Sonepar Buys Independent Electric Supply to Anchor Expansion Efforts in California

In one of its largest acquisitions in recent years, Sonepar USA, Philadelphia, has acquired Independent Electric Supply (IES), San Carlos, Calif. The deal gives Sonepar a solid footprint in California, one of the few major markets in the United States in which it did not have a major presence.

Founded in 1976 as a 10-employee distributorship to serve electrical contractors in the aerospace industry, Independent Electric Supply has 24 branches in the Northern California, the San Francisco Bay area, the Golden State’s Central Valley, Central Coast, Southern California, and in Tempe, Ariz. IES also operates two specialty division houses: Independent Power System (IPS) and Independent Utility Supply (IUS). The company will continue to operate under the leadership of Ron Snow, CEO, and Tom Massip, president.

Before this acquisition, Sonepar USA’s only locations in California were branches operated by its Essco Wholesale Electric Inc. division in Grand Terrace, Los Angeles and San Diego, and two branches operated by Hagemeyer North America in Concord and Torrance.

IES’ Tom Massip said in the press release announcing the acquisition, “It’s a great opportunity for our employees to become a part of a vigorous, growth-oriented organization. As is a characteristic of all acquisitions Sonepar has made over the years, we will continue to operate and market ourselves with our existing management team in place and will remain known in the markets we have served for 35-plus years as Independent Electric Supply.”

Dave Gabriel, CEO of Sonepar USA, said in that press release, “This strategic acquisition provides an opportunity for Sonepar USA to expand its presence through one of the strongest regional distributors in the California market. Independent Electric Supply is a company whose organization and employee base exemplifies Sonepar’s most critical characteristics of a customer-centric organization with strong local leadership and local brands.”

Electrical Wholesaling’s most recent Top 200 listing ranks Sonepar as the largest electrical distributor in North America, with $5.28 billion in 2010 sales and pegs Independent Electric Supply in the #18 spot with $373 million in 2010 sales. Independent Electric Supply had been one of the largest independent distributors in the Affiliated Distributors buying/marketing group, and has left A-D after the acquisition

Burke Burkhardt senior managing director, HT Capital Advisors, New York, said in an e-mail to Electrical Marketing that he and Eric Lomas, the firm’s president, initiated and orchestrated the acquisition. Burkhardt believes this acquisition may well be a “precursor to many other transactions over the next year or two,” as business conditions improve in the electrical market. While declining to comment on the specific valuation of the transaction, he said that his firm anticipates that valuations will continue to increase in the near future.

Burkhardt said most of the major national electrical distributors, as well as some large regionals, are back on the acquisition trail, and that his firm has also been approached by large industrial products distribution companies expressing interest in the electrical market. He said he has talked to most of the potential acquirers over the past couple of months, and they all are beginning to understand that they cannot succeed by making “low-ball” offers.

Based on discussions with many potential sellers, Burkhardt believes that a major factors driving merger/acquisition activity in the electrical wholesaling industry is owners’ desire to lock in the maximum 15 percent federal capital gains rate which could increase after December 31, 2012.