E-commerce firms emerge as suitors
Billion-dollar international players are making a name for themselves with US-based acquisitions
By John R. Johnson -- Industrial Distribution, 3/1/2000
The list of new players in the acquisition arena seems to grow by the day. After a slew of moves at the end of 1999, you can call retail and online giants Home Depot, Need2Buy.com Inc. and Amazon.com suitors of distribution firms, as well.On Dec. 13, Home Depot announced the purchase of Atlanta-based Apex Supply Co. Inc., a distributor of plumbing, HVAC and other products. The deal, which closed in January, gives H-D a professional presence in the marketplace, and analysts predict it could be a forerunner for entry into other industrial segments.
Founded in Atlanta in 1949, Apex Supply is one of the country's most respected wholesalers of plumbing, HVAC and other related professional products. It has 21 locations in Georgia, Tennessee and South Carolina.
And, Amazon.com was the talk of the annual convention of the Specialty Tools & Fasteners Distributors Assn. last November when it announced it was not only carrying home improvement items on its site, but was purchasing Tool Crib of the North. Amazon acquired the tools and equipment catalog company in an effort to help fulfill orders. Amazon did not purchase Tool Crib's five retail outlets.
Adam Fein, of Pembroke Consulting Group, says that's a trend the industry will see more of, especially as electronic retailers discover that the distribution sector -- industrial MRO, specifically -- is a complicated arena. Fein is one who predicts more clicks and bricks mergers.
An example is the Dec. 15 purchase of MDC Electronics by Need2Buy.com, an online marketplace for buyers and sellers of electronic components. According to management, the deal "positions Need2Buy as a total purchasing solution for OEM buyers by combining our transaction and market making capabilities with MDC's expertise in fulfillment and logistics," said Maury Friedman, CEO of Need2Buy.com. "This marriage of our online marketplace with a 'brick-and-mortar' distribution company is a powerful combination."
According to Fein: "A lot of e-business companies are aligning themselves with distributors in very tight relationships, and it's only a matter of time before some of them merge." He also notes that distributors provide e-tailers with a fulfillment opportunity, and that while e-commerce will accelerate consolidation, it might also enable the small independent to remain competitive.
"A number of alternative solutions -- everything from supplyforce.com to Eventory to mro.com -- are offering salvation or hope to independent distributors in the same way alliances did 15 years ago," says Fein. "E-commerce will accelerate the consolidation trend, but at the same time encourage independents to find new ways to thrive and benefit from e-commerce."
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