WESCO still on the acquisition trail

By Jack Keough

WESCO is often referred to as the largest publicly-traded electrical distributor in the U.S. But in reality the Pittsburgh, Penn. -based distributor sells much more than electrical distribution products. Over the years, WESCO has expanded its reach and product categories into many more markets, particularly the MRO, OEM and safety areas.

WESCO has more than 400 locations across the U.S. with eight distribution centers. It grew through excellent management under recently retired top executive Roy Haley and its current chairman, president and CEO John Engel. Both men are widely respected distribution veterans.

Through a series of acquisitions, organic growth and new markets, WESCO continues on its path to success.  Some of these acquisitions have been in specialized smaller niche market customer segments such as RECO, automation, controls and electrical distributor.  RECO added $25 million in sales from six branches. RECO was purchased in March 2011 and since then WESCO has purchased several more companies. The company clearly indicated recently that it will seek further acquisitions.

Recent acquisitions include Brews Supply in Canada, which had about $50 million in sales from the industrial, utility and other markets. Then there was RS Electronics in Livonia, Mich., which recorded sales of about $60 million. The company services the auto industry and other markets. Trydor Industries Ltd., a British Columbia company that distributes and services high-voltage electrical products was also purchased this summer. The acquisition of Trydor, which has $35 million in sales, is designed to bolster WESCO’s presence in Canada.  And in July, WESCO completed its acquisition of Conney Safety Products, a provider of MRO and safety products, headquartered in Madison, Wisc. The company has sales of approximately $85 million.

 The Conney acquisition raised a few eyebrows in the MRO industrial sector as WESCO expanded its reach in that area, rather than just electrical.

 Engel talked about the company’s acquisition strategy in a call with analysts following release of WESCO earnings for the second quarter in which sales rose about 10 percent.

“We had highlighted several years ago categories outside of core electrical, “Engel said according to a transcript provided by www.seekingalpha.com . “We had four different categories highlighted. Electrical was highlighted, but so was industrial and so was safety and so was one additional category, so it’s been in our sights and we think our business model extends horizontally to other product categories that we can sell to our existing customers to service their MRO, OEM and capital projects.”

The company makes it clear there is an opportunity for distributors to grow substantially in the highly-fragmented MRO market. It also sees tremendous growth for selling its existing core products to new customers from its acquired companies.

WESCO also emphasized that it is far from finished when it comes to acquisitions.

“We have the capacity and financial flexibility to continue to fund our strategy of above-market organic growth plus accretive acquisitions. Our acquisition pipeline remains robust and we see excellent opportunities to further expand and strengthen our portfolio, “Engel said.

“In summary, as we reach the midyear point of 2012, we’re operating with a stronger and more diverse business—stronger and more diverse in terms of customers in end markets, products and suppliers and geographies. Our long-term outlook remains unchanged. We expect the economy to continue to recover slowly over the next several years. We expect the industrial and utility end markets to continue to grow this year and construction to continue its move through a bottoming process in the second half and well into next year. ”

He later added : “Our pipeline’s in terrific shape…with the shape of our capital structure and balance sheet entering a third quarter, we’re extraordinarily well positioned to continue to work the acquisition opportunities.”

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

Tagged with

Comment on the story

Your email address will not be published.