By Bridget McCrea
As an NAED member that’s well known for its activity in the merger and acquisitions (M&A) space, Shealy Electrical Wholesalers of West Columbia, S.C., caught the electrical distribution industry off guard in June when it announced that it was being acquired by Border States Electric of Fargo, N.D. Pending regulatory approval, the deal will be finalized on August 1, 2016. And with that, yet another independent, 17-location electrical distributor will be absorbed by a larger entity.
Part one of this series of stories looked at what Shealy Electrical was doing for its employees to become a full ESOP. During that process, the company worked with Border States to see how its ESOP worked, and decided a sale was the best way to go. But at the beginning of the process, Shealy was not looking to be bought.
Not Up for Sale
Up until the point where Shealy Electrical and Border States discovered the alignment between their individual ownership and succession plans, White says the former had no intention of selling itself to or merging with another company. In fact, as of late-2015, he says Shealy Electrical planned to continue down its own M&A path, acquiring good candidates and bringing them under the company’s umbrella. “We never spoke to any other companies about a possible sale,” says White. “It was really just a conversation that started out as us exploring what it would take to create our own ESOP.”
White says creating an ESOP from the ground up would have required much effort, time, and money. “We would have had to borrow money from a bank and tie up available capital that would have otherwise been used to purchase technology, invest in people, or make new acquisitions,” says White. “Those investments have to be made on a continual basis in order to remain relevant in this industry.”
By joining forces with a business partner that already has more scale and broader geographic coverage, Shealy Electrical will not only be able to serve a wider swath of customers, but it will also be better positioned to go up against the likes of Grainger and Amazon Business. “Those players are starting to infringe on our business, and they’re setting the technological standards for all of us,” White say. “For a company of our size and scale, competing with that takes considerable time, attention, and investment.”
In its own merger announcement, Border States Electric’s CEO Tammy Miller said she was excited to welcome Shealy Electrical Wholesalers to the employee-owned company. “Shealy is a market leader with a proven track record of sustainable growth,” Miller said. “Their values and belief in service excellence, strong vendor relationships and the power of employee-ownership align well with our culture at Border States.”
White is equally as enthused about the merger, and envisions a time when the smaller firm can create “significant scale” and become a Top 10 electrical distributor in the U.S. “What if we could pretty quickly provide to our customers and our associates a technology platform that was already built and tested and one of substantial quality?” he asks. “And what if we could give our associates the opportunity to become part of the 100% ESOP-owned company essentially overnight and do all those three things without having to take on any debt? Based on these and other factors, it was a pretty easy to decision to make.”
In Part 3 of this series of stories on the merger between Shealy Electrical Wholesaling and Border States Supply, we examine how the two companies will be working together as one for the future.
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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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