Mergers boom, margins slow
By Staff -- Industrial Distribution, 4/1/1998
Acquisitions continue to shake up the power transmission industry as profit margins lag for many distributors.Fifteen distributor members of the Power Transmission Distributors Assn. were acquired in the U.S. or Canada last year, the highest number ever, says PTDA executive vice president Mary Sue Lyon. Meanwhile, at least a half-dozen of the PTDA's manufacturer members were acquired last year.
The trend toward consolidation continues. Recent mergers include Applied Industrial Technologies' acquisition of Associated Bearings Co. of Kansas City, Mo. International Motion Control Inc. also made recent moves, acquiring Air-Dro Cylinders, Inc. of Decatur, Ala. plus SAS Fluid Power Inc. of Renton and Spokane, Wash., and Portland, Oreg.
Lyon expects more of the same throughout this year. "It's driven by the marketplace and customers. Large customers are demanding national contracts...more distributors need to be in all markets of the country." Companies targeted for acquisition run the gamut in size.
Herb Baxter, an Ohio area sales manager with IMO Industries Inc.'s Boston Gear Division, a manufacturer, suggests more consolidation will benefit end users if distributors and suppliers are able to offer a more complete, less expensive product package.
"You're now able to go into a customer and offer him a complete product package,'' he says. A customer may "go to one manufacturer and one distributor and be able to get one quality product line.''
As change abounds, PTDA members expect modest sales growth again this year, according to a recent members' survey. Only 52 percent of those distributors anticipate increased profits, however.
PTDA members also reported that 1997 sales met their expectations. "Anecdotally, the vast majority of my members said the year was strong,'' Lyon says.
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