WESCO Discusses M&A Activity, Supply Chain Issues

WESCO Discusses M&A Activity, Supply Chain Issues

After reporting “strong” third quarter earnings results, WESCO CEO John Engel fielded questions from reporters during the company’s conference call. Two key issues were addressed early in the conversation: merger and acquisition activity and supply chain issues.

Before taking questions, Engel pointed out that WESCO is continuing its growth and expanding its portfolio following last year’s merger with Anixter, and as a result will capitalize on continued economic recovery. “We are transforming into a growth company as a result of our digital investments, cross selling our expanded portfolio of products and services and providing resilient and sustainable supply chain solutions for our customers around the world,” Engel announced to reporters.

But it didn’t take long for the conversation to shift toward mergers and acquisitions. The first reporter to ask a question pointed out the recent announcement that Rexel USA has acquired Mayer, and asked Engel is he is looking into additional WESCO acquisitions.

“M&A is a critical value creation lever for us,” Engel answered. “I think we have a situation where the big are going to get bigger, faster now. We don’t look at M&A as an event. It is a process. We have a pipeline of opportunities we are managing right now. As we speak, we have several MBAs that have been signed with potential targets. We can perfectly time the M&A transaction. So, you have got to be positioned and need to put in the place to be the final bidder. We are an exceptionally strong position to continue to drive M&A. We are committed to deliver back within our target range and we are working a whole multitude of opportunities.”

Later in the conference call, Dave Manthey of Baird asked Engel about supply chain issues, and how they are impacting WESCO.

“There are clear challenges out there, we didn’t really see any material impact in Q2,” Engel explained. “In Q3, we are thrilled with how we have executed. And I think we are, again, seeing the benefits of our newfound scale and global supplier partnerships as a result of doubling up the company. But sales would have been a little higher had we had zero supply chain constraints, where we are past due from our suppliers. And they would have been higher to the tune of 1% to 2%. I think that is just an important mark. Those sales don’t go away. Remember, those sales now occur into Q4 just move forward.

“So I mean, we are thrilled with what we posted in the quarter but we are not completely immune from supply chain issues. With that said, I think a lot of folks have reported now and I think you can put into context how we perform versus others. We are very confident that we are executing at a high level and feel very good about our value prop.”

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