Illustration 60886103 / Kheng Ho To / Dreamstime
Illustration 60886103 Kheng Ho To / Dreamstime
60886103 / Kheng Ho To / Dreamstime
60886103 / Kheng Ho To

Two Purchases in Brazil Set Stage for Next Advance by EDGE Global Supply Partners

Feb. 14, 2014
EDGE Global Supply expanded its presence in Brazil last month with the announcement of two acquisitions there. The bigger footprint in Brazil not only boosts EDGE’s participation in Brazil’s growth but also serves as a base for pursuing further expansion in Latin America.

EDGE Global Supply, a Milwaukee-based joint venture among 11 large automation-oriented electrical distributors that was formed in 2012 to give its members a global network, expanded its presence in Brazil last month with the announcement of two acquisitions there. The bigger footprint in Brazil not only boosts EDGE’s participation in Brazil’s growth but also serves as a base for pursuing further expansion in Latin America.

Intereng Automação Industrial LTDA and LAAX Tecnologia de Informação LTDA will join Ladder Automação Industrial LTDA, an automation distributor in São Paulo and Rio de Janeiro, which EDGE bought in July 2012. Together, the acquisitions cover a territory that accounts for 45% of Brazil’s gross domestic product and expand EDGE’s offerings in Brazil’s datacom and telecommunications markets, EDGE President Bob Eisenbrown told Electrical Marketing.

Both of the acquired companies, like all 11 of the EDGE members, are Rockwell Automation distributors, but Rockwell is just one of many suppliers the companies share in common. Intereng, which operates primarily in the Brazilian states of Sao Paulo and Mato Grosso do Sul, was founded in 1991 and is an authorized distributor for Belden, Bussmann, Fandis, Fluke, Panduit, Phoenix Contact, Prosoft Technology, Rockwell Automation, Rockwell Software, Tektronix and Veeder Root. The Intereng headquarters are in Jaboticabal with branch locations in Americana and Bauru.

LAAX Tecnologia de Informação was founded in 2009 and covers the Brazilian datacom market with headquarters in São Bernardo do Campo. LAAX is an authorized distributor for Commscope, Fluke Networks, Panduit and Pentair and serves a broad list of commercial, institutional and industrial customers.

EDGE doesn’t plan to make many immediate operational changes at the acquired companies, and will continue to operate them under their existing brands, Eisenbrown told EM. The contiguous Rockwell Automation geographical authorizations now cover 45% of Brazil’s production, and the new additions expand EDGE’s reach to the western part of Brazil.

“They will continue to grow with their own brands, though with added recognition as EDGE companies,” Eisenbrown said. “We can bring them additional skills, and there may be some opportunity around infrastructure, improved logistics and improving the supply chain, maybe a DC (a centralized distribution center), but that’s not an immediate need. We’re just starting to get our arms around what the synergies are. There may be some opportunities over the long term in the back-office, but it’s not like these companies were overweight.”

EDGE is taking a fairly light hand with its acquisitions. It looks to keep existing management in place for at least three to five years, and Eisenbrown doesn’t think it’s a good idea to impose new management from outside.

“We work on different ways to transfer knowledge. Like with Ladder, we may have their people come to visit in the U.S. for a few days or maybe weeks and go around to the various member companies. And we may see a point someday where we want to put someone down there, but expats are very expensive and they don’t solve the leadership problem. If we put in a new business system or something, we may draw from members for a short time, but anything more than that doesn’t create the right leadership locally. We found the same thing on the manufacturing side.”

Eisenbrown sees the expanded Brazilian operations as an ideal starting point for further growth in Latin America, a region that is increasingly attractive to manufacturers of all kinds. “Most of the companies we deal with (as customers) in North America are already operating in Latin America — or if not, they need to be.”

Although EDGE’s first three acquisitions have all been in Brazil, the group continues to pursue acquisition opportunities in other developing markets, including Asia and especially China, as well as Eastern Europe, Eisenbrown said. The creation of EDGE isn’t so much about capitalizing on double-digit growth in emerging countries as it is about serving members’ existing customers with global operations and establishing long-term bases in thriving economies.

The beauty of the automation market in emerging economies is that as the consumer market grows, those consumers need more goods and services, which drives growth in industries such as food and beverage, automotive and appliances where manufacturers have a constant need to upgrade their plants. Yet Eisenbrown suspects the days of double-digit, year-over-year growth may be in the past now. Rapid growth is kind of mixed bag anyway, in that it raises the value of local distributors and also raises the price for acquiring them. Eisenbrown doesn’t see significant macro drivers pushing mergers and acquisitions

“We have a focus on the markets, but also on getting good companies,” he says. “We haven’t observed an acceleration in consolidation in these markets. It depends more on where the ownership of the individual businesses and their thoughts and motivations.”

News of EDGE has spread through the global Rockwell distributor community enough that Eisenbrown’s team doesn’t have much trouble getting an audience with independent distributors to discuss potential deals.

Eisenbrown has been busy trotting the globe scouting deals since joining EDGE in August 2012, but the travel is nothing new for him. He did a lot of international travel during his years at Rockwell. “At EDGE it’s more unpredictable — especially when you’re in negotiations on a potential deal where you may have to go there on short notice — but the amount of travel is the same,” he said. “I can only do that because I have a very understanding wife.”

The founding members of EDGE are French Gerleman Electric, Gerrie Electric Wholesale International, Horizon Solutions, Kendall Electric, Kirby Risk, McNaughton-McKay Electric, North Coast Electric, Revere Electric Supply, The Reynolds Company, Van Meter Industrial and Werner Electric Supply.