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ABB Exec Talks GE Industrial Deal

ABB Exec Talks GE Industrial Deal

Swiss robotics and automation powerhouse buys GE’s electrification solutions unit in order to expand its North American footprint and enhance its existing (and planned) product lines. 

Merger and acquisitions are fairly common in the electrical industry, but transactions involving huge, international companies aren’t quite as commonplace. That’s why when ABB announced this week that it was buying GE Industrial Solutions, tED decided to take a deeper dive in the $2.6 billion deal and find out what drove the decision and how it will ultimately impact the way the combined entity works with distributors.

As GE’s global electrification solutions business, Atlanta-based GE Industrial Solutions was attractive to ABB—a Zurich, Switzerland-based robotics, power, heavy electrical equipment, and automation technology manufacturer—for several reasons. With customer relationships in 100 different countries and an established, installed base across North America, for example, the former will help ABB strengthen its Number 2 position in electrification on a global basis, while also expanding its presence in the North American market.

Expected to close early next year, pending customary regulatory clearances and antitrust reviews, the deal will give ABB a stronger foothold in a marketplace where it has already invested significantly over the last seven years. “We’ve already invested a little over $11 billion in the U.S. market,” says Doug Schuster, ABB’s head of global business unit, installation products, “including the acquisition of Thomas & Betts (which ABB acquired for $3.9 billion in 2012).”

According to Schuster, the pairing of ABB with GE Industrial Solutions will help the former strengthen its U.S. foothold and pursue its North American business strategy. “Whereas the [acquisition] opportunity was around market access, it will also significantly close key product and portfolio gaps for ABB,” he continues, noting that for the most part, ABB is best known as a technology and innovation leader in electrical products and components. GE Industrial Solutions fits into the picture, he adds, with its established portfolio of engineered configured solutions. “Those solutions complement ABB’s portfolio very well.”

“In general, we [see] GE Industrial Solutions’ portfolio as a really great car, and we can put some pretty powerful engines into it,” Schuster explains. “The combination of the two companies will really add value for our customers, and therefore, provide a set of valued solutions with our channel distributor partners to really bring a stronger portfolio to market.”

Proven Track Record
With its acquisition of Thomas & Betts five years ago, ABB established itself in the North American market. Schuster expects that footprint to grow once the GE Industrial Solutions deal closes—a move that he sees as beneficial for its channel partners, which comprises a large number of electrical distributors.

“When we combine with the GE Industrial Solutions portfolio, we’ll be able to provide a much more extended offering to our distributor partners,” says Schuster. “Ultimately, it will be up to them to choose how they can extract the value that we’re going to bring.”

Going forward, Schuster says ABB plans to continue supporting distributors as it does today while also introducing those partners to GE Industrial Solutions’ offerings. Distributors that are already working with the latter will see product enhancements and new offerings, while those that aren’t will “have the opportunity to use the value of that solution to complement the offering,” says Schuster. “We view this as ‘working with our partners’ to let them see the value that they’d like to use.”

Even Bigger Solutions
Aside from the normal round of regulatory and antitrust reviews and approvals, Schuster doesn’t foresee any major roadblocks ahead for this particular deal. He does admit that joining the two companies together may be challenging, but points to ABB’s history of working on these types of deals as proof that the outcome will be positive.

“There’s always a lot of work to be done, but we believe that we have the capability to [handle] it,” says Schuster, noting that GE Industrial Solutions’ leadership team will be “coming along with us,” and is anxious to come onboard at ABB. “There’s a lot of positive energy around this deal,” he adds. “We just have to execute and make it happen.”

When asked how ABB plans to use technology to support product line expansion and become even more competitive in the North American market, Schuster says that’s the “sweet spot” for the manufacturer, which focuses on bringing innovative technology solutions to market. “GE Industrial Solutions has a strong product portfolio and ABB has exceptional technologies,” Schuster says. “By combining the two, we’ll be able enhance the technology within the GE offering, and in other cases combine product sets to create even bigger solutions.”

For example, he says ABB has a track record of developing solutions that are used to build highly-efficient structures, including international airports (i.e., in Dubai and Italy) and shopping malls (in Dusseldorf and Bangkok). “We’ve done this significantly on a global basis,” says Schuster, “but we haven’t had the opportunity to bring some of those solutions to the North American market.”

That will change when the companies combine, he explains, and once the merged entity   packages ABB’s latest innovations and pairs them with the GE’s solutions. “That will help us extend ourselves into the construction, food processing, chemical, oil, and gas markets,” says Schuster, “where I believe we can take the same technology, use it to gain new market access with the GE Industrial Solutions portfolio, and then actually extend that technology to new customer sets.”

Working Together
Calling the ABB-GE deal one that will “pay for itself,” Schuster is confident that the acquisition is “well worth” the upfront investment. “It gives ABB [expanded] access to the largest market in the world, and in a very significant way,” says Schuster. “We have high expectations around growing the business and working well together; we also see some opportunities to combine resources and become even more effective.”

Going forward, Schuster says ABB will be looking for new ways to support its channel partners and end users—an effort that could translate into additional acquisitions in the future. “If there’s an opportunity to expand our market access—or to extend or improve our portfolio,” he says, “then the answer is ‘yes,’ we look for opportunities to do that. However, there’s nothing sitting on deck today that we’re ready to announce.”

To electrical distributors already working with one or both of the newly-combined companies, Schuster says ABB is “extremely excited” about increasing its value in the North American market and providing an even better, stronger solution for its distributor partners. “We’ve putting extreme passion and energy into this,” says Schuster, “in order to make it something that our partners will truly value and work with us to unfold.”

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Bridget McCrea  is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.

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