- The economic downturn: Wake me up when it's over
Many executives in the electrical market will remember 2011 as a year when market conditions didn't improve as quickly as hoped. While it's tough to argue this unfortunate fact of life, many distributors and manufacturers placed major bets on future growth by acquisitions or expansion into new markets. As you will see later on in this article, energy-efficient lighting controls, LEDs, electric vehicles, the smart grid and tablet computers attracted much of the investment. Despite all the frustrations over the sluggish recovery, electrical distributors who responded to Electrical Wholesaling's annual Market Planning Guide survey forecast an 8% increase for 2011 and a 5% increase for 2012. Those are two big steps in the right direction.
- The return of distributor acquisitions
Early in the year, Electrical Wholesaling's editors kept hearing rumblings about how the market environment was ripe for a new surge in acquisitions and how business owners who missed out on selling their distributorships during 2006-2007 when they could have maximized the value of their businesses didn't want to miss out on another selling opportunity. The rumors turned out to be accurate. With capital more accessible from financial institutions in 2011, acquirers with loaded wallets were ready to spend for the right companies. With its purchases of Independent Electric Supply, San Carlos, Calif., and One Source Distributors Inc., Oceanside, Calif., Sonepar stole the show with two big-name acquisitions in California that added more than $700 million in sales (2010 sales data) and 30-plus branches in the nation's largest electrical market. The company also bought Toronto-based SESCO.
WESCO Distribution Inc., Pittsburgh, continued its acquisition strategy of focusing on companies with tightly focused market niches. It purchased RECO, Cincinnati, an automation specialist with annual sales of $25 million that markets a broad basket of Siemens automation and industrial products, and Brews Supply, Calgary, Alberta, an industrial distributor that focuses on western Canada's petrochemical business. Two other electrical distributors ventured outside the boundaries of the electrical market to bolster their industrial businesses. Before being acquired by Sonepar, OneSource acquired D&D Tool and Supply, Vista, Calif., and Steiner Electric Co., Elk Grove Village, Ill., acquired two Illinois industrial distributors — Inland Cutting Products and Industrial Sling Co., both of Countryside, Ill.
Other 2011 acquisitions of note include the purchases by Elliott Electric Supply, Nacogdoches, Texas, of Key Electrical Supply, Houston (formerly owned by electrical contractor Integrated Electrical Services) and two of Treadway Electric Co.'s Arkansas branches; the move by Columbia, S.C.-based Shealy Electrical Wholesalers into the Charlotte metropolitan market with its acquisition of Electrical Distributors Inc., Charlotte, N.C.; and the purchase of another energy service company (ESCO) by Horizon Solutions, Holyoke, Mass., with its acquisition of Tekinor Energy Solutions, Fall River, Mass. And in another acquisition by a Top 200 distributor, Alameda Electrical Distributors, Hayward, Calif., expanded into central California with its purchase of Central Wholesale Electrical Inc., Livermore, Calif. A complete list of distributor mergers and acquisitions is on page 23.
- The merger of Activant and Epicor stuns distribution ERP world
IT folks are still sorting through the implications of the $2 billion merger orchestrated by private equity firm Apax Partners, New York, of Activant Solutions, the largest provider of ERP systems in the electrical vertical with Epicor Software Corp., Irvine, Calif., which had previously had relatively little name recognition in the electrical market. The Livermore, Calif.-based Activant is a best known for its Eclipse, Prophet 21, Trade Service and Prelude ERP systems, the data and services it provides to IDEA, Arlington, Va., and its Vista Information Services data unit, while Epicor offers broad market experience as a provider of ERP software for distributors and manufacturers in a diverse array of retail, industrial and consumer markets. Pervez Qureshi, formerly Activant's CEO, was appointed CEO of the Epicor Software Corp., after the merger.
Meanwhile, Epicor, Infor, SAP and other distribution software vendors are moving fast to offer CloMoSo (cloud, mobile and social) offerings. One cloud-based offering that hit the market this year was Epicor Express, which provides distributors with support, service, software updates and training on a subscription basis. In other news in the distribution software arena, Infor and GGC Software Holdings, Inc., an affiliate of Golden Gate Capital, acquired Lawson Software and are now serving more than 75,000 customers in the distribution industry and other verticals such as manufacturing, health care, the public sector and hospitality.
- Acquisitions light up the green market
You may not like what you see in the performance of some LEDs or are tired of hearing about all the opportunities in lighting retrofits. But you can't dispute the fact lighting manufacturers are investing big bucks in LEDs and digital lighting control systems. This year's blockbuster deal was Cree Inc.'s purchase of Ruud Lighting, Racine, Wis., for approximately $525 million in cash and stock, which expanded the company's offering of indoor and outdoor lighting fixtures and dramatically increased its presence in the mainstream electrical market. Cree made a related announcement last month with the news that it broke ground on a $24.5 million, 208,000-square-foot expansion of Ruud's manufacturing facility in Wisconsin that it says will create 469 new full-time jobs over the next four years.
Acuity Brands, Conyers, Ga., continued its expansion into LEDs, lighting fixtures and digital lighting controls with its purchase of Horizon Lighting Control, Gainesville, Ga.; Sunoptics, Sacramento, Calif., a manufacturer of daylighting products; Healthcare Lighting Inc., Fairview, Pa., a manufacturer of spec-grade fixtures for the healthcare market; and lighting controls manufacturer Pathway Controls, Calgary, Alberta. These deals build on its 2010 purchases of LED manufacturer Renaissance Lighting, Herndon, Va. and several lighting control manufacturers.
Other 2011 lighting deals of note included the technology sharing agreement that Hubbell Lighting, Greenville, S.C., inked with Hella, a large German automotive products company; the announcement by Siemens that it was postponing plans to spin-off its Osram business unit including the Sylvania lighting brand; Osram's announcements that it was increasing its stake in lighting control manufacturer Encelium Technologies, Teaneck, N.J., and buying Siteco, a German lighting manufacturer; and Leviton Manufacturing Co.'s acquisition of Obvius Energy Information Solutions, Portland, Ore., a specialist in lighting and energy management.
- Mainstream electrical manufacturers moving to the smart grid
While you may not be selling digital utility meters or other products for the smart grid right now, be aware that some of the largest electrical manufacturers in the land are spending billions of dollars on what they see as a real game-changer in how electrical power will be distributed and consumed in the future. Industry giants like Schneider Electric, GE, Siemens, ABB and Eaton are all developing smart-grid solutions. Earlier this year, Schneider Electric acquired Telvent GIT SA, Madrid, Spain, for approximately $2 billion and GE Energy Services, Atlanta, acquired Remote Energy Monitoring Ltd., with operations in the United Kingdom and Australia.
- Electrical manufacturers build their portfolios across a broad spectrum of industries
In addition to the lighting and smart grid acquisitions already discussed, in 2011 electrical manufacturers acquired manufacturers of data centers, wire and cable, motors and other energy-related products. Schneider Electric acquired Lee Technologies. Fairfax, Va., a data center specialist; and Summit Energy, Louisville, Ky., a provider of energy management and sustainability services; Legrand got deeper into data centers with its acquisition of Electrorack Products Co., Anaheim, Calif.; and GE expanded its offering of products for data centers with its deal for Lineage Power, Plano, Texas, a maker of power conversion products.
In other news, Regal Beloit, Beloit, Wis., bought Ramu Inc., a small motor manufacturer headquartered in Blacksburg, Va.; Coleman Cable Inc., Waukegan, Ill., bought lighting manufacturer The Designer's Edge, Bellevue, Wash., finalized its purchase of Technology Research Corp., Clearwater, Fla., and acquired First Capitol Wire & Cable and Continental Wire & Cable, both based in York, Pa.; Cooper Industries, Houston, acquired Martek Power, Torrance, Calif., a manufacturer of power management products; and United Copper Industries, Denton, Texas, was acquired by KPS Capital Partners.
- Renewables and electric vehicles continue to attract industry interest
Despite the crash of the federally funded solar manufacturer Solyndra and the way questions about the future status of government tax incentives for investments in solar and wind have soured some companies on renewables, there was still plenty of action in this market. Burndy, Manchester, N.H., bought Wiley Electronics, a provider of grounding, bonding and cable management solutions for solar applications; ABB bought Epyon, a manufacturer of electric vehicle charging equipment; GE Energy invested in eSolar, a provider of tower-based solar thermal technology; Leviton Manufacturing Co. Inc., Melville, N.Y., rolled out EV charging stations; electrical distributors including Crescent Electric Supply Co., East Dubuque, Ill., and North Coast Electric, Seattle, installed EV charging stations at some branches; and Westinghouse Solar Inc., Campbell, Calif., expanded its sales channel to include electrical distributors. See this month's cover story on electric vehicle supply equipment on page 17.
It was also interesting to see how many distributors and manufacturers hired specialists in renewable or energy solutions during 2011. Werner Electric Supply, Neenah, Wis., hired Richard Henes as a solar specialist, and Eric Meter as product manager of clean energy products; Karmen Wihelm joined Van Meter Industrial, Cedar Rapids, Iowa, as director of energy services and solutions after managing energy efficient-programs for electric utility Alliant Energy; Rick Klingele was promoted to lighting/energy services manager at BJ Electric Supply, Madison, Wis.; Don Harrod was appointed energy management solutions-team leader for Springfield Electric Supply Co., Springfield, Ill.; and Scott Wilson joined Leviton as national sales manager-renewables.
- Distributors, manufacturers and reps start figuring out how to use tablets in their businesses
This year may go down as the beginning of the tablet era in the electrical world, as many electrical firms purchased iPads and other tablet computers for their salespeople and started installing them at their counter areas to promote manufacturers' products via videos and allow fingertip access to spec sheets and other product data. Many contractors are using them on job-sites, too. According to a recent article in Engineering News-Record magazine, some of the more progressive design firms store project plans and related documents on the cloud so all employees and subcontractors can work off the same set of plans in real-time. In the next month's issue, Electrical Wholesaling's readers will get some great insight into an intriguing tablet application for the electrical market developed by John Hoelz, president of J.F. Nolan & Associates, an independent manufacturers' rep based in New Berlin, Wis. Hoelz recently started up a new company, RepFiles, to market a new content management system designed to help salespeople use tablet computers to organize and maintain electrical manufacturers' product data files, spec sheets and videos so they will be on-hand at all sales calls.
- A relatively quiet year in copper
When you get used to wild swings in the copper market where prices more than double in a year — as they did in 2009 — a YTY change (through press-time) of -10% or a YTD change of approximately 20% don't seem so dramatic anymore. While even the smartest minds in the metals market say it's impossible to game copper prices over the long haul, with the economy on the mend, don't be surprised if copper starts climbing again.
- Who's who at the zoo
Some well-known industry veterans took on additional responsibilities at their companies, while others moved on to new executive posts at different companies. Industry veteran Neil Schrimsher left the electrical manufacturing world to use his years of experience at executive posts with Cooper Lighting, Siemens and GE as CEO of Applied Industrial Technologies, one of North America's industrial distributors; Dennis Sadlowski, formerly CEO of Siemens Energy & Automation, is now CEO of International Battery Inc., Allentown, Pa.; and Tracy Bilbrough, who had been president and CEO of Generation Brands and its stable of lighting brands, and was previously president of T&B's Commercial Division, became CEO of Switch Lighting, a LED manufacturer based in San Jose, Calif.
In some of 2011's biggest internal promotions at electrical manufacturers, Maryrose Sylvester was named president and CEO of GE Lighting, Nela Park, Ohio; Chuck Treadway was named president and CEO of Thomas & Betts Corp., Memphis; and Daryl Dulaney was appointed CEO of Siemens' newly formed Infrastructure and Cities Sector for North American and will continue to serve as president and CEO of Siemens Industry Inc. At Atkore International, Harvey, Ill., John Williamson is now president and CEO; Ed Kurasz was appointed president of the Pipe Tube and Conduit Division; Bob Pereira is now president of the Cable Division; Steve Elsdon is president of the North America Cable Management Systems Division; and Roger Vaught is V.P. for the company's conduit and fittings product lines.
There were also some notable changes at Ideal Industries Inc., Sycamore, Ill., where Nick Shkordoff moved from his post as president of Anderson Power Products, an Ideal subsidiary, to group V.P. and general manager of the company's core electrical division, replacing Glenn Hollister, who is now launching a new Ideal division aimed at the safety and health markets, and Jeff Kellerman was hired as V.P./general manager of the company's Tool Group.
In two other big personnel news, John Pappas, who had been a member of the management team at Coleman Cable Inc., Waukegan, Ill., for 27 years, was promoted to senior vice president-corporate marketing and Jim Kosciolek joined Ilsco, Cincinnati, as senior V.P., after serving as V.P. of sales at Mersen, Newburyport, Mass. And in a big move in the rep market, Charles Cohon, president, Prime Devices Corp., Morton Grove, Ill., became president of the Manufacturers Agents National Association (MANA), Aliso Viejo, Calif., after many years of service with the association.
There was no lack of personnel news in the distribution arena, either. At Rexel SA, Paris, Rudy Provoost, who led the lighting unit of Royal Philips Electronics NV (Philips Lighting in the U.S.) will succeed Jean-Charles Pauze in 2012, and Jack Johnston is now CEO at WinWholesale, Dayton, Ohio. In other executive appointments, Keith Steger was promoted to president of Eck Supply Co., Richmond, Va.; John Horgan is now president of Cape Electrical Supply, Cape Girardeau, Mo.; Mike Smith took on expanded responsibilities at OneSource Distributors, where he is now president and COO; Chris Sokoll, a 21-year veteran at Houston Wire & Cable, Houston, was appointed president of the company's Southern Wire subsidiary; Serge LeBlanc was appointed president of Lumen/Sonepar Canada in Montreal, succeeding Francois Anquetil; and Charles Collat Jr. was promoted to executive V.P. and COO at Mayer Electric Supply, Birmingham, Ala.
At Graybar Electric Co., St. Louis, Kathleen Mazzarella was promoted to the newly created position of executive V.P. and COO; Bob Lyons became senior V.P., following the retirement of Richard Offenbacher; Steven Horst is now V.P, service and administration; Scott Neubauer, who has been with the company for 25 years, is now V.P. of pricing; Bob Siegel is now V.P. of product management; Bill Mansfield was promoted to V.P. of industrial and commercial and Steve Stone took on additional responsibilities of V.P., electrical construction and comm/data.
We pay our respects to some well-known industry leaders who passed away during the past 12 months: Claude Brown, Westinghouse Electric Corp.'s Lamp Division; Edward Carroll, a 40-year wire industry veteran who spent time with Tappan Wire & Cable, General Cable and GE; Zach Gibler, Lighting Science Group, Satellite Beach, Fla.; Paul Gubany, Bussmann/Cooper Industries, St. Louis; Jim Newton, Oakes Electric Supply/Horizon Solutions, Holyoke, Mass.; Ab Potter, Gordon Electric Supply, Kankakee, Ill.; Clyde Rutland, Wholesale Electric Supply Co., Houston; Louis Sachs, Sachs Electric, St. Louis; and Richard Schiewetz, WinWholesale, Dayton, Ohio.
2011 Distributor Acquisitions in the Electrical Market
|Central Wholesale Electrical Inc., Livermore, Calif.||Alameda Electrical Distributors, Hayward, Calif.|
|Howe Electric Supply, Jacksonville, Ill.||Butler Supply Inc., Fenton, Mo.|
|TelTek Sales Inc., Philadelphia||Colonial Electric Supply Co., King of Prussia, Pa.|
|Cobra Wire & Cable, Hatboro, Pa.||EIS Inc. (Genuine Parts Co.), Atlanta|
|City Electric Supply, Iowa City, Iowa||Electrical Equipment & Engineering (3E), Windsor Heights, Iowa|
|Springdale and Fort Smith, Ark., branches, of Treadway Electric Co. Little Rock, Ark.||Elliott Electric Supply, Nacogdoches, Texas|
|Key Electrical Supply, Houston||Elliott Electric Supply, Nacogdoches, Texas|
|Tekinor Energy Solutions, Fall River, Mass.||Horizon Solutions, Holyoke, Mass.|
|Automation Technology Inc., Boise, Idaho||Minarik Corp./Kaman, Glendale, Calif.|
|Midstate Electric Supply, Berlin, Vt.||Needham Electric Supply (NESCO), Canton, Mass.|
|D&D Tool and Supply, Vista, Calif.||OneSource Distributors, Oceanside, Calif.|
|Electrical Distributors Inc., Charlotte, N.C.||Shealy Electrical Wholesalers, Columbia, S.C.|
|SESCO/QUESCO, Toronto, Ontario||Sonepar SA, Paris|
|OneSource Electrical Distributors, Oceanside, Calif.||Sonepar USA, Philadelphia|
|Independent Electric Supply (IES), San Carlos, Calif.||Sonepar USA, Philadelphia|
|Heintz Electric Co., Quincy, Ill.||Springfield Electric Supply Co., Springfield, Ill.|
|Inland Cutting Products, Countryside, Ill.||Steiner Electric Co., Elk Grove, Village, Ill.|
|Industrial Sling Co., Countryside, Ill.||Steiner Electric Co., Elk Grove, Village, Ill.|
|Fabory Group, Tilburg, Netherlands||W.W. Grainger Inc., Lake Forest, Ill.|
|RECO, Cincinnati||WESCO International Inc., Pittsburgh|