- Concerns over the economy consume the electrical industry
What can be said about the economy that hasn't already been rehashed a thousand times? It put every CEO's profit-producing skills to the toughest test he or she may very well see in their lifetime. While many companies have been rocked by sales decreases topping 20 percent, to date the recession has knocked very few electrical companies out of business. That's a testament to their resilience and business acumen — and probably the piles of cash they have been squirreling away during the good times for a rainy day. They have endured the deluge and hope to start drying out in 2010.
- Copper goes a different type of crazy in 2009
In 2009, demand for copper was down and inventory levels were up. Historically, that's a recipe for a decline in copper prices. But 2009's recipe for copper pricing seemed to be out of whack with reality, as prices rose along with inventories. Copper analysts who have tracked the metals market for decades are uncertain which way the market will turn in 2010. They thought 2008 was bizarre, too, when copper crested $4 per pound and then plunged below $1.50 at year-end. Copper prices spent most of 2009 climbing toward $3 per pound and at press-time copper was selling for $3.13 per pound according to data at www.kitco.com.
John Gross, publisher of The Copper Journal and one of Electrical Wholesaling's contributing writers, wrote in the November edition of his publication that questionable market data from China — which shows copper consumption up 47 percent in 2009 while the rest of the world's markets show a 20 percent decline in 2009 — makes current pricing trends even more puzzling. Gross said in that article that the problem is further compounded by the fact that in today's investment community commodities are often viewed more “as financial instruments, rather than the raw materials necessary to make the things we use every day.”
- IMARK Group and Equity/EDN Marketing Group merge
The story on the merger of IMARK and Equity/EDN goes beyond the sheer numbers, but they do indeed paint a picture of a huge deal: combined 2008 sales of approximately $14 billion, combined industry market share of an estimated 18 percent and a combined membership of 1,135 electrical distributors operating an estimated 2,100 locations.
It's a merger of two marketing/buying groups with distinctly different personalities. IMARK is respected in the industry for the professional marketing programs it offers members and the top-tier distributors it attracts, while Equity/EDN is proud of its free-wheeling style and the combined purchasing clout it offers many of the electrical market's smallest full-line electrical distributors to compete with the big boys. Many of the distributors in IMARK's stable are among the fastest-growing distributors in the land and can be counted by the fistful on Electrical Wholesaling's Top 200 listing. They often compete head-to-head with members of Affiliated Distributors (A-D), Wayne, Pa., which before the merger was generally considered to be the largest group in North America when ranked by total member sales volume. According to information on www.mya-d.net, A-D has 128 distributors with 1,192 locations that do a combined total of $11 billion in electrical sales.
- In a light year for distributor merger and acquisition activity, strategic deals lead the way
When Electrical Wholesaling's editors sit down to write this article each year, a sizeable chunk of it is usually devoted to all of the acquisitions the large national or regional distributors made over the past year. In many years, it's not unusual for this magazine to report on more than two dozen distributor acquisitions. We won't come close to that number in 2009 (see chart on this page) because of the economy and more specifically because of the difficulty accessing capital to fuel acquisitions. The credit squeeze has put the kibosh on power shopping, but as the credit markets open up, we fully expect to see deals a-plenty.
Despite the credit crunch, W.W. Grainger Inc., Lake Forest, Ill., was in full-on acquisition mode, and inked several interesting deals, including the purchase of an energy-service company (ESCO). Its acquisition of Alliance Energy Solutions, Oxford, Conn., will help it provide a full basket of product supply and installation services to end users. Grainger also took a 100-percent stake in Asia Pacific Brands India Private Limited, one of India's larger electrical and industrial distributors and increased its stake its Japanese MRO venture, MonotaRO.
Schaedler YESCO, Harrisburg, Pa., has been busy expanding throughout Pennsylvania, as during the past two years the company bought the electrical division of H&S Supply of New Oxford, Pa.; B&R Electric Co., St. Marys, Pa.; and the Indiana, Pa., branch of Gertz Electric. Its purchase this year of Service Electrical Supply Co. Inc., Pittsburgh, was even bigger, as it established the company as a force to be reckoned with in the Pittsburgh market, which has enjoyed a surge of growth in recent years, particularly in its downtown area and along its riverfront.
Cape Electrical Supply, Cape Girardeau, Mo., made several deals, too, buying utility specialist Delmo Electric, Fisk, Mo., and Beck Electric Co., Kennett, Mo. Other acquisitions of note include the purchase by Arrow Electronics, Inc., Melville, N.Y., of A.E. Petsche Co., Arlington, Texas, a distributor of interconnect products that was ranked No. 40 on EW's Top 200; the acquisition by Shealy Electrical Wholesalers, Columbia, S.C., of South Carolina-based Santee Electric Supply; and the move by OneSource Distributors, Oceanside, Calif., to stake a claim to the infrastructure and industrial markets of Hawaii by purchasing certain assets of Berkeley Engineering Inc., a Rockwell Automation distributor in Honolulu. Other 2009 mergers of note include the marriage of Richardson Electric Inc., Chattanooga, Tenn., and Creswell Industrial Supply, also of Chattanooga, and the merger of two rep firms: Electrical Marketing Services, Altamonte Springs, Fla., and GCA Electrical Lighting, Tampa, Fla., which will now operate jointly as GCA-EMS, based in Tampa.
- The lighting market leads manufacturer M&As, but the biggest deal of the year is Hubbell's acquisition of Burndy
The lighting market had the biggest share of acquisitions this year as manufacturers scrambled to bulk up their offerings of LED products, but it was Hubbell Inc.'s purchase of Burndy/FCI, Manchester, N.H., that made the biggest splash. Burndy, one of the best-known brands in the connector and termination market, will strengthen Hubbell's grip on the utility, industrial and commercial markets.
While several of the biggest names in the lighting game made acquisitions or partnered with other manufacturers in the LED arena, Philips Electronics made the most headlines. The company bought Dynalite, an Australian lighting control manufacturer; Teletrol, Manchester, N.H., a developer of software and manufacturer of hardware for the building automation and energy management markets; and later in the year licensed its LED technology to Acuity Brands, Atlanta, for use in Acuity lighting fixtures. Acuity was busy, too, acquiring SensorSwitch, Wallingsford, Conn., and Control & Design Inc., a California-based manufacturer of lighting controls. Also making a LED acquisition was Cooper Industries, Houston, which bought Irvine, Calif.-based Illumination Management Solutions Inc., a manufacturer of LED components. Cooper also bought the Federal Signal Corp.'s Pauluhn Electric industrial lighting business based in Pearland, Texas.
It's not unusual for there to be a lot of M&A activity in the wire and cable market, and this year was no exception. Alcoa sold its wire harness and electrical distribution business to Platinum Equity, a private investment firm and later in the year Platinum Equity bought a controlling interest in the Atlanta-based Alcan Cable division of Rio Tinto. General Cable Corp., Highland Heights, Ky., dug deeper into the broadcast and entertainment markets with its acquisition of Gepco International Inc., Des Plaines, Ill., and Southwire, Carrollton, Ga., acquired Maxis Corp., Phoenix, a manufacturer of wire handling equipment and tools. Also making news in the wire and cable market in 2009 was the merger of two wire handling equipment manufacturers, Reel-O-Matic, Oklahoma City, Okla., and Tulsa Power, Tulsa, Okla.
Other manufacturer news of note was the move by Emerson Electric, St. Louis, to expand in the data center market with the purchase of Avocent Corp., Huntsville, Ala., for $1.2 billion in cash; the purchase by Rockwell Automation, Milwaukee, of Rutter Hinz Inc., an engineering firm based in Saskatoon, Saskatchewan; and Schneider Electric's acquisition of Conzerv Systems, a digital meter manufacturer based in India; In the test equipment market, Fluke Corp., Everett, Wash., expanded its offering of thermographic equipment with the acquisition of Hawk IR International, North Yorkshire, United Kingdom, and in the OEM switch market E-Switch Inc., Minneapolis, bought Lamb Industries, Portland, Ore.
- LEDs edge closer to the mainstream
As far as market maturity, LEDs are somewhere between early childhood and puberty. Because they can run $100 per fixture for applications now serviced by lamp/fixture combinations easily selling for less than a quarter of that price, their cost must come down before they will make a serious dent in the market share held by traditional lighting sources. Fixture manufacturers also must learn how to design the fixtures that work best with LEDs, which are very susceptible to heat-related loss of life if their thermals aren't managed properly. Their growth may also be stunted by a flood of inferior product already creeping into the market, and the fact that the development of basic lighting performance standards is well underway but not quite complete. These challenges are all part of the maturation process and are not insurmountable. A senior executive who has survived the lamp wars for 30 years says it's an exhilarating time to be in the LED industry because of how quickly the technology is coming along and the opportunities that exist for huge growth.
- Several electrical distributors and electrical manufacturers step up big-time in the wind market
There was plenty of green ink throughout the general press about the construction of wind farms throughout the “wind belt” that stretches from Texas, northward through Oklahoma, Kansas, Iowa and the Dakotas, as well as the plans to begin construction of wind farms off the East Coast in the Atlantic Ocean. Closer to home in the electrical market some clear leaders have emerged. Siemens has made major strides in wind, GE gained market share throughout the world, and GexPro Services now does $100 million in business with wind vendors.
Another electrical company to watch in the wind market is Border States Electric (BSE), Fargo, N.D. To get in the game with wind, solar and other renewables, the company has launched its Grid Solutions program, which provides a single point of contact for material and logistics solutions for large infrastructure projects across the United States, This specialized projects team provides value-added services and material management for substations, power transmission, wind and solar energy, data and telecommunications, and high-voltage industrial projects. Border States also became an authorized distributor for 3M's newly formed Renewable Energy Division, which offers products and solutions that can enhance wind turbine reliability and efficiency such as films, tapes, coatings and adhesives and took on the CentroSolar America line of photovoltaic panels. BSE is developing photovoltaic project business in Arizona, New Mexico and Texas and intends to provide a complete line of solar products and supply chain solutions to electrical contractors engaged in the photovoltaic market.
- Federal stimulus money starts dripping into the construction market
As you can learn in much more detail in this month's cover story on page 18, the American Recovery and Reinvestment Act of 2009 (ARRA) is starting to pump billions of dollars into the economy, and the first wave is starting to hit federal buildings and facilities. With $130 billion earmarked for construction and renovation of these facilities, there will be major opportunities in energy-efficient lighting upgrades and general electrical retrofits of older buildings.
- Rexel announces intentions to convert all branches to the Eclipse/Activant platform
When you acquire dozens of U.S. distributors over the years you are bound to end up with a diverse array of distribution software systems that need to be maintained and upgraded. In 2009, Rexel moved to standardize its entire distribution network of well over 200 locations on Eclipse. The deal is Activant's largest ever.
- Who's who at the zoo
The lighting market saw the most senior-level changes in the electrical manufacturing community. At Ruud Lighting Inc., Racine, Wis., Christopher Ruud was promoted to president, a role his father, Alan Ruud, held since founding the company in 1982; Cathy Choi is now president of Bulbrite Inc., Moonachie, N.J., and her father Andrew Choi, former president, is now chairman. After Keith Ward left EYE Lighting International, Mentor, Ohio, to become president and CEO of LED manufacturer Luminus Devices, Billerica, Mass., Tom Salpietra became president and COO of EYE Lighting; and Khaled Haram, became president and COO, Lighting Science Group, Satellite Beach, Fla.
In other major appointments at electrical manufacturers, Daryl Dulaney was promoted to president and CEO of Siemens Industry Inc., New York; Andrew Quinn was promoted to president from executive vice president at ILSCO, Cincinnati; Peter Sheehan was named CEO, Cobra Wire and Cable Inc., Hatboro, Pa.; and Charles Treadway joined Thomas & Betts Corp., Memphis, Tenn., reporting to Dominic Pileggi, chairman and CEO. Two of the most prominent manufacturing executives who retired in 2009 were Charlie Jerabek, who retired from his president and CEO post at Osram Sylvania, Danvers, Mass., and was succeeded by Rick Leaman; and Sam Shankar, president of Tork, a division of NSi Industries, Huntersville, N.C.
One of the biggest headlines was the announcement that Roy Haley would step down as WESCO's CEO and serve as executive chairman through May 2011 after leading the company for 15 years. Taking them helm as president and CEO will be John Engel. Another one of the largest electrical distributors announced a major management change and restructuring. Sonepar USA announced in June that Dave Gabriel, region president, North America, and Kathy Rusko, region CFO, North America, have leadership responsibility for all Sonepar operations in Canada, Mexico and the United States. Paul Klasing will continue in his role as president of Sonepar USA with expanded responsibilities to include Hagemeyer USA. Klasing will report to Gabriel. Jay Bricker, currently the senior vice president of supplier and vendor relations, marketing, communications and business development for Sonepar USA, will continue in his role with his responsibilities now expanded to include electrical supplier and vendor negotiations for Hagemeyer USA. Other headlines at distributors include the news that Chris Baynes is now president, Baynes Electric Supply Co., Brockton, Mass., and that James Sipe is now COO of Cape Electrical Supply, Cape Girardeau, Mo.
2009 Distributor Acquisitions in the Electrical Market
|A.E. Petsche Co., Arlington, Texas||Arrow Electronics, Inc., Melville, N.Y.|
|Delmo Electric Supply, Fisk, Mo.||Cape Electrical Supply, Cape Girardeau, Mo.|
|Beck Electric Co., Kennett. Mo.||Cape Electrical Supply, Cape Girardeau, Mo.|
|(Merger) Richardson Electric Inc., Chattanooga, Tenn.||Creswell Industrial Supply, Chattanooga, Tenn.|
|Huge Electric, Shanghai, China||Hagemeyer China|
|Berkeley Engineering Inc., Honolulu, Hawaii||OneSource Distributors, Oceanside, Calif.|
|Columbus, Ohio, location of Johnson Electric Supply Co., Cincinnati||PEPCO Inc., Eastlake, Ohio|
|Indiana, Pa., branch of Gertz Electric||Schaedler YESCO, Harrisburg, Pa.|
|Service Electrical Supply Co. Inc., Pittsburgh||Schaedler YESCO, Harrisburg, Pa.|
|Sante Electric Supply, Florence, S.C.||Shealy Electrical Wholesalers, Columbia, S.C.|
|Indianapolis branch of Richards Electric Supply, Cincinnati||Vision Control & Automation/Standard Electric Supply, Milwaukee|
|Alliance Energy Solutions, Oxford, Conn.||W.W. Grainger Inc., Lake Forest, Ill.|