[JACK KEOUGH] A Closer Look with
In glancing through this year’s Big 50 list, which was published in our last issue, there are a couple of major themes. The first is, of course, the economy and the effect of the horrible weather
earlier this year, which caused many distributors to scale back their
optimistic numbers for the year. The good news, however, is we
are seeing some glimmers of hope that projects that were put off
in the first quarter are now taking place.
Consolidation: The Big Picture
A continuing and growing theme is that we are also seeing many
of these larger distributors going beyond their traditional core
product base, targeting for acquisition small and mid-size distributors that carry complementary product lines. Many of these larger
distributors are looking to become a “one stop” supplier for their
This is far different from M&A activities years ago, when a cutting tool distributor, for example, would simply buy a competitor
that carried similar products or complementary product lines.
M&A activity, to no one’s surprise, is growing at a rapid rate.
Activity had slowed in recent years, but it has come back with a
flourish, surpassing the boom times for such activity. In fact, last
year there were some major deals including MSC buying Barnes
Distribution North America for $550 million.
With valuations at high levels, many distributors are looking to
sell. In fact, 25 percent of industrial distributors said they would
be agreeable to a buy-out, according to ID’s Annual Survey of
Distributor Operations. That is much higher than in previous years.
The survey also showed that a third of the responding distributors
are looking to make an acquisition.
When it comes to the Big 50 distributors, we see that many of
them are making acquisitions in order to take market share from
David Little, CEO of DXP Enterprises, clearly summed up what
Growth by Segment: Safety and More
many larger distributors are saying during a recent interview with
ID: “We either want smaller distributors to sign up, or we want
to take market share from them,” he said. “We are not targeting
other big players in the industry, but trying to grow incrementally
in a different way.”
Although many acquisitions have involved smaller distributors,
there was one major transaction concerning the Big 50 just a
few months ago when Sonepar announced it was acquiring the
Industrial Distribution Group (IDG), a company well-known for
its integrated supply expertise. Sonepar, a major global electrical
distributor, also acquired Hagemeyer North America several years
ago. It is further evidence that some specialized distributors in
other product areas have expanded into the MRO area.
Some of the Big 50 distributors seemingly have identified the safety area as a path for growth.
Wesco, for example, considered to be the largest electrical
distributor in the country, has greatly expanded into the MRO/
safety areas. Two years ago, Wesco bought Conney Safety, a move
that is already paying major dividends. In fact, the company has
added some 35 salespeople to Conney Safety since. And Wesco
made more inroads into the safety arena with its more recent
purchase of Hazmasters, one of the largest safety distributors in
Canada. Many even had speculated that Wesco could have been
the possible acquirer of IDG, an acquisition that would’ve been
a successful extension of its integrated supply management
Wesco has indicated in recent meetings with analysts that it
will continue to look for acquisitions in its core electrical business as well as possibly acquiring more MRO/safety
Grainger has acquired several companies in the past few years,
including the purchase last December of Safety Solutions Inc., a
Dublin, OH-based distributor of safety footwear, supplies, and
services with a strong focus on the manufacturing sector. In 2012,
Safety Solutions Inc. had sales of $63 million.
The interest in adding safety products to existing lines has also
been a trend for some years.
Several years ago, Industrial Distribution asked readers to
identify the product lines they would be adding. Safety and
janitorial supplies finished as the top two product categories.
Another Look at the Big 50
When it comes to the Big 50 distributors, we see
that many of them are making acquisitions in
order to take market share from smaller