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"Those large companies have historically gone after the smaller players to grow incrementally," Gordon said in the latest MDM Executive Briefing (available at mdm.com/executivebriefing). "Now they're acquiring larger companies, from about $75 million to $400 million and taking big chunks out of the market."
For example, in August, Sonepar, No. 1 on MDM's list of top electrical distributors, announced it would buy Independent Electric Supply, No. 15 on that same list with sales of $370 million in 2010.
What's going to happen in the long term, according to Gordon, is that a lot of that mid-sized, family-owned business will just go away.
It's a trend that could be good and bad. Fewer mid-sized players translate to fewer choices for customers, but at the same time the new landscape could provide for some interesting opportunities for the remaining smaller players.
Smaller distributors in nearby geographic markets could create partnerships for dealing with manufacturers. Or they could create partnerships with distributors in adjacent sectors to provide more diverse options to their customers, allowing them to compete with the bigger companies who have also been diversifying.
"A lot of it is going to come down to who to partner up with," Gordon says.
Click on the video below to listen to Gordon's discussion of the impact of acquisitions on the distribution marketplace. This clip is an excerpt from the October Executive Briefing, featuring Gordon discussing The Changing Landscape of Distribution and 7 Minutes With Summit Electric Supply's President and CEO Victor Jury, available at mdm.com/executivebriefing.
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