- The acquisition will certainly change MDM’s list of top power, data and security distributors for 2022 – Rexel was # 5 and Mayer was # 12 in the 2021 rankings.
- The arrival of Mayer by Rexel gives the electrical distribution giant a strong presence in the southeastern United States, where it had gaps in coverage.
- Mayer’s decision to sell seems odd, analysts say, given the history of the company that is proudly owned by the family.
Last week, French publicly traded electrical distribution giant Rexel announced the acquisition of Mayer Electric, a family-owned company based in Birmingham, Alabama, for $ 456 million.
The move made clear sense for listed Rexel (RXL: PA), which will add key markets in the Southeast and fill in some of the holes in its national map. But it also raised eyebrows in the entire category, as many suspected that if the family-owned Mayer ever sold, it would sell it to another private distributor rather than a public distributor. The union is also sure to shake up next year’s ranking of the best distributors of electricity, data and security.
In this episode of “Behind the Deal”, in which MDM takes a look at a large-scale distribution transaction, we examine how the Rexel-Mayer deal will change the ranking of top distributors, describe the benefits for Rexel and ask why a very proud family business like Mayer sold to a public company.
The case in figures
Rexel’s worldwide revenue in 2020 was 12.6 billion euros ($ 14.6 billion). The North American sales of its Rexel USA / Rexel Canada division amounted to $ 5.3 billion, which places it 5th among the 2021 Top Distributors for the electrical chain.
With the addition of Mayer, ranked No.12 with $ 1.1 billion in 2020 revenue on the latest list, Rexel’s new look is set to take a lead in the rankings. And with Mayer integrated into Rexel’s portfolio, that leaves an opening at the end of the list.
The move follows a much bigger deal – which also sparked a bigger shift among major distributors – that happened last year in the electricity business. In 2020, WESCO International Inc. acquired Anixter International Inc. for $ 4.5 billion, which at the time brought together the second and third largest electricity distributors on the 2019 list of best electricity distributors. from MDM.
Anixter ranked No.2 in 2019 with $ 8.4 billion in annual revenue and WESCO ranked just behind him at No.3 with $ 8.2 billion (Sonepar was then the leading player in the electricity with 10.6 billion dollars). After the ink dries on that contract, WESCO rose to number one on the list with $ 11 billion in annual revenue for 2020, surpassing Sonepar USA and its $ 10.8 billion in sales in 2020.
This deal does not match the size and scope of WESCO-Anixter – its enterprise value is a tenth of what WESCO paid for – but its impact will be felt across the Channel, said John Gunderson, vice-president. president of epaCUBE, a longtime veteran of the electrical industry. and former MDM Analytics executive.
“This acquisition is a big rock in the pond,” he says. “It will create ripples.”
What is there for Rexel?
Like WESCO’s purchase of Anixter, Rexel’s addition of Mayer makes sense on several fronts. Rexel said the acquisition will bring “several strategic benefits to both parties,” including:
- It will strengthen Rexel’s presence in the South-East and Mid-Atlantic regions, with a particular focus on high-growth areas. Mayer’s physical footprint is highly complementary to that of Rexel, and Mayer’s well-established reputation in the market will benefit both companies.
- It will extend and strengthen Rexel’s relationships with its key suppliers.
- And Mayer will be able to rely on a series of tools developed by Rexel to accelerate its digital presence and sales, develop new services and improve operational efficiency.
“The acquisition of Mayer will allow Rexel to expand its presence in North America, the world’s largest market for power supply and a key pillar of our strategy,” said Guillaume Texier, CEO of Rexel in a communicated. “The strengths of the two companies in the regions where Mayer operates are very complementary and should allow harmonious integration. We are impressed with the quality and reputation of the Mayer team and look forward to starting working with them, under the leadership of Jeff Baker, CEO of Rexel USA.
Texier added that the transaction is “fully in line with both the strategy and the financial objectives” announced by Rexel during its February Capital Markets Day.
It’s a good deal for Rexel, says David Gordon, president of Channel Marketing Group, a distribution strategy and marketing consultancy that helps distributors, manufacturers and representatives of the industrial and construction sectors to generate knowledge and ideas to stimulate growth.
“From Rexel’s point of view, it is a strong brand, it is the first range of distribution equipment in all its branches with Schneider Electric, it is entrepreneur-oriented, and it is in the South, which is an area of growth and favorable to businesses. Gordon said. “Mayer is in a growing market, so if you’re Rexel, you want to be there. And they paid a price that worked for them.
Gunderson adds that the acquisition is “more additive for Rexel, because the Mayer-Hite footprint fills some gaps that the Rexel-Gexpro sites may not cover well. The Mayer-Hite sites do not overlap greatly with the Rexel and Gexpro sites which cover the eastern United States. In many southern states, Mayer is a dominant distributor in many of their localization markets. In Florida, Rexel is one of the state’s major distributors with the exception of the handshake, but Mayer is strong at the handshake. “
(Rexel was unable to comment at press time, but we should find out more about the company’s plans for Mayer when we speak with Rexel USA CEO Jeff Baker at the end of this week. this Q&A on mdm.com later this month.)
Mayer sold? And for how much?
Mayer would not comment on the deal beyond the official statement from the company. When MDM reached out to Wes Smith, the president and CEO of the distributor, he told us the press release spoke for itself.
“We are honored and delighted to join the Rexel Group, a forward-thinking and innovative leader in the electrical distribution industry,” Smith said in the statement. “Maintaining the Mayer brand and culture, alongside and as part of the Rexel brand and culture, will create strategic value for our customers, suppliers, communities and stakeholders. Our combined geographic footprint, delivering the best digital products, services, solutions and capabilities, will help our customers and suppliers grow and succeed. “
The move was surprising in several ways, however, according to longtime professionals and electrical analysts. On the one hand, Mayer has been a proud family business since its founding in 1930 and has consistently touted its conscientious succession planning processes. Selling to a public company after almost 100 years has caused some scratches.
“People were surprised Mayer sold,” says Gordon. “One of the reasons is that over the last few years they’ve been telling people, ‘We have planned our succession. We will have several next generations at the helm of the company. We invest in technology. We invest in services. And then they will sell.
The other sticking point for industry analysts like Gordon was price. Mayer is a $ 1.1 billion company that has sold about 40% of its annual revenue, which Gordon says looks small.
“We don’t know what their EBITDA is, but that means it was bought at a discount,” he says. “Why would you want to sell at a discount? “
Sign of other offers to come?
Like any mega-distribution agreement, the acquisition of Mayer by Rexel raises questions about further consolidation in the electrical circuit and beyond. Gordon says when discussing the news of the deal with a distributor, this executive told him, “Well, this is a signal I should sell. “
“There will be other potential sellers who will look at this deal and say, ‘Maybe I would like to sell too,’ Gordon adds. “The challenge for some of them is where do they stand with a strategic acquirer? If someone is in a big market and all the strategic acquirers are already there, who needs them? But there will be more offers in 2021.
Gunderson agrees that this transaction has the potential to fuel mergers and acquisitions, and even trigger changes in the buying group landscape, of which Mayer is a major player.
“The biggest ripple in the pond that I see will be in the buying groups, because Mayer is a major distributor of IMARK,” he says. “Does this partnership continue, and if not, how does it affect the Distributors who are part of IMARK and the Affiliate Distributors? This could cause more distributors to move between groups or consider selling. To me, this move is like a move from Texas or Oklahoma to the SEC. This will likely cause more distributors to switch conferences.
We always welcome suggestions for “Behind the Deal”, the MDM series that delves deeply into market changes in wholesale distribution. E-mail [email protected] to be present.
