Mergers & Acquisitions – June Update

Mergers & Acquisitions – June Update

Posted 6/5/2020

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What a difference a few weeks make—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.

This update is brought to you by Pompeo Group and its strategic merger and acquisition partner Tounge Associates.

2020 has already proven to be a memorable year—not always in the ways we might like, certainly, but it has made itself stand out in a number of ways.  Uncertainty has been the word of the day and what has seemed to be driving the anxiety for many managers, principals and owners of lighting, electrical and controls’ manufacturers, distributors and design firms. Business owners now face an unpredictable economy and rapidly changing market conditions. Thankfully, there is also a continuation of projects in many sectors of our industry, so it is a little less impacted by the downturn others are experiencing.

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.

Some new factors for lighting, electrical and controls company owners, CEOs 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. 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 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 the 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. 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 their desired purchase.* and, late last month, the story some people thought they never would see—the sale of GE Lighting.  Savant Systems, Inc., a major player in the smart home environment purchased GE Lighting in order to position themselves as the premier smart home brand globally.*

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’d like to learn more about our firms, please visit our about us page and www.toungeassociates.com .

 

*Merger information courtesy of EdisonReport.

**Additional merger information courtesy of EdisonReport, Electrical Wholesaling, Architectural Lighting and Electrical Connections.

 

If you would like to arrange an initial confidential discussion to discuss these options, please complete the form below and we will be in touch as soon as possible.







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