Blog: Acquisitions fueled distributors’ growth in 2012

By Jack Keough

It’s no wonder, based on many earnings reports, why so many distributors and manufacturers were on the acquisition trail in 2012 as those acquisitions helped drive many of them to record revenues.

WESCO, for example, one of the largest electrical/MRO distributors in the country, hit a record $6.6 billion in sales last year and completed four acquisitions—RS Electronics, Trydor Industries, Conney Safety and EECOL Electric. The acquisitions positively impacted sales by 3.3%.

Those four acquisitions contributed greatly to WESCO’s bottom line. Consolidated sales in the fourth quarter were $1.64 billion, an increase of 3.5% compared to the same quarter in 2011. Acquisitions accounted for 4.3 percentage points of growth.

In fact, Conney Safety has grown so well that the company plans to add 35 sales positions this year.

John Engel, chairman, president and CEO of WESCO, offered a few reasons as to why the market is seeing increased consolidation. These are quotes attributed to Engel during an investor earnings call from a transcript provided by www.seekingalpha.com.

“We’re absolutely hearing from customers they’d like to do business with a smaller number of larger suppliers and that bodes well for us,” he said. “But we’re hearing it increasingly from suppliers. They’d like to do business with a smaller number of larger, well capitalized, more disciplined channel partners. And with the consolidation that’s occurring in the supply base, major moves last year (such as) ABB buys T&B, Eaton buys Cooper that just makes that relationship even more and more important from both our perspectives.”

Having an expanding breadth of product lines and geographical locations can also help companies like WESCO expand its integrated supply business.

Kaman Industrial Technologies (KIT), the distribution segment of the Kaman Corp., reached $1 billion in sales for the first time in its history and was greatly helped by acquisitions and new partnering arrangements. During 2012, KIT acquired Zeller’s business unit, which greatly expanded its capabilities in electrical, automation and engineered systems. The acquired Zeller business was a premier Schneider Electric distribution partner.

A few months later Kaman entered into a national distributor agreement with Schneider. KIT became a distributor for Schneider Electric’s line of industrial automation and control products as well as select power control and protection products commonly used in motor control applications. It was a perfect complement to KIT, who is well-known as a power transmission/fluid power distributor.

Kaman executives note that the acquisition of Zeller has resulted in a number of joint programs such as in water and wastewater treatment plans. Combining their strengths, KIT is now able to offer entire engineered systems. Zeller had about $80 million in sales when it was purchased and Kaman expects continues growth from that acquisition in 2013 as well as Florida Bearings, which Kaman also acquired last year.

But KIT, like WESCO and most other distributors are concentrating on organic growth. KIT, in fact says that it will consolidate facilities and reduce headcount because organic sales dropped off in the latter part of 2012.

WESCO says that organic sales were down 6% in October, up 6% in November and down 6% in December. Organic sales were reportedly down 2% in January.

KIT wasn’t the only distributor to break into the $1 billion club. Take, DXP Enterprises for example, an industrial distributor that cracked the $1 billion mark for 2012.

DXP is a publicly traded professional distribution management company that provides products and services to a variety of industries through its Innovative Pumping Solutions (IPS), Supply Chain Services and MROP Products and Services.

DXP completed several acquisitions last year that greatly helped them over the $1 billion mark.

And MSC, with its purchase of Barnes Distribution North America (BDNA) for $550 million is expected to help MSC reach its goal of $4 billion within a few years. The purchase price also caused some eyebrows to be lifted in the distribution industry. BDNA had sales of about $300 million last year.

Jack Keough was the editor of Industrial Distribution magazine for more than 26 years. He often speaks at many industry events and seminars. He can be reached at john.keough@comcast.net or keoughbiz@gmail.com

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