Avnet purchases Marshall; Is an MRO blockbuster next?
By Industrial Distribution Staff -- Industrial Distribution, 8/1/1999
PHOENIX --The electronics distribution industry saw its largest merger ever last month when Avnet purchased Marshall Industries in a deal valued at about $830 million.Marshall Industries had sales of $1.7 billion last year. Avnet, one of the world's largest industrial distributors of electronic components and computer products, expected to have sales in excess of $6.3 billion in its fiscal year, which ended July 2.
The acquisition could have a significant impact on the industrial community. Marshall, for example, is a key member of the companies comprising OrderZone.com, W.W. Grainger's online shopping area. At press time, it was undetermined how the merger may affect that relationship.
More importantly, is the mega-deal a forerunner of what is to come in the industrial/MRO sector? While the industry has certainly seen its share of mergers lately, a mega-merger of Marshall-Avnet proportions may still be two or three years off, according to Adam Fein, principal at Pembroke Consulting, who tracks the consolidating distribution marketplace.
"I think it's a forerunner of the type of deals that will happen in a few years," said Fein. "If you look across distribution industries, industrial/ MRO is at a fairly early stage. The consolidation of electronic components distribution has been going on for 15 to 20 years, and this is kind of the end range now. I don't think the industrial MRO distribution will ever consolidate as much as electronics or pharmaceuticals, but I think within three years we'll see a blockbuster deal."
Just who will be the principals involved remains to be seen. However, it has been predicted that the lower 50 companies on our Top 100 list will all disappear over the next few years. Rumors have also circulated recently that Industrial Distribution Group or MSC Industrial could be swallowed up by a large manufacturer who is willing to get into distribution. Both of those firms have seen their stock fall recently, which also makes them attractive to suitors with deep pockets.
However, for the time being, Fein expects more of the smaller deals, which result in strong regional players. Down the road, if those regional players don't expand nationally, "they become very attractive acquisition targets for a good strategic buyer," said Fein.
As for the Avnet-Marshall deal, Avnet chairman Roy Vallee said: "This combination brings together two recognized leaders in the use of information technology and will allow Avnet to benefit from Marshall's outstanding leadership position in electronic business and electronic commerce. The resulting economies of scale provide a strategic differentiator for Avnet to meet the competitive challenges facing our industry well into the future."
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