EDGE Global Supply has purchased the majority of Chinese electrical distributor Beijing Willtech Co. Ltd. (Willtech). Willtech covers the Beijing, Tianjin and Shanxi markets and is an authorized distributor for Rockwell Automation. Yu Donghai, a founder of Willtech in 2006, will remain in his position as general manager and will be responsible for the continued growth of the business.
The deal puts EDGE in the unenviable position of being active in two countries making headlines recently for concerns about their fall from superstar growth a few years ago to struggling or underwhelming economies. Its two acquisitions in Brazil in 2014 closed a short time before news of corruption investigations involving oil giant Petrobras, construction companies and government officials combined with declining commodities prices and currency valuations to send that economy into a slump that’s still ongoing. China meanwhile has seen its stock markets rise and crash amid uncertainty about the actual level of economic growth in the world’s second-largest economy.
Being active in those markets is evidence that the 11 North American industrial electrical distributors that own EDGE are willing to play a longer game, said EDGE President Bob Eisenbrown in an interview with Electrical Marketing.
“It is a long-term view. These are not economies that are going away. They’re big markets,” Eisenbrown said. “These are two countries that were priorities from the beginning. We don’t use the term BRIC as much these days, but Brazil and China were the two with the highest priority. There are not that many markets where you can build up the substantial business size that you can there.”
China’s ongoing shift from its export-heavy manufacturing emphasis of the past toward a domestic consumer-driven economy is an important part of the area’s huge long-term potential, he said. “Because of their shift to a more consumer-driven economy, the industries that will become more developed lend themselves well toward needing more automation and more electrical infrastructure. We will have to weather this slowing period — it’s never going to be double-digit growth again, but that wasn’t sustainable anyway.”
Willtech’s activities are primarily focused on the industrial automation market, with very little involvement in the commercial market that plays to consumer demand, but commercial growth has a big trickle-down impact in terms of manufacturing, Eisenbrown said. Willtech serves markets including natural resources, mining, consumer products, automotive and tire manufacturing. The production processes in those industries are coming to resemble those in the West, he adds. “They need to drive productivity. The old days of just throwing a lot of people at a problem are not true today. They’re focused on becoming more efficient, so that should play well to our strengths there.”
The investment in Willtech is the first expansion for EDGE in Asia, and an entry to China will make it easier to begin expanding there. Eisenbrown has known Willtech since his days with Rockwell Automation’s global drives business and he has stayed in touch. Yu Donghai, one of a group of owners who sold the business to EDGE, retains an ownership interest in the business. Such an arrangement keeps the motivation strong.
Willtech holds contiguous Rockwell Automation area of primary responsibility (APR) authorizations for Beijing and Tianjin, two of the largest markets by GDP and population — the territory around Beijing has 20 million people— and the province of Shanxi is nearby. This geographic coverage will give EDGE a privileged seat to get a closer look at real manufacturing activity on the ground in some of China’s most active markets.
Having a solid base of existing operations will also make future acquisitions in the country simpler for EDGE, Eisenbrown said. “Things like due diligence can be a very lengthy process when you’re going into a new country where you don’t have operations. Once you’re in, you’re more familiar, you have legal and accounting firms you’ve worked with and that helps with future acquisitions.”
Eisenbrown declined to give any hints about where EDGE is inclined to expand next.
EDGE Global Supply is a Limited Liability Corp. developed and owned by a group of North America-based distributor members to build a network of distribution company partners outside of North America. Founding members of EDGE are French Gerleman Electric Co., Gerrie Electric Wholesale International Inc., Horizon Solutions LLC, Kendall Electric Inc., Kirby Risk Corp., McNaughton-McKay Electric Co., North Coast Electric Co., Revere Electric Supply Co., The Reynolds Co., Van Meter Industrial Inc. and Werner Electric Supply Co.
