Slow But Oh So Steady

Glacier-like, the electrical industry continues toward consolidation.

Once again, Graybar Electric Co., Inc., St. Louis, Mo., tops the list of the nation's largest electrical distributors, as identified by Electrical Wholesaling magazine. With $3.3 billion in sales in 1997, the distributorship outpaced its nearest rival in sales volume, WESCO Distribution, Inc., Pittsburgh, Pa., by over $700 million. This spread between the No. 1 and No. 2 distributors remains virtually the same as it was in 1996, in spite of WESCO's active acquisition stance in 1997.

Six companies with more than $1 billion in electrical product sales headed up the $67 billion electrical wholesaling industry in 1997; sales tallies fell off abruptly after that point, to the $600 million mark. By EW's estimates 43 electrical distributor companies did $100 million or more in sales in 1997. (Seven more than in 1996.) Overall, the entire list of the 250 tallied about $29.9 billion in sales in 1997, representing 44% of industry sales. Those statistics provide place markers for the industry and also bring into focus what was really going on in 1997:

Dramatic up-sizing. Big distributors have set about acquiring other big distributors. For a synopsis of 1997's big-on-big activity, check out the list at right of 16 distributors that disappeared off the "250 Biggest" after being acquired in 1997; all acquirers but one stand among the top 50 distributors in size. This activity shifted (consolidated) approximately $735 million, a bit over 1% of industry sales.

In the lead among 1997's active acquirers, WESCO bought up four companies from among the nation's largest distributors with combined sales of over $230 million. The other multi-firm acquirer in 1997 was Rexel, Inc., which bought up three "250"-size electrical distributors with combined sales of over $165 million.

But the news that makes one sit up and take note are the companies adding 25%, 37%, 47% and more to their sales in one dramatic acquisition move. Like Houston, Texas-based Warren Electric Group's acquisition of Watson Electric Supply Co., Dallas, Tex.; Muskegon, Mich.'s Fitzpatrick Electric Supply Co.'s buy-up of Langstadt Electric Supply Co., Appleton, Wis.; or Rumsey Electric Co. in Conshohocken, Pa., acquiring Tecot Electric Supply Co., New Castle, Del. This type of acquisition activity continues apace in 1998.

Slow consolidation. As we continue to reel from what often seems to be daily news releases announcing who bought whom, it's sometimes hard to grasp the big picture. On a closer look, the message becomes clear: While industry certainly has been moving toward consolidation, it is doing so slowly.

Overall, the entire list of the "250" with its total 1997 sales of about $29.9 billion accounts for 44% of industry sales. That appears to be an increase of 1% in market share for the group, which one could easily conclude came about due to all the acquisitions and label it "consolidation."

Three points to remember, however: 1. The 250 may have added as much as 1% to their market share in one year, in one of the heaviest acquisition years in the history of the list. At one percent per year, they still have a long slow way to go to consolidate the industry. 2. The 44% figure could easily drop once a final number for 1997 sales comes in. 3. While acquisition activity abounds, the electrical industry still remains populated by small firms doing 60%+ of the sales.

Increased specialization. On this year's list, fifty-one (or 20% of the companies) are specialists. Five of the companies among the top 25 are specialists. Several of the bigger ones formed up only in recent years: Anicom, Inc., a wire and cable specialist that pushed rapidly to $244 million by acquisition; Cummins Utility Supply, Fort Worth, Tex., spun off from Rexel in 1997 and joined the list this year at $144 million; and Communications Supply Corp., Stamford, Conn., a datacom wiring specialist, propelle d onto electrical industry scene by its acquisition of GNWC Wire, Cable and Network Products, Downers Grove, Ill.

A full list of the 250 largest distributors starts on page 28 of this issue.