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I’ve been following closely the news of the WESCO and Anixter combination, as I was a leader on the HD Supply Power Solutions team when it was sold to Anixter. As one of the “integration leaders,” part of my job was to bring the $2 billion-dollar electrical distributor into the Anixter organization. That was one of the bigger deals in recent memory in the electrical distribution channel, but it was nothing compared to the combination that occurred on June 22.
This new combination of MDM’s No. 2 and No. 3 largest electrical distributors makes WESCO the largest Electrical Distributor in North America, with combined 2019 sales of more than $17 billion.
Let’s break down the acquisition into three channels: Utility, electrical distribution and datacomm. Each has their own dynamics, manufacturers and reps, and operate differently in North America.
This channel in the U.S. is made up of 160+ investor-owned utilities, and 2,700+ electrical co-operatives and municipals. The Canadian market of actual buying customers is even smaller. As a market that has fewer than 4,000 end customers, this is a very exclusive channel. The manufacturers who serve this market often have a different sales team or manufacturer rep network to support it. At the distributor level, this is considered its own channel, where a utility team works just on utility, for example.
WESCO is now the largest utility channel electrical distributor in North America with more than $3 billion in utility sales in 2019. The next closest competitors in the channel, Irby (Sonepar) and Border States, are significantly smaller than the new WESCO. It will be interesting to see what WESCO does in terms of representation, potential combination of overlapping facilities, and how they manage the manufacturer relationship. It is evident they are an immediate market leader, with both companies demonstrating proven track records of success.
Electrical Distribution Channel
This channel in North America is the largest and most complex of the three channels. It serves end customers in government, electrical construction and manufacturing. Numerous national and local distributors serve this channel. Each market has its own dynamic, competitors and environment. Leveraging your size and scale nationally is extremely difficult, as each market is its own ecosystem. To make it more complex, there are distinct subchannels for industrial-focused versus construction-focused distributors.
The New WESCO will be the largest single entity in the North American electrical market. WESCO has a very strong national account, industrial and construction business. Anixter also participates in these markets and has similar business strengths. This channel has the most business and potential overlap.
Anixter has been one of the largest players in the datacomm market for the past 50 years. This channel has its own unique set of end customers, manufacturers and distributors. It is like the utility channel, as the number of distributors who are serious players in datacomm is limited. Anixter and WESCO will become the largest player in the space, followed by Graybar and some more regional distributors. Again, the new WESCO is the clear market leader with a proven track record of success here.
Editor’s note: John Gunderson was a distributor leader at HD Supply and was on the leadership transition team during the sale of the $2B HD Supply Power Solutions business to Anixter from 2014-2017. Join him and MDM’s editorial team for a special MDM Live webcast, happening Friday, 1-2 p.m. EDT, for an in-depth discussion of the acquisition and its larger implications for the distribution industry.