Shepherd Sells to Graybar; 1st of Q3 2023

This morning started with the long-awaited news that 131 year old Shepherd Electric (Baltimore, MD) was acquired by 154 year old Graybar.

We had heard since late last year rumors that Shepherd Electric was in potential talks and now it’s learned that Graybar acquired 2022’s 34^th largest electrical distributor who, according to Electrical Wholesaling, had revenues of $429 million.

It is presumed that this is Graybar’s largest acquisition revenue-wise and, after learning about the purchase price of Billows Electric, who’s revenue was only $245 million, it the Shepherd deal was anywhere close, it was a significant investment into the DC marketplace for Graybar (Graybar’s 2023 10-K may be an interesting read next year.)

Given the government’s penchant for investing into the DC marketplace and Graybar’s involvement with a number of government purchasing programs, this is a great fit for Graybar.

And given that Sonepar and Rexel were already strong in the market, it’s questionable if they were involved in the process

According to a rep who received a telephone call from Shepherd Electric, the company will remain a member of IMARK Electrical and no operational changes will be made. This aligns with prior Graybar acquisitions that are part of its North American Subsidiaries group which is acquiring a number of quality companies.

Congratulations to the Vogel family, Shepherd Electric and Graybar on the acquisition.

The recent acquisition of two strong, Mid-Atlantic independents (Billows Electric and now Shepherd Electric) highlights that there are fewer and fewer strong independents remaining. Those that remain are ESOPs or have strong young management. The end result is that there are fewer available for acquisition (but still many smaller companies).

In talking to some today regarding Graybar’s acquisition, it led to some discussions, and thoughts, regarding NAED.

NAED … Representing the Industry or Independent Electrical Distributors?

With national chains representing a greater percentage of the business than every before and the industry representing more of a barbell (or maybe a seesaw) with lots of small distributors on one end and a few very large (the top 15-20 full-line distributors are all $500+ million) on the other end, the question becomes “whom does NAED represent?”

If national chains are not overtly active in the association, is the association an association of independent electrical distributors?

There are elements of the association value proposition that may benefit the largest distributors, most notably the EPEC program, but without visible involvement and active endorsement of association initiatives, the strength of the association diminishes, and so will manufacturer involvement.

While the search for a new president for NAED evolves, hopefully the search team will engage these national organizations, and manufacturers, to solicit input that will help put NAED on a strong footing to drive the industry forward and retain its position as the channel of choice.

So, Graybar makes the first acquisition of Q3. There were eight distributors acquired in Q2. What’s your best guess for the number to occur this summer?