The Top News Stories of 2008

Here are EM’s picks for the top news stories of 2008.

The credit crunch squeezes funding available for construction projects. Nowhere does Wall Street’s financial meltdown hit the electrical construction market more directly than in the financing of construction projects. It’s a pretty simple equation: No available credit for general contractors, building owners and developers equals no work on new construction projects for electrical contractors and other subcontractors — and no demand for electrical supplies.

Copper’s wildest ride takes pricing closer to more “normal” levels. Declining demand for copper sparked a crash from record heights topping $4.00 per pound down closer to $1.50, which is pretty darn near the high end of the 60 cents per pound to $1.20 per pound historical pricing range.

Acquisitions of ESCOs grab the headlines in the green market. A new twist to the green story in 2008 were the acquisitions of several energy-service companies (ESCOs). ESCOs service end users’ needs for more efficient buildings. Their interests include lighting retrofits but typically go far beyond the electrical world into energy-efficient heating and air conditioning (HVAC), insulation, windows and doors and on-site power generation. To expand its footprint in this lighting maintenance work, Sylvania Lighting Services, Danvers, acquired Amtech Lighting Services, one of the nation’s largest lighting maintenance companies, from ABM Industries, New York. With the addition of Amtech’s network of 26 branches, 64 satellite operations and fleet of 500 to 900 service vehicles, Sylvania Lighting Services said the acquisition makes it the nation’s “most comprehensive lighting service organization.”

In a smaller purchase, Servidyne Inc., Atlanta, acquired Atlantic Lighting and Supply Co., also of Atlanta, a lighting distributor that sells energy-efficient lighting products and solutions to property managers, building engineers, contractors, store planners, facility managers and architects in the commercial, industrial, multi-family and institutional markets. The 29-year-old company specializes in the design, sale, distribution and installation of energy-efficient lighting systems. Atlantic Lighting & Supply’s services include assistance in lighting design and retrofits, building energy audits and lighting maintenance.

Horizon Solutions LLC, Rochester, N.Y., also bought an ESCO with its purchase of Lighting Resource Management (LRM), Newburyport, Mass. LRM has completed more than 200 lighting upgrade projects for large corporations throughout the Northeast.

Fewer blockbuster distributor acquisitions in 2008. Acquisitive distributors may be finding it a little harder to get the cash they need to fund acquisitions, but there were still some mega-deals going down in 2008. In 2007, Electrical Marketing newsletter reported on close to 40 deals and the total value of the electrical sales changing hands in those transactions was at least $2.5 billion. It looks like 2008 will close out with about 20 deals with estimated electrical sales of $1 billion (see chart on page 5).

The Top 200 electrical distributors sold during 2008 included Beacon Electric Supply, San Diego; Electric Fixture and Supply Co., Omaha, Neb.; ESSCO Wholesale Electric, Chandler, Ariz,; Equity Utility Service Co., Marietta, Ga. Harris Electric Supply Co. Inc., Nashville, Tenn.; Maurice Electrical Supply, Washington, D.C.; World Class Wire & Cable, Waukesha, Wis., and the U.S. operations of Hagemeyer NA.

In addition to these largest acquisitions, specialty distributors appeared to be quite marketable. Along with acquiring one of the largest wire specialists in World Class Wire & Cable, Anixter International, Glenview, Ill., bought several fastener specialists. Facility Solution Group, Austin, Texas, which acquired OK Electric Supply, Perth Amboy, N.J., in 2006, added a lamp specialist to its growing portfolio of energy-oriented companies with its purchase of Denver’s Light Bulb Supply Co., and Sonepar added to its utility offering with Stuart C. Irby’s purchase of Equity Utility Service Co.

IDEA and Trade Service part ways. Somewhere deep within the electrical industry’s hard drives and servers there’s a whole lot of shaking going on. When IDEA Inc., Arlington, Va., and Trade Service Corp., San Diego, agreed to part ways in July, it left the Industry Data Warehouse (IDW) that IDEA built and maintains without an important source of data to populate a large number of its electrical product records of the entire electrical industry.The IDEA/Trade Service agreement to disagree puts two bands of devoted data enthusiasts in direct competition with each other. Led by Tony Dubreville and a veteran management team, Trade Service is glad to be done with the I2 ownership era and to be operating as a fully independent company that can sell its data services to anyone in the electrical market. At IDEA, a proven team of data veterans has survived some bruising political turf battles, new leader Bob Gaylord has rallied his troops and they are going all-out to fulfill IDEA’s vision of becoming the electrical industry’s central source for electrical product information

The housing market waits until next year (maybe). It’s going to take most of next year to sell all the available housing inventory sitting vacant on cul-de-sacs throughout the United States. Then, and only then, will homebuilders start swinging their hammers and help this market crawl out of the wreckage.

The rise and fall of gas prices prove just how closely tied the electrical market is to almighty oil. With gas prices well under $2 a gallon, it’s hard to believe that just a few short months ago, electrical distributors were adding fuel surcharges to deliveries. This crazy ride in gas prices sure drove home the point that the electrical market is an oil-based business. Manufacturers need to fuel their trucks to deliver products to distributors. Reps spend hours of windshield time traveling to the far reaches of their market areas to call on end users and visit with distributors’ far-flung branch networks. Electrical distributors have to gas up all those delivery vehicles. Electrical contractors are always on the move, too, traveling to job-sites and picking up all of those will-call orders.

U.S. manufacturers ink fewer big deals in 2008. While EM reported on fewer manufacturer mergers and acquisitions than usual during the past year, there were plenty of strategic purchases in the lighting market and VDV markets, and plenty of investment overseas by North American firms. By dollar volume, the purchase by South Korea’s LS Cable of Superior Essex, Atlanta, for approximately $900 million was probably this year’s largest acquisition. Another large deal was Eaton Corp.’s, purchase of the Moeller Group, Bonn, Germany, a transaction it initially announced in 2007.

Several manufacturers made strategic acquisitions to enhance their positions in the green market. GE Energy, Atlanta, acquired Kelman Ltd., Lisburn, Northern Island, a provider of monitoring and diagnostics technologies for transformers for smart-grid applications, and Schneider Electric announced plans to purchase Xantrex Technology, Vancouver, British Columbia, a manufacturer of inverters for the wind and solar markets. Cree Inc., Durham, N.C., expanded further into LED lighting fixtures with its purchase of LED Lighting Fixtures Inc., and inked a deal with Zumtobel to sell LED downlights in Europe. The companies’ first-year sales target is 50,000 units.

In other lighting news, GE said it’s exploring all options (including a sale) for its Consumer & Industrial operations, which includes its lighting and industrial businesses, and Paragon Lighting, Hudson, Wis., merged with Varon Lighting Group, Elmhurst, Ill. Hubbell Inc., Orange, Conn., bought Kurt Versen, a specification-grade lighting fixture manufacturer, for approximately $100 million, and in an unrelated move bought some of Unity Manufacturing’s assets but not the Unity name and trademark or its metal enclosure unit in Garland, Texas.

Leviton Manufacturing Co. Inc., Little Neck, N.Y., and Thomas & Betts Corp., Memphis, Tenn., were in the news on a variety of fronts in 2008. Leviton bought back the minority ownership stake T&B held in the company since 1994 and built its position in residential control networks with the purchase of ControlThink, Orem, Utah. T&B acquired Homac Manufacturing Co. for its expertise in the utility and substation markets and sold its PVC conduit and pipe business to Mitsubishi Corp., Tokyo, Japan.

In another larger acquisition, Cooper Industries, Houston, bought three companies for a total of $100 million: SurePower Industries Inc.; Omnex Control Systems and Roam Secure. SurePower manufactures DC electrical systems for the transportation industry; Omnex is a specialist in wireless applications and Roam Secure provides text alert and other information notification technology.