Electrical Industry – Mergers and Acquisition
Jim Taggart
In 2015, I believe that the electrical industry will again see a substantial number of mergers and acquisitions. Last year was a relatively quiet year for acquisition activity. Especially after the large scale consolidation we saw in 2012/13 — Eaton’s deal for Cooper, ABB’s purchase of Thomas & Betts, Wesco securing EECOL, and General Cable acquiring Alcan Cable, to name a few.
So why is this going to happen?
• New regulation and trade agreements are rapidly taking shape, making entrance to the global markets easier and more viable.
• Companies must re-balance/diversify their product and market portfolios.
• Companies must look for smart ways to use the cash they have been protecting for the past few years.
• Canada has historically low borrowing costs.
• European and Asian companies have found their base/home markets stagnant and look for expansion into faster growing regions.
• Concerning GDP growth, North American markets in the short term will outperform European markets.
• Since North American economies are looking relatively healthy and wages are rising in China, there is more of a push to manufacture closer to the large U.S. market.
• Lower oil and gas prices, which allow for cheaper energy/power costs, will further encourage the shift of manufacturing back to North America.
As a result of the above conditions, I believe that we are going to begin a new phase of market consolidation; the largest companies are going to continue to look at expansion through acquisition. Throughout the remainder of this year, our industry will continue to be influenced and shaken by mergers and acquisitions.
These phases of rapid industry consolidation have always been difficult on its participants – manufacturers’ representatives lose/gain long-time relationships, electrical distributors must adjust their supplier offerings, and manufacturers are driven to look for cost-saving synergies. Even Electro-Federation Canada (EFC) is affected; consolidation can cut into our membership dues collection.
However, in the longer term this consolidation makes the remaining participants larger and stronger with these industry benefits.
• ability to attract the needed talent and resources
• invest in the needed capital to develop new products
• better resourced to expand and compete in global markets
• add the necessary technical resources
• more adept at securing government funding
• more capable of investing and supporting the needed business infrastructure (ex: idea’s industry data warehouse)
• update equipment and machinery to ensure increased productivity
So if mergers and acquisitions are going to happen, what can you do to be prepared? One of the best ways to be prepared for change is to be well networked and informed of industry events. EFC can be your communication pipeline and chance to network and meet other members at our many events. It is best to get into the game and accept industry consolidation rather than ignore and embrace the status quo. EFC remains YOUR strong industry association!
Jim Taggart is President, Electro-Federation Canada.
