MDM reported on a dozen announced acquisitions in the past month, and October was active, as well. It's interesting how diverse the deals are across sectors and size. Some companies are shedding units to focus on the core; some are buying market share, and others are extending product and service capabilities. Many companies are trying to get deals done before year-end. Credit markets are indeed improving, people are adjusting to a long-term/low-growth scenario, and larger companies have a lot of cash to do some pre-holiday shopping.
In manufacturing, there were a few international deals, with Midwest-based U.S. companies acquired by European companies. SKF agreed to buy U.S. manufacturer Lincoln Industrial, and ABB will buy motor manufacturer Baldor Electric Company. In both cases it means an expansion of not only geography, but also into complementary product areas. Belden agreed to buy the communications products business from Thomas & Betts, a logical transfer. On the distributor side, WESCO is buying TVC Communications, a broadband products distributor.
MSC Industrial is buying Rutland Tool from Lawson Products for $11 million in cash. Rutland fell on hard times after it was acquired by Airgas in 1996, when Rutland reported $65 million in revenues. Airgas took about a $60-million hit on Rutland when it sold it in 2005 to Lawson. My take: Rutland finally found a nest with a bird of the same species.
Parker Hannifin acquired Gulf Coast Seal, a hybrid manufacturer-distributor into offshore oil and gas operations. MDM's proprietary Value Warning System blasts a red alert whenever a manufacturer buys distribution, as 99.9 percent of historical record indicates the same reaction occurs as when you combine matter and anti-matter (you can assign which is which based on your industry affiliation). Often deals like this have been about taking a niche market segment direct, with customers often losing service value. But there is a product line extension opportunity here, as well. This is the New Normal so I am keeping an open mind. It will be interesting to see how Parker manages other franchised distribution transitions.
Some of these deals add strong service components, one of the clearest emerging trends in terms of how distributors, after getting smoked the past few years, are rising from the ashes and redefining how they differentiate and compete in 2011 and beyond. I expect we'll see some innovative add-ons. After spending the past few years fishing or golfing, the M&A guys may not have a lot of free time for the holidays this year. I think they'll get over it.