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People - Dec 21, 2012
Obituaries - Dec 21, 2012
November EPI Index Shows No Change
Housing Starts Dip 4% in November
Electrical Marketing - December 21, 2012
Around the Industry - Dec 21, 2012
An article in this month’s issue of Electrical Wholesaling picks the most interesting electrical news of 2005. In the second of two articles based on that report, EM takes a look at the companies and trends that made news during the past year.
Rumors are starting to swirl on other potential acquisitions of large regional distributors. Sonepar’s purchase of Stuart C. Irby, Jackson, Miss., rumors of Home Depot’s interest in Hughes Supply, and reports of private-equity firms courting electrical distributors make one wonder if the electrical industry is on the threshold of a new round of super-sized acquisitions. Although most of the 2005 acquisitions were relatively small, the stage may be set for some sizeable acquisitions by companies from inside or outside the business that would use the purchases of electrical distributors with large regional footprints to quickly build a national presence.
Luxury condo construction pumps up an already overheated housing market. One of the fastest-growing segments of the housing market is the construction of new luxury condo towers in downtown locations. The sheer size of these projects is astounding. Developers plan to build the world’s largest residential condo tower in Miami, the 1,000-unit Empire World Towers, and Donald Trump is expected to open the 50-story Trump Plaza in Jersey City, N.J., in 2007. The New Jersey project will have more than 800 condos, and the Trump Tower now being built in Chicago will have an estimated 472 residential condominiums. A few blocks away, the Waterview Tower hotel/condo project, slated to open in 2009, will offer 200 hotel rooms and 233 swanky residential condos. Another big project is the $800-million Fan Pier project on Boston’s waterfront. It’s approved for construction in 2006 and will include 675 residential units.
However, when you read past the glossy developer brochures, you may find that in some markets, buyers are only interested in these condos as investments. An estimated 25 percent of new condos built in the Miami market will be owned by investors who have no intention of ever living in them. Economists are concerned that once the bubble bursts, as it almost certainly will when too many investors decide to cash in at the same time, prices of these condos will crash faster than an elevator in free-fall. You will hear the howls of pain from Miami to downtown Chicago.
Acquisitions abound among manufacturers and software vendors. Southwire Co., Carrollton, Ga., made the biggest acquisition of the year with its purchase of the Essex Electrical Products building wire operations, based in Fort Wayne, Ind. The company also acquired DeCorp Inc., Hendersonville, Tenn., for its Flatwire technology. In other wire industry news, General Cable Corp., Highland Heights, Ky., announced plans to buy the high-voltage cable business of Safran SA, Montereau, France, and Encore Wire entered the MC cable market with a 150,000-square-foot manufacturing facility in McKinney, Texas.
Another industry segment that’s seeing a wave of acquisition activity is distribution software. Not all that long ago, names like Activant, Intuit and Infor wouldn’t have meant much to most electrical distributors, but those companies now own the largest distribution software vendors — Eclipse, Prophet 21, Trade Service Systems (now owned by Prophet 21) and NxTrend. The round of acquisitions that started in the IT market last year continued in 2005. Activant Solutions, Austin, Texas, bought Prophet 21 Inc., Yardley, Pa., and Speedware Corp., Montreal, with its Prelude Systems software; and Softcare Computer Consulting Co., Pittsburgh, bought the FACTS business unit of Cleveland-based Application Resources Inc. The Trade Service management team also announced plans to buy the business back from i2 Technologies, Dallas.
Other major acquisitions include the move by Square D/Schneider Electric, Palatine, Ill., into the lighting fixture business with its purchase of Juno Lighting Inc., Des Plaines, Ill., and its acquisition of Power Measurement Inc., Victoria, British Columbia. Legrand, West Hartford, Conn., added to its portfolio of residential structured wiring assets with its purchase of On-Q Home, Harrisburg, Pa.
Rounding out the major acquisitions in 2005, Fluke Corp., Everett, Wash., continued its acquisitive ways with its purchases of Infrared Solutions, Plymouth, Minn., and LEM Instruments, Liverpool, United Kingdom; and Bain Capital acquired FCI Connectors, Manchester, N.H. Siemens Energy & Automation Inc., Alpharetta, Ga., bought Robicon Corp., New Kensington, Pa., while another Siemens’ division, Siemens Communications, bought Myrio Corp., Kirkland, Wash., to expand its product offering in the home entertainment market. Thomas & Betts, Memphis, Tenn., purchased Southern Monopole and Utilities Co., Birmingham, Ala.; and Wiremold/Legrand bought Cablofil, Mascoutah, Ill.
Electrical contractors’ roll-ups continue to evolve. Think back to the late 1990s. Remember the industry wags who predicted national contractor roll-up firms were going to revolutionize the electrical contracting business? These national roll-ups have experienced varying degrees of success.
Emcor, Norwalk, Conn., is doing well. Electrical business accounts for approximately 25 percent of Emcor’s $4.2 billion in sales, and the company continues to prosper. Emcor’s well-balanced portfolio of contracting services also includes HVAC and mechanical system contracting. Quanta Services Inc., Houston, is gaining favor on Wall Street after a few rough years. Formed in 1997 through an IPO, Quanta acquired 85 specialty contractors as it built a niche in the telecommunication, cable television and utility markets.
Encompass, formed through the 2000 merger of Group Maintenance and Building One, two contractor roll-ups that focused on electrical HVAC, mechanical and other building services, filed Chapter 11 in 2002, and has sold several businesses back to local contractors. Integrated Electrical Services (IES), Houston, has been in the news in 2005 as it struggles to gets its finances in order. Part of the reorganization is the sale of at least 11 contracting firms back to the original owners. IES had built up a network of contractors across the United States in the late 1990s, but the company ran into financial difficulty when the economy soured in 2000. IES is now reportedly considering a bankruptcy filing (see article on page 3).