M&A activity heated up in 2005

It was a year of consolidation and solid growth for the distribution industry

Jack Keough -- Industrial Distribution, 1/6/2006

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Mergers and acquisitions took center stage in 2005, as a series of blockbuster announcements were completed, bringing reminders of the booming M&A activity of the late 1980s and early 1990s.

Among the major players in merger activity were Ferguson Enterprises, Airgas, Activant Solutions, and Infor Global Solutions. Ferguson, a division of Wolseley plc, alone completed seven deals in late 2004 and throughout 2005. Airgas made several acquisitions in 2005, while software provider Activant Solutions completed a major purchase of Prophet 21, one of the most well-known software companies in the distribution business. Infor acquired several software companies. 

In January, we reported that distributor members of Industrial Network Inc. merged into NetPlus Alliance, bringing NetPlus membership to 190 companies in 42 states; Industrial products maker Eaton Corp. agreed to purchase the businesses of Winner Group Holdings Ltd., a China-based company that makes hydraulic fittings and adapters.

Airgas continued on its acquisition binge by purchasing A&R Welding Supply Inc., Watt Welding Supply of Oregon and DC Welding of California.

Economists also told us that 2005 would be a solid year for distribution business. That prognosis turned out to be mostly correct, although business was not as strong as many had predicted. 

In February, we noted that E.S. Dygert merged with R.T. Enterprises, creating one of the largest sealing and related custom product companies in North America. Stanley Works acquired ISR Solutions, and Parker Hannifin acquired Trilogy Systems. We also reported on the many companies that had given so generously to Tsunami relief efforts in Southern Asia and Africa. A big purchase took place in construction when White Cap Construction Supply acquired Greenwald Supply, Inc. and Greenwald Industrial Products, Inc. White Cap had previously been acquired by Home Depot.

Again, acquisitions highlighted stories in March. Activant Solutions acquired Montreal-based Speedware Corp., while Kennametal announced plans to acquire Extrude Hone Corp. Infor Global Solutions, a provider of enterprise resource planning and supply chain solutions, purchased MAPICS, a provider of ERP solutions. Infor earlier had acquired Mercia Software, a wholly-owned subsidiary of European software maker Finmatica.

In April, NAHAD-the Assn. for Hose and Accessories Distribution drew a record-setting attendance of 925 people in Miami, as more than 220 distributor companies attended. The Fluid Power Distributors Assn. also had a very successful meeting in California, under the theme of “Using Business Intelligence.” Brian Kundinger stepped down as FPDA president after serving two terms. We also reported on East Carolina University’s industrial distribution laboratory, which gives students hands-on experience and practical knowledge of a working distribution branch office.

In May, the Industrial Supply Assn. held its convention in Toronto. Attendance was down, and there were some logistical problems at the meeting, but ISA officials were confident that there would be a good turnout for its November meeting. ID also published a new white paper by the Bearing Specialists Assn. that focused on the problems facing U.S. manufacturers and offered tips for dealing with them. The white paper was enthusiastically received by the distribution marketplace. At the BSA meeting in May, James J. Fitzpatrick, Bearings Specialty Co., and John Nations, Bearings & Drives, two well-respected veterans in the bearings industry, received lifetime achievement awards.

Ferguson Enterprises topped ID’s list of the Big 50 distributors in North America in our June issue. Early in 2005, the company purchased Full Service Supply, the integrated supply division of Kennametal, as well as J.D. Daddario Supply, Mecko Supply Co. and R Supply Co. (late in 2004).  This was the first time ID used total world-wide sales in determining the largest distributors. We also reported that you can, indeed, teach an old dog new tricks. N.H. Bragg Co., a 150-year-old family-owned firm, launched a new e-commerce site. So N.H. Bragg, which started selling buggy whips and blacksmith supplies back in the 1850’s, now sells supplies over the Internet.

In July, ID reported on how a 100-year-old distributor, A. Louis Supply of Ashtabula, Ohio, has kept up with its competitors by being ahead technology-wise and stocking the right amount of its products for customers. We also described how to create a “win-win” agreement for distributors and manufacturers.

INDUSTRIAL DISTRIBUTION presented its 59th Annual Survey of Distributor Operations in August. The survey revealed that the Internet was not a threat to distributors, but that there were still a number of problems plaguing the distribution sector. Those problems included national contracts, health care costs and customers moving overseas. Nearly 800 distributors responded to the ID survey.

The study also showed that industrial distributors are continuing to look beyond traditional markets to build their businesses. The Home Depot acquired National Waterworks Holdings Inc., a distributor of products used to build, repair and maintain water and wastewater transmission systems. Safety Today, a safety supplies distributor in Groveport, Ohio, acquired Colonial Industrial Products South of Deerfield Beach, Fla., while Ozark Fluid Power of Little Rock, Ark., merged with fluid connectors distributor Fluid Air of Memphis, Tenn. Also in August,  Infor acquired Formation Systems, a provider of product lifecycle management solutions for process manufacturing companies.

The economy continued to strengthen. W.W. Grainger reported record sales for the second quarter, employment factory orders improved, according to the Institute for Supply Management, and machine tool orders continued to rise.

In September, Hurricane Katrina ripped through New Orleans and the Gulf Coast. Many industrial distributors were forced to shut down their business operations in the region as floodwaters ruined hundreds of thousands of dollars in inventory. The rebuilding of the region has just begun. The hurricane forced the National Industrial Belting Assn. to move its convention from the Crescent City.

In a major deal that month, Ferguson purchased Endries International and Endries Inc., headquartered in Brillion, Wis. The purchase gave Ferguson expansion opportunities in the fastener and vendor-managed inventory business.

Activant Solutions, which had been on a buying binge, completed its purchase of Prophet 21. Prophet 21 itself had acquired several other software firms since 2003, including Faspac, Systems Design, Trade Service Systems, and Distributor Information Systems Corp. Earlier in 2005, it acquired Stanpak Systems, a software supplier to the paper, safety, cleaning, and packaging industries.

Barnes Group Inc. acquired the stock of Toolcom Supplies of Edinburgh, Scotland, a distributor of MRO supplies in the United Kingdom.

Also in September, Professor Jay Smith, director of the Industrial Distribution program at the University of Alabama at Birmingham retired. Smith is a well-known entity in the distribution business.

In October, we reported on Hughes Supply’s purchase of TVESCO, a Tennessee Valley-based distributor of electrical utility and electrical products, while WESCO International announced plans to acquire Carlton-Bates Co., a regional distributor of electrical and electronic components headquartered in Little Rock, Ark. Hughes Supply also received much publicity in 2005 due to reports that it may be purchased by The Home Depot.

The Power Transmission Distributors Assn. saw a strong turnout at its Industry Summit held in Las Vegas. A total of 831 members came to the event, a 23 percent increase over the 2004 meeting. Girard G. “Jerry” Etheridge Jr. was the recipient of the Warren Pike Award for lifetime achievement in the PT/motion control industry.

In November, we reported that Sonepar USA, a privately-held French electrical distributor, had bought the Stuart C. Irby Co., one of the nation’s largest and oldest electrical distributorships. With the purchase, Sonepar became the fifth largest electrical distributor in the United States. Also, Applied Industrial Technologies acquired Spencer Industries, a regional fluid power distributor headquartered in Kent, Wash. Spencer will operate as a subsidiary of Applied under the name Spencer Fluid Power Inc.

In another big move, ORS Nasco was acquired by Brazos Private Equity Partners. Also in November, Lawson Products announced plans to purchase Rutland Tool & Supply Co., a distributor of industrial products in California, Arizona, Texas, and Georgia.

The Industrial Supply Assn. held its last “weekend before Thanksgiving” convention at the Hyatt Regency O’Hare, just outside of Chicago. Attendance was down 10 percent compared to 2004, but was ahead of the May convention figures. ISA will move to a single-convention format this year.

Also in November, we reported that the NorthAmerican Industrial Representatives Assn. voted to discontinue operations and forge a relationship with the Industrial Supply Assn.

The Specialty Tools and Fasteners Distributors Assn. held it largest-ever convention, with more than 4,800 people turning out for its 29th Annual Convention and Trade Show Nov. 6-8 in Baltimore. Former Secretary of State Colin Powell was the keynote speaker and drew rave reviews.

Our December news noted that the Danaher Corp. announced plans to purchase Visual Networks, a maker of network testing equipment; Werner Electric Supply acquired Best Electric Supply of Milwaukee, expanding the firm’s territory to include virtually all of Southeastern Wisconsin; and Motion Industries completed its acquisition of Voorhies Supply Co., a Louisiana distributor of industrial parts and supplies. The Hite Co. announced plans to buy six Hagemeyer electrical distribution sites.

The year 2005 was a celebratory year for some companies. The L.S. Starrett Co. celebrated its 125th anniversary, and the David Queller Co. recorded its 100th year in business, as did A. Louis Supply. 

The industrial distribution sector lost some well-respected distribution leaders in  2005.  Sidney Jacobsen, founder of MSC Industrial Direct, passed away in June. Mr. Jacobsen, 87, founded MSC in 1941 originally as Sid Tool Co., helping it grow into one of the largest distributors in the country. Sebastian Circo, founder of Precision Industries, died Sept. 27th. Circo founded Precision in 1945 as Precision Bearing Service. And Maria A. Kirchner, CEO of Monumental Supply Co. in Baltimore, a distributor of pipe, valves and fittings, died March 8 after a brief illness.

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