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Electrical Wholesaling's Top Ten News Stories of 2014

Dec. 30, 2014
Electrical Wholesaling’s picks for the most interesting news and trends in 2014.

1. Distributors tighten their acquisition focus on growth markets. On the M&A front, 2014 will be remembered not for an overwhelming number of acquisitions or the size of any of the deals, but for the tight focus many acquirers had on industries like oil and gas, lighting, automation, electric utilities, security and safety products. The only deals involving Top 200 electrical distributors at press time were Border States Electric’s purchase of Western Extralite Co., Kansas City, Mo., and the merger between Granite Electrical Supply Inc., Sacramento, Calif., and Electrical Distributors Co., San Jose, Calif., to form Edges Electrical Group. WESCO Distribution Inc., Pittsburgh, Pa., has often focused on niche markets like voice-data-video (VDV), utilities or integrated supply with its acquisitions, and this past year was no different with its purchases of utility specialists Hi-Line Utility Supply Co., Elgin, Ill., and LaPrairie Inc., Newmarket, Ontario. Other examples of this niche focus include the acquisition by Anixter International, Skokie, Ill., of 60-location Tri-Ed Distribution, Woodbury, N.Y., which bills itself as the largest distributor of security products in the United States; the move by Shealy Electrical Wholesalers, West Columbia, S.C., to bolster its position in the Carolinas’ lighting market with its purchase of Charlotte, N.C.-based Nova Lighting, N.C., a lighting specialist that focuses on high-end lighting jobs in the commercial, industrial, retail, municipal and institutional niches; and Sonepar’s acquisition of IDG Group, Belmont, N.C., a giant in the MRO and integrated supply market with $700 million in annual sales that Modern Distribution Management ranks as the 22nd largest industrial distributor in the United States. For more distributor acquisitions see the chart on page 23.

2. Sonepar and Rexel increase focus on the oil & gas and automation markets with acquisitions in Brazil, Europe, Latin America, Australia and the South Pacific. While the two largest distributors in the world are best known in the United States for their acquisitions of dozens of family-owned distributors over the past few decades, during 2014 their attention globally was squarely on distributors specializing in  the oil & gas and automation markets. Sonepar SA, Paris, bought several Rockwell Automation distributors, including Routeco Group Holdings, the largest automation distributor in Great Britain; Singapore’s HoST Pte Ltd., said to be the oldest Rockwell Automation distributor outside of North America; and Melexa, Bogota, Colombia; as well as distributors in Australia, Canada, the Czech Republic, Costa Rica and Germany.

Rexel was busy, too, with its acquisitions of oil & gas specialist 4 Knights International, Bangkok, Thailand; Beijing Ouneng, a Chinese automation specialist; Elevite, a Swiss lighting specialist; and Al-Hobayb Group, Riyadh, Saudi Arabia, another oil & gas specialist.

3. Lighting manufacturers expand their LED lighting control lines, but concerns surface over the ability of LED controls to talk with LED lamps. With all of the rapid technological progress on the LED lamp front, it seems like LED controls are racing to keep pace with the lamps they control. As the link between the lamps and increasingly intelligent building networks now part of so many new offices and upscale homes, LED controls, whether they be hard-wired or wireless, must be easy to program, manufacturer-agnostic and glitch-free. That can prove to be a challenge, but lighting industry evangelists working for the Lighting Controls Association (www.lightingcontrolsassociation.org), (the Department of Energy’s Solid-State Lighting program (www.energy.gov/eere/ssl/solid-state-lighting) and manufacturers like Lutron Electronics Co., Coopersburg, Pa., are working hard to educate installers and consumers about compatibility issues and to develop standards.

On the acquisition front, lighting controls are particularly hot, and at least two lighting manufacturers made acquisitions. Leviton bought lighting control manufacturers ClickOn Technology, South Africa, and Bitwise Controls, New Orleans, La.; and Echelon Corp., San Jose, Calif., acquired Lumewave, Sacramento, Calif.

4. Office construction is finally recovering. It takes a while for office construction to come around after a recession because it’s so dependent on the hiring patterns of tenants. New office construction seemed to take longer than usual to recover from this recession, with many major metropolitan areas suffering with office vacancy rates of over 20%. Thanks in large part to a dramatic increase in the hiring of tech companies in several key office markets, office construction is on the mend in some areas. CBRE Research says the exceptionally low sub-10% vacancy rates in markets like Boston, New York, San Francisco and San Jose, Calif., are due in large part to the construction of new office towers needed because of the increase in tech hiring.

5. Largest LED manufacturers restructure lighting businesses. No one will dispute the fact that LEDs will dominate the lighting market within the next few years. But the rapid transformation of this industry has required some major restructuring on the part of two of the three largest lighting manufacturers — Philips and Osram — and assurances by the third, GE Lighting, that it’s in the lighting market to stay because it fits within the corporate parent’s focus on energy and infrastructure.

Last year, Siemens spun off 80.5% of Osram as an IPO and the company now operates as an independent public company with a sizeable (19.5%) investment stake remaining from its former parent. This year, Philips Lighting’s corporate holding company announced a dramatic restructuring in which it recast itself into two separate companies, HealthTech and Lighting Solutions, and an earlier spin-off of its lighting components business, including Lumileds and auto lighting products. GE’s chief marketing officer Beth Comstock said GE Lighting division is not for sale, and the company recently invested $40 million in an LED manufacturing line at its Hendersonville, N.C., lighting factory.

6. GE’s proposed purchase of Alstom leads electrical manufacturers’ M&A activity. When GE’s $16.9 billion purchase of Alstom is approved, it will give the company access to the European power generation market and position the company as a player for the long haul. GE is slowly but surely emerging from the shadow of its former financial unit, which clouded the company’s intentions to be a major player in the energy and infrastructure market. The Alstom acquisition would give the company a solid position in the utility transmission and distribution market, high-voltage switchgear and distribution equipment; fit nicely with its big position in renewables through its wind turbine business unit; and bolster its product offering in emerging microgrid opportunities.

Other major deals by electrical manufacturers during 2014 included Southwire’s purchase of Coleman Cable, Waukegan, Ill.; ABB’s sale of the Thomas & Betts’ Meyers Steel Structures business to Trinity Industries; and the acquisition by Emerson Electric of SPX Corp.’s 44.5% minority stake in EGS Electric Group LLC, and its related decision to rename the business unit with a very familiar industry name — Appleton Group.

Photo courtesy of www.hudsonyardsnewyork.com

It doesn’t seem all that long ago that when you looked at the data for multi-family housing starts what stuck out the most was how much it varied from month-to-month. There always seemed to be wild swings in the numbers, and because so much of the focus before the recession was on the explosive growth of the single-family housing market, it was easy to overlook multi-family housing starts.

That’s clearly not the case anymore. Multi-family housing starts are driving much of the housing market’s growth since the recession because of some far-reaching demographic and cultural changes that may tamp down single-family growth for some time to come. Multi-family housing starts are up more than 30% from their pre-recession levels. Much of this growth can be traced to the fact that many new home buyers either can’t afford the usually more expensive down payment on a single-family home, or don’t want to deal with the additional maintenance and prefer an apartment or condo downtown.

8. Energy continues to drive everything in some MSAs. While it’s easy to imagine how much explosionproof equipment is used on the drill sites, it’s not uncommon to overlook how much other business oil fracking brings to North Dakota and Texas, and parts of Ohio, Pennsylvania, New York, Louisiana, Colorado and Montana. Outside of big MSAs like Houston, New Orleans and Oklahoma City, the markets seeing the most direct impact from the new oil business tend to be in rural areas with total populations of less than 1 million people. When you look at the MSAs nationwide with the highest percent of population growth 2012-2013, energy-oriented MSAs that rank among the nation’s Top 20 in percentage of population growth are: Odessa and Midland, Texas; Bismarck and Fargo, N.D.; and Greeley, Colo. And when you look at the list of small markets with huge housing growth, Fargo, Bismarck, Grand Forks, N.D; and Greeley, Colo.; are on it.

9. Microgrids are starting to really matter. It seems like a perfect storm is now underway that will create demand for microgrids that can supplement the aging U.S. electrical grid with local power production from natural gas-fired turbines, renewables like solar and wind and other energy sources. The potential of the smart grid, the aging U.S. electrical grid, and the increasing appetite for electricity in some regions not in the position to build new coal-fired plants or power plants fueled by traditional means are working together to create demand for microgrids. All of the major electrical manufacturers that produce utility-scale, high-voltage switchgear and distribution equipment are quite interested in microgrids, and examples of these local power plants are popping up all over the place. Two 2013 reports from Navigant Research said more than 400 microgrids are now being built and that the global market for microgrids will top $40 billion by 2020.

Photo courtesy of ABB

The photo at right shows an ABB microgrid on Alaska’s remote Kodiak Island. According to ABB, the Kodiak Electric Association (KEA) is working with the company to install its PowerStore commercial flywheel technology “to integrate with a battery system on Kodiak Island in Alaska to enable the integration of more renewable energy from an expanded wind farm to its microgrid.” ABB says KEA operates a microgrid that generates virtually all of its 28 megawatts (MW) of electricity capacity from hydropower and wind. Another example of a microgrid is at the University of California at San Diego, a campus with more than 40,000 students. The university now relies on a microgrid powered by a mix of solar power, a 2.8 MW fuel cell, and a natural gas powered co-generation plant for 92% of its electricity.

10. Who’s who at the zoo. Industry leaders promoted to CEO, president or other senior executive posts for electrical distributors during 2014 included Brian McNally, the new executive V.P. and CEO of Rexel North America, who spent 30 years with Arrow Electronics; John Hardy, who moved from his long-time post as president of CapitalTristate to V.P. of business development at Sonepar USA in Philadelphia; Jay Dienst, who joined Power/mation, St. Paul, Minn., as president; Halsey Cook now with the Sonepar North America senior management team after years with Legrand, where he was president of the Electrical Wiring Systems Division for North America; John Burke, now president and CEO of SupplyFORCE, King of Prussia, Pa., after 13 years as president and COO of Kirby Risk Electrical Supply; and Michael DeVoney, the new president of Turtle & Hughes Integrated Supply division, succeeding Jay Drummond, who retired after 20 years with the company.

Manufacturers. Electrical manufacturer execs who took on new senior roles this year included Gary Amato, a 26-year Hubbell veteran, who became executive V.P. of Hubbell’s Electrical Segment and will manage that segment and oversee Hubbell Lighting following Scott Muse’s retirement as president of that business; David Heinzmann, who was promoted to COO of Littelfuse from his previous role as V.P. of the company’s global operations; Jim James, now Ideal Industries’ chairman upon the retirement of David Juday, former chairman of the board; Ed Bednarcik, who joined Lighting Science Group (LSG) as CEO; Pam Erickson, the new executive V.P. at NSi, Huntersville, N.C.; and Mike Masino, now division president–Gardner Bender.

Other promotions and executive appointments in the electrical market included Kevin Cosgriff becoming the new president and CEO for the National Electrical Manufacturers Association (NEMA), Rosslyn, Va.; Paul Molitor moving from NEMA to CEO and president of IDEA; Ed Crawford’s move from Philips Lighting to Affiliated Distributors to become president of U.S. Electrical and International Development for Affiliated Distributors; and the news from Portland, Ore., that Douglas Gastich, joined BlueVolt as president and general manager.