2011 Distributor Acquisitions Heat Up in Electrical Market and Other Verticals

Sept. 9, 2011
Distributors are selling their businesses at a pace the electrical wholesaling industry usually only sees in the most active acquisition years. And while

Distributors are selling their businesses at a pace the electrical wholesaling industry usually only sees in the most active acquisition years. And while industry analysts aren't willing to say 2011 will see a record number of distributor deals, this year is shaping up to be one of the most active acquisition years in the last decade (see chart of 2011 distributor acquisitions on page 2). Electrical Marketing has already reported on 19 distributor M&As in 2011, while in all of 2010 there were only nine distributor deals.

The electrical market tends to see a surge in acquisitions when bank capital to fuel acquisitions is readily available, business owners are optimistic about future business conditions, or when the industry's biggest acquirers want to build out their distribution networks into new regions or market niches. While the future business climate is suspect right now, there's plenty of money available for acquisitions, particularly from private-equity firms itching to invest their clients' cash. There currently aren't any national or super-regional distributors building out national distribution networks on as grand a scale as when companies like Consolidated Electrical Distributors Inc. (CED), Dallas; Sonepar USA, Philadelphia, or All-Phase Electric Supply, Benton Harbor, Mich., would purchase electrical supply houses at a dizzying rate. But as we saw recently with Sonepar's purchase of Independent Electric Supply, San Carlos, Calif., they will make a deal to expand their geographic presence into specific markets where their coverage is light.

The most common acquisitions this year have been deals where distributors want to expand into a tightly focused niche outside of the mainstream electrical market, as was the case the with the purchase by Horizon Solutions, Holyoke, Mass., of Tekinor Energy Solutions, Fall River, Mass., to bolster its growing ESCO business; Steiner Electric Co.'s acquisition of Inland Cutting Product and Industrial Sling Co., both of Countryside, Ill., to build its industrial supply business; the acquisition of D&D Tool & Supply, Vista, Calif., by OneSource Distributors, Oceanside, Calif., to expand into the sales of tools and industrial supplies; and WESCO's acquisition of RECO, Cincinnati, an automation specialist.

Other distribution industries are seeing plenty of acquisitions in 2011, too. Indeed, many of the largest distributors in other market verticals have been busy buying companies this year. For instance, HD Supply, Atlanta sold its plumbing business with 2010 sales topping $400 million to Hajoca Corp., Ardmore, Pa.; Avnet, Inc., Phoenix, acquired a French distributor of IT supplies; and AmerisourceBergen Corp. Valley Forge, Pa., acquired two companies in the pharmaceuticals market, IntrinsiQ, LLC, Burlington, Mass., and Premier Source, San Mateo, Calif. Also, Kaman Industrial Technologies Corp., Bloomfield, Conn., acquired Target Electronic Supply, Inc., Westwood, Mass., a motion control distributor that will become part of Kaman's Minarik subsidiary, an automation distributor that was for years listed on Electrical Wholesaling's Top 200 before being acquired by Kaman in 2010; and Wolseley, Zug, Switzerland, sold its building materials distribution business in the United Kingdom to Saint-Gobain, a French manufacturer and distributor, and its UK-based Electric Center business to Edmundson Electrical. Modern Distribution Management, (www.mdm.com) has reported on many other deals across a wide swath of the distribution industries in 2011.

Acquisition activity should remain brisk for the foreseeable future according to two sources familiar with mergers and acquisitions in the distribution industry. Burk Burkhart, HT Capital Advisors, New York, told Electrical Marketing earlier this year that distributors want to take advantage of the current record-low maximum 15 percent federal capital gains rate, which will expire after Dec. 2012 unless it's extended by the U.S. Congress. And on the website of I.B.I.S. Inc., Norcross, Ga., a technology consulting firm, distribution industry consultant Brent Grover said in a blog posting that, “It appears to us that the current bull market for attractive wholesale distribution businesses will continue for the next 12 months, barring shocks to the general economy.”

2011 Distributor Acquisitions in the Electrical Market

Company Acquirer Central Wholesale Electrical Inc., Livermore, Calif. Alameda Electrical Distributors, Hayward, Calif. Howe Electric Supply, Jacksonville, Ill. Butler Supply Inc., Fenton, Mo. Springdale and Fort Smith, Ark., branches of Treadway Electric Co. Little Rock, Ark. Elliott Electric Supply, Nacogdoches, Texas Key Electrical Supply, Houston Elliott Electric Supply, Nacogdoches, Texas Automation Technology Inc., Boise, Idaho Minarik Corp./Kaman, Glendale, Calif. Midstate Electric Supply, Berlin, Vt. Needham Electric Supply (NESCO), Canton, Mass. D&D Tool and Supply, Vista, Calif. OneSource Distributors, Oceanside, Calif. SESCO/QUESCO, Toronto, Ontario Sonepar SA, Paris RECO, Cincinnati WESCO International Inc., Pittsburgh Inland Cutting Products, Countryside, Ill. Steiner Electric Co., Elk Grove Village, Ill. Industrial Sling Co., Countryside, Ill. Steiner Electric Co., Elk Grove Village, Ill. Independent Electric Supply (IES), San Carlos, Calif. Sonepar USA, Philadelphia City Electric Supply, Iowa City, Iowa Electrical Equipment & Engineering (3E), Windsor Heights, Iowa Tekinor Energy Solutions, Fall River, Mass. Horizon Solutions, Holyoke, Mass. Fabory Group, Tilburg, Netherlands W.W. Grainger Inc., Lake Forest, Ill. Cobra Wire & Cable, Hatboro, Pa. EIS Inc. (Genuine Parts Co.), Atlanta