By Bridget McCrea
When Ralf Deneke looks around at the international electrical industry he sees a few key trends unfolding. As vice president of distributor and channel management for Siemens AG in Germany, Deneke has his finger on the industry’s pulse in several countries and is “in the know” about what’s going on in overseas markets.
Already strong in China, large electrical distributors like Sonepar, Rexel, and Wesco are taking a growing interest in the activities of small, independent distributors in countries like Thailand and Vietnam. “Manufacturers tend to do a lot of direct business in these two countries,” Deneke says. “That model has been in place for a while and now the larger, global distributors are noticing the opportunities there.”
The natural market progression would be for those independents to first join forces in Affiliated Distributors-like fashion. This gives the smaller players in the market better pricing and the ability to advertise as a group, rather than just a single distributorship. “International distributors in the electrical market are using this strategy to balance out the larger players,” says Deneke.
In other cases the smaller distributors are acquired by the international firms. When such mergers take place the small distributor gains prowess (by being part of a larger entity) while the acquirer benefits from increased market share and the “man on the street” in-country expertise built over the years by the smaller firm. “We’re seeing this activity going on in China and it’s moving out to other countries,” says Deneke, who points out that both Sonepar and Rexel generate about 50 percent of company growth via acquisitions.
With the European market relatively flat in terms of sales growth right now, U.S. firms are also viable targets for international firms that are in expansion mode. China and Brazil are equally as attractive for their continued growth, says Deneke. He expects the trend to continue in 2013 and pinpoints Asia as an area that’s of particular interest right now for firms in search of acquisition targets. “It’s a pretty attractive, emerging market.”
Former Rexel U.S. CEO and retired industry consultant Dick Waterman of Dallas says that even as they endured one of the worst recessions in their country’s history, electrical firms in the U.S. remained prime acquisition targets for international firms. In fact, he says that a “fairly substantial” number of firms are currently on the selling block in the U.S.
The most recent economic cycle (or, “shake out”) is partly to blame, says Waterman, but some of the activity can be attributed to the general evolution of business. “There are still hundreds of companies here in the U.S. that are family-owned and that are going on their third and fourth generations of family ownership,” Waterman explains. “At lot of owners are ready to exit the business. The question is, will they turn their companies over to family or sell them to other firms?”
Waterman expects the consolidation trend to continue internationally and domestically. When assessing the impact of the merger activity on distributors and manufacturers within the electrical industry, Waterman says it typically creates opportunity for smaller, independent firms that are focused on niche markets. “There will always be room for new, independent firms that hone their efforts around serving specific customer niches well.”
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 firstname.lastname@example.org or visit her website at www.expertghostwriter.net.Tagged with tED