With at least 10 Top 200 distributors acquired over the past 12 months or so, mergers and acquisitions have heated up again in the electrical market.
It’s not all that unusual for 10 Top 200 electrical distributors to be acquired in one year, according to Electrical Wholesaling’s acquisition database, but it typically only happens in the frothiest of acquisition climates. We appear to be in one right now. The Top 200 distributors acquired in 2017–2018 are Associated of Los Angeles, Los Angeles, CA; City Electric Supply, Syracuse, NY; Tacoma Electric Supply, Tacoma, WA; The Hite Co., Altoona, PA; Kriz-Davis, Grand Island, NE; Electrical Equipment & Engineering (3E), Windsor Heights, IA; Womack Electric Supply, Danville, VA; Upchurch Electrical Supply Co., Fayetteville, AR; Reynolds Co., Dallas, TX: and Tri State Supply, Washington, PA.
As EW’s editors were updating our database of more than 500 acquisitions of electrical distributors since the 1990s, we decided that it might be interesting to analyze some of the acquisition news of the past 25 years. This article offers some insight into how the largest acquisitions have changed the landscape of the electrical wholesaling industry over the past three decades, and our analysis of some of the distinctly different growth strategies some of the biggest acquirers in this industry have used to build their branch distribution networks.
DIFFERENT STROKES FOR DIFFERENT FOLKS
Electrical distributors use acquisitions in their growth strategies in many different ways. Some companies, like Graybar Electric Co., St. Louis, MO, or Elliott Electric Supply, Nacogdoches, TX, blend them with aggressive branch start-up campaigns, while other distributors rely on acquisitions more heavily to expand into other markets. Some companies build their market presence almost entirely by branch startups, like the Britain-based City Electric Supply, which has quietly built a billion-dollar business in the United States with more than 400 branch startups. Here are the most common strategies electrical distributors use to make acquisitions.
Acquire a company to establish a geographic presence in a market adjacent to an existing branch’s market area. Border States Electric (BSE), Fargo, ND, used this strategy to fill in some gaps in its coverage of the West North Central region with its 2014 acquisition of Western Extralite, Kansas City, MO, and its 2017 acquisition of Kriz-Davis, Grand Island, NE. Acquiring Kriz-Davis also added to the company’s focus on the utility market.
Another example is Graybar Electric Co.’s 2016 acquisition of Cape Electrical Supply, Cape Girardeau, MO. It added more than a dozen locations through acquisitions to serve industrial and utility customers along the Mississippi and Ohio Rivers, including Cumberland Electric Supply, Somerset, KY; Beck Electric Co., Kennett, MO; and two utility specialists — Delmo Electric, Fisk, MO; and Electrical Sales Engineering (ESE), Bowling Green, KY.
Go big and buy a multi-branch distributor to expand into a new region of the country. There’s plenty of examples of this over the years, most recently with Mayer Electric’s expansion from its base in the Southeast earlier this year to the western Pennsylvania market of The Hite Co., Altoona, PA, and BSE’s purchase of Shealy Electrical Wholesalers, West Columbia, SC.
Use an acquired company as a platform for further growth by acquisition. Some companies acquire in a new region and then use that company as a “platform” to make more acquisitions. Richard Worthy’s AMP Electrical Solutions bought Leff Electric, Brooklyn Heights, OH, in 2013 with the intention of making additional purchases in that region, and he did that with Sonepar with many of its acquisitions, including Brook Electrical Supply, Lincolnshire, IL; Capital Lighting and Supply, Alexandria, VA; Cooper Electric Supply, Tinton Falls, NJ; Viking Electric Supply, St. Paul, MN; and World Electric Supply, Miami, FL:
Make an acquisition because of a product line the company carries. This isn’t unusual with Rockwell Automation distributors that want to expand their APR (area of primary responsibility) into a new region. Several recent examples include Rexel’s 2016 acquisition of Brohl & Appell, Sandusky, OH; CED’s purchase this year of Tri State Supply, Pittsburgh, PA; and McNaughton-McKay’s 2017 acquisition last year of The Reynolds Co., Dallas, TX.
Make an acquisition to establish or build out a presence in a new product specialty or expertise, such as lighting or industrial automation. A good example is Rexel’s 2012 purchase of Munro Distributing Co., Fall River, MA, because of its expertise in working with ESCOs and expertise in lighting retrofits.
When you look at the dozens of distributorships the big acquirers have acquired over the past three decades, you quickly see how many of the deals involved family-owned businesses that were founded by strong-minded entrepreneurs who lived and breathed the business. In many ways, their stories are quintessential American story of so many small business startups. They didn’t necessarily come from wealthy families. But they had the energy and the dream to create and own their own business.
Many of these companies were started up in the post-World War Two years by returning veterans; you also find quite a few electrical wholesalers that have been around since the nation’s first electrical systems were being installed in the early 1900s. When they decided to sell, it was often for the same reasons that entrepreneurs in any industry agree to an acquisition — they didn’t have family or employees interested or ready to lead the business into a new era. So many of these founders and owners put an imprint on the culture of their companies. Old-timers in the business will never forget how legends like Ron Kinney of All-Phase Electric, J.R. Thompson of Warren Electric, Terry Hunt of Houston Wire & Cable, or Malcolm Watson of Watson Electric Supply shaped their businesses.
Many companies have used acquisitions to expand their market reach, but over the past few decades there have only been a few that done it on a truly massive scale —Sonepar, Rexel, CED and WESCO. Each of these companies have acquired dozens of electrical distributors in the past 25 years or so, and our records show that together they have made at least 165 acquisitions in the United States and 10 large regional acquisitions in Canada. It’s also worth noting that Anixter International, Glenview, IL; Crescent Electric Supply, East Dubuque, IL; Border States, Mayer Electric Supply and Graybar have made quite a few significant acquisitions, but not yet quite on the scale of the companies mentioned previously. As a group these five companies have acquired 66 companies in the past 25-30 years, according to our database. For a quick recap of the biggest all-time deals, check out the chart below — our picks for “The 25 Distributor Mergers and Acquisitions that Shook the Electrical Market.”
We would also be remiss to not mention some of the other bigger acquirers over the years, companies which themselves were acquired after making headlines with their own acquisition activity. These companies include All-Phase Electric Supply, which made dozens of acquisitions from the 1970s through the 1990s before being acquired by CED; Hughes Supply, which made at least 17 acquisitions before being acquired by HD Supply in 2006; Utilserve Holdings, which rolled up several utility specialists before being acquired by Hughes Supply in 2002; Anicom, which acquired at least 12 wire and cable distributors before filing for Chapter 11 bankruptcy protection in 2001; and Communications Supply Corp., which acquired seven wire and cable specialists before WESCO acquired the company in 2006.
Let’s take a look of how the biggest acquirers made their own distinct marks on the electrical industry with their acquisitions.
CED – THE QUIET GIANT
When you look at the companies who have been the most active acquirers over the years, you really have to start with Consolidated Electrical Distributors, Irving, TX. It’s not only because over the past few decades they have probably acquired more distributors in this industry than any other company, but because in so many cases the companies the Coburn family has quietly acquired have been blue-chip players in their local market areas. When they acquire a company, typically the local management and company name stay in place, and the CED parentage is often left pretty deep in the background.
We have 49 acquisitions going back to the 1990s for CED in our database. But because the company doesn’t publicly announce any of its business, it’s a safe bet quite a few more deals were completed. When you look at the list of CED’s larger acquisitions, it reads like a Who’s Who of family-owned businesses in the electrical wholesaling industry. You had several really big acquisitions, like the 1999 acquisition of Ron Kinney’s All-Phase Electric and its 80-plus branches, and the Guillevin International purchase, also in the 1990s, which now operates more than 90 branches in Canada.
CED also made several dozen other notable acquisitions, not only because of the sizes of the companies in terms of dollar sales, but also because of how the company used them to become a major player in a region. For instance, its 1985 acquisition of Gilman Electric Supply gave the company a foothold in Maine, and the opportunity for Goody Gilman to expand the business in his home state and to eventually manage CED’s operations in its Yankee division. This CED division now includes 23 locations in Maine, New Hampshire, Vermont and New York.
SONEPAR – U.S. EXPANSION ON A GRAND SCALE
Sonepar first appeared on EW’s radar back in the 1980s when we visited with Jose Menendez and some other company executives in at the 1986 NAED Annual Conference in Montreal. An EW cover story on the company’s international expansion intentions followed later that year.
Its North American expansion started quietly in 1984 with the acquisition of the 13-location Canadian distributor Lumen. The rest, as they say, is history. Twenty-three years later the company has 2016 revenues in North America of $9.6 billion and 988 locations across the continent, most acquired through acquisition. In the United States the company has 700 electrical and industrial locations and operates in all 50 states, according to information on its website.
Even in the biggest of companies, the culture of the company so often starts with the key managers and founders. In the case of Sonepar, one of the largest privately owned family businesses in the world, that’s the Coisne family, which is well known throughout the world over the past few decades because of how Henri Coisne, honorary chairman, and his daughter Marie-Christine Coisne-Roquette, chairman, have managed the company’s global expansion efforts.
In the earliest year of Sonepar’s expansion in the United States, the public face of the company was Richard Worthy, who joined the company from GE Capital in 1998. Over the next seven years, he and his management team completed 29 acquisitions and built the business up to more than a billion dollars in U.S. sales. Those acquisitions included expansion into New England, the New York-New Jersey-Philadelphia tristate area; Chicago, Minneapolis, Florida, Baltimore-Washington and the Gulf Coast. After Worthy’s tenure, the company expanded aggressively into California, Texas, and the Intermountain region.
The Sonepar Way has been to use some of these acquisitions (often along with a hub-and-spoke distribution concept) as platform companies to expand in various regions. It did this with Cooper Electric Supply in New Jersey, Pennsylvania and New York; with Stuart C. Irby company to expand in utility business and throughout the East South Central region; with Northeastern Electrical Distributors to expand in New England; with Capital Light to expand in Virginia; and with Viking Electric to expand from Minnesota into the Milwaukee market.
REXEL – THE MANY STEPPING STONES TO A HUGE PRESENCE IN NORTH AMERICA
Like its global rival Sonepar, first moves into the North American market were fairly small. Back in the 1980s, when the company was known as Compagnie de Distribution de Matériel Electrique (CDME), Rexel acquired Bob Merson’s Southern Electric Supply as a platform company and set up a partnership with Merson called International Technical Distributors (ITD) to expand in the United States. Back when EW did a cover story on Southern Electric Supply in Jan. 1991, Merson had acquired 12 locations in the Southeast through ITD. After its 1992 investment in Willcox and Gibbs, the1993 merger with Grouplec Distribution, and the name change from CDME to Rexel, acquisitions began to accelerate. These purchases during the 1990s included big regional chains like Consolidated Electrical Supply, Miami, FL and Summers Group, Dallas, and some large independent distributors like Cashway Electric Supply, Denver, CO; The Sacks Group, Cleveland, OH; Taylor Electric Inc., Portland, OR; and Pacific Electrical Supply, San Leandro, CA. Still to come in the early 2000s were big purchases like Chuck Steiner’s Branch Group in 2000 and Westburne Inc., one of Canada’s largest chains, also in 2000. Westburne had been an active acquirer of U.S. distributors, acquiring firms like United Electric Supply, St. Louis, MO, and Colotex Electric Supply, Loveland, CO.; and Wehle Electric, Buffalo, NY.
We don’t have the space in this article to cover all of the 40-plus other acquisitions the company made since the 1990s, but there have been a few too big not to mention, like the purchase of GE Supply (now Gexpro) in 2006; Capitol Light & Supply, Hartford, CT, in 2006; and Platt Electric Supply, Beaverton, OR, in 2012. These days, Rexel is doubling down on its corporate commitment to energy efficiency and is building out its Rexel Energy Solutions initiative that got a big boost from its purchase of Munro Distributing.
WESCO – BUILDING OUT NICHE MARKETS
WESCO did add to its geographic reach through acquisitions such as Atlanta Electrical Distributors (Atlanta metro - 2016); Avon Electrical Supplies (New York metro – 1998); Hill Country Electric Supply (Austin metro – 2015); and Needham Electric Supply (New England – 2015). But what makes WESCO’s acquisition strategy unique is that many of its 30-plus acquisitions over the past 25-30 years were targeted at specific product areas or businesses, including utility, voice-data-video (VDV), industrial automation and integrated supply. In the industrial automation arena, key acquisitions included Cascade Controls, Tukwila, WA (2007); Control Corporation of America, Richmond, VA (2000); and WR Control Panels, Columbus, OH (1998). It also made a big splash in the integrated supply market in 1998 with its purchase of Bruckner Supply, Port Washington, NY, and in the VDV market with its 2006 acquisition of Communications Supply Corp., Carol Stream, NY, which at that time had over $400 million in VDV sales and 32 locations.
Summary. Although acquisitions have long been part of the industry, independent, family-run businesses still have the largest share of sales, and will maintain that dominant share for the foreseeable future. That share continues to slowly decline and the five largest companies — Sonepar, WESCO, Graybar, Rexel and CED — now account for roughly one-third of the business.
A list of all the 500-plus acquisitions Electrical Wholesaling and Electrical Marketing newsletter have covered since the 1990s is now available as part of the new $395 introductory rate for 24 annual issues of Electrical Marketing newsletter and 24/7 online access at www.electricalmarketing.com to the newsletter’s new electrical market data offering.