital offering, ABB Ability^TM with the extensive GEIS installed base
• ABB expects $200M of annual cost synergies in year five
• Acquisition will help accelerate growth and competitiveness in key markets, especially North America
• Division reports to EP President Tarak Mehta with Stephanie Mains, who was President and CEO of GE Industrial Solutions leading the business as Managing Director
• There is a long-term strategic supply relationship between the two companies and the long-term right to use the GE brand.

And in a letter regarding the ABB / GEIS Integration reiterated:

• “ABB has signed a long-term agreement to use the GE brand. With this right, we will continue to use it in several applications including on products. If any changes to usage of the GE logo are required, we will be in touch.”

An ABB Senior Sales Manager, Larry Badillo, had a good overview of the combined companies’ offerings in a LinkedIn posting:

ABB, the worldwide leader in Large Power Transformers, Large AC Motors, Excitation Systems, Electrical Substations, Drives and Process Automation will now own an additional 12 repair shops and 36 field service locations across North America which will provide complete Lifecycle Solutions for these products to our customers.

These Service Centers provide Transformers Services (Rebuilds), Motor Services (Rewinds), Drives & Automation Services (Upgrades), Switchgear Services (Retrofits), Hydro Services (Generator Repairs), Engineering Services (Studies and Maintenance Testing), Mechanical Services (Modifications) and Inspection Services (Nondestructive Surveys and Evaluations).

This combination will also provide ABB a larger breath of products in Electrical Distribution (Switchgear, Switchboards, Busway, Panelboards, Transformers, Safety Switches & Load Centers), Control Equipment (MCC’s & Motor Starters) and Critical Power Equipment (ATS, PDU’s, STS, UPS, Paralleling Switchgear) as well as expand the channel partner network and local sales coverage for the commercial construction market in North America.

It will also strengthen GE Industrial Solution’s EPC/Turnkey capabilities and the ability to pursue more government and utility projects especially in the Hydroelectric Power Generation Industry.

So, the deal is done.  The “work” begins.  ABB and GE people have been working for awhile on developing plans for go-forward strategies and business integration. Some of these can now at least be discussed and/or input solicited.

Reportedly there were a number of internal communiques within GE in June to update many personnel and meetings are being held beginning this week to discuss, refine, approve, begin implementation of plans.

From reading the press releases and talking to individuals:

• Expect ABB to invest in salespeople. GE was under-represented in the field and ABB recognizes this and recognizes that to capitalize on its investment it will need more “feet on the street”.  We’ve heard some initial plans and they are significant. To the point that a question becomes “where will they find that number of qualified people and/or how can they train them fast enough?”
• The cost synergies appear to be minimal … $200M in year 5 … which indicates that the synergies may be confined to some support areas / duplication areas and factories / warehousing. ABB committed a significant investment in new product development and, per the press release, if it is bringing ABB Ability^TM to GE products there will be the need for product investment.
• Don’t expect much, if any, combining of sales organizations between ABB Electrification Products (ex- T&B) and GE nor a combination or expansion of programs such as Signature Service. Too much for the company to deal with initially.  Long term, who knows.
• It will be interesting to hear Rockwell’s thoughts when GE products get repackaged as ABB EPIS (or just with ABB) and are sold through Rockwell distributors. Will this create conflict? Customer expectation that the distributor is also carrying ABB products that compete with Rockwell? Could the same occur with Siemens Automation? Only time will tell how perceived channel conflicts will be managed and/or communicated.
• GE distributors should become more aware of ABB Ability to be prepared to upsell this capability to their customers. It represents an additional revenue stream.
• And it doesn’t appear, at least for now, any change in EPIS / GE management structure … but then again, that is why there are ongoing meetings.

What are your thoughts on the new combination? What would you like to see happen? How could this impact your business?