2020 M&A MAY UPDATE
This update is brought to you by Pompeo Group and its strategic merger and acquisition partner Tounge Associates.
What a difference a few weeks makes—from a booming economy to a world on ‘Pause’. Uncertainty has been the word of the day and what seemed to be driving the anxiety for many managers, principals and owners of lighting, electrical and controls’ manufacturers, distributors and design firms. Many business owners we all now face an unpredictable economy and rapidly changing market conditions. However, in the midst of the uncertainty and turmoil we hear many great stories of lighting manufacturers converting their lines to produce masks, plexiglass barriers, etc. in the national effort to fight the virus. Thankfully, there is also a continuation of projects in many sectors of our industry, so it is a little less impacted by the overall downturn others are experiencing but certainly not immune from the overall decline.
Channel Marketing Group and DISC CORP recently released the results of their third COVID-19 Electrical Market Sentiment Report. “With feedback from almost 500 electrical distributors, manufacturers and manufacturer representatives, it appears that the electrical market, nationally, shows signs of stabilizing.” From our standpoint Pompeo Group has seen continued activity with companies focusing on specification telling us that some projects (varying by geographical area) are in fact opening up again. While many lighting and electrical conglomerates (and/or public companies) have frozen in place, there are many other companies in our space who view this as a good time to make acquisitions, which in turn can be potentially a life-changing opportunity for owners of lighting design firms, electrical distributors and of course lighting, electrical and IoT manufacturers.
Originally, we planned to discuss succession planning and more specifically factors impacting the decision to sell but the current climate brings a whole new set of circumstances to that decision-making process. The recent demise of a highly respected lighting manufacturer highlights the need for business owners (especially those family companies without a solid succession plan) to be proactive in their consideration of acquisition opportunities instead of waiting for the market to determine their future for them. Some new factors for lighting, electrical and controls companies’ owners, CEO’s and Chairpersons to consider:
- Will this be another 2008 downturn…or worse?
- How will the global economy be affected?
- Will the dependence on Chinese manufacturing for components shift to other locations?
- Will USA based manufacturers now have an advantage?
- How long before we ramp back up to an acceptable level of commerce?
Business owners who weathered the 2008 recession and worked for years to rebuild are looking at the possibility of a repeat and wondering if they have the resources, and the stamina, to do it again. Given that many of those owners are 12 years older and closer to retirement age, we believe that this may produce a group of owners wishing to sell who might not have been thinking of it while the market was booming the past few years. If you find yourself in that camp, we would be happy to discuss options to plan an exit or just discuss and share best practices of how people are weathering the current climate.
To help business owners, Pompeo Group and Tounge Associates are pleased to continue the offer we made in the last update of a 20% discount from our regular valuation fee for 60 more days which can help facilitate both your internal business planning for 2020 and beyond, whether that decision is to sell in the near future or to simply establish a benchmark for growth to attain the value you desire to ultimately retire in comfort many years from now.
Together we’ll flatten the curve as we move through this. In the meantime, here is what we saw in merger and acquisition activity in the lighting, controls, electrical and IoT industry over the past 60-90 days:
In March, Ecosense acquired Soraa assets including the company name, several Soraa product lines as well as intellectual property. Legrand, the building products and services conglomerate in acquired Focal Point, confirming their intent to be a player in the commercial lighting arena. Eaton announced plans to sell its hydraulics business to Danfoss A/S, a Danish industrial company, for $3.3 billion in cash. Minnesota-based distributor Fastenal purchased assets of Apex Industrial Technologies. Apex has provided Fastenal with thousands of industrial vending machines, and the distributor is generally considered to be the leader in the use of this on-site sales tool at industrial and commercial locations. IES Holdings, Inc.[not to be confused with that IES, professional lighting association] announced they had acquired all of the equity interests in Aerial Lighting & Electric, Inc. (“Aerial”), a Connecticut-based electrical concern. IES Holdings also acquired Plant Power & Control Systems (PPC), an Alabama-based manufacturer and installer of custom engineered power distribution equipment. According to IES’ press release, PPCS, which had 2019 revenues of approximately $19 million, will become part of IES’s Infrastructure Solutions segment and continue to operate under the Plant Power & Control Systems name. And acquisitions over the past 60 days weren’t limited to just the manufacturing front–rep agencies also saw M&A activity during the past 60 days when SMTM and McCreary Sales, two of Encore Wire’s independent rep agencies, merged recently. And, in the most recent M&A news, there was an intriguing twist (courtesy of EdisonReport.com) in the continuing story of AMS’ acquisition of industry titan Osram. The Austrian sensor manufacturer, while awaiting regulatory approval to purchase the Munich-based manufacturer, is still trying to determine how to pay for the desired purchase.
Tounge Associates’ excellent source of M&A experience combined with Pompeo Group team’s nearly three decades of lighting and electrical industry recruitment experience will help firms—whether it is a manufacturer, wholesaler or design firm—to source the right buyer, the best merging partners or the most strategic acquisition targets. Both Tounge Associates and Pompeo Group understand the importance of confidentiality and base our reputations on extreme sensitivity to this matter. As a result, much of our work comes through recommendations from satisfied clients.
If you would like to arrange an initial confidential discussion to discuss these options, please contact us as indicated below. If you’d like to learn more about our firms, please visit our about us page and www.toungeassociates.com .
**Merger information courtesy of EdisonReport, Electrical Wholesaling, Architectural Lighting and Electrical Connections.
LIGHTOVATION, THE DALLAS INTERNATIONAL LIGHTING SHOW 2021
Jan. 07-10, 2021
Dallas Market Center
“The Pompeo Group helped me win my position as Senior Vice President. I was represented well, and the communication was outstanding. I always knew where I stood and what options were available. Paul and his team are the consummate professionals---capable, confident, and most important---discreet. Pompeo Group is my go-to for talent in lighting.”Kevin Grayson
Michael Colligan – Host “Get a Grip on Lighting Podcast”
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