The electronics distribution industry will never again see the kind of merger and acquisition activity that took place in the 1990s. During that period, trade journals’ rankings of the Top 100 Distributors became the Top 50 and then the Top 25.
The driver, of course, was nationalization and then globalization. Distributors were filling in the regional gaps where they needed sales coverage and suppliers were encouraging distributors toward that goal. In addition to expanding the sales reach, whittling down the partner list – whether it was fewer distributors or fewer suppliers – also made sense. Economies of scale ruled the day and in those days economies were relatively easy to achieve. Consolidate a few offices, some inventory and personnel, you got economies of scale.
Today it’s not that easy: the supply chain has become so lean that there isn’t much consolidation to be found anymore. So much of M&A in the past decade has been strategic—filling in talent or service gaps.
TTI Inc., with its recent announcement it would acquire Astrex Electronics, achieves both geographic and strategic expansion, according to Mike Morton, president, TTI Americas. “For TTI, our acquisition strategy will continue to differ from that of some of our peers,” Morton said in an interview. “We will not seek an acquisition simply for revenue growth. Fortunately we are still able to meet our global growth objectives organically.”
TTI’s acquisition strategy can best be described as “hands-off:” TTI acquired Mouser Electronics and Sager Electronics in the U.S., but both companies still operate independently. Although certain back-end functions are common to the distributors, everything else – including management, line cards and sales – are separate. TTI’s Astrex announcement, in fact, followed closely on the heels of Sager’s news that it would acquire specialty distributor PowerGate LLC.
“For Sager the Astrex acquisition has no impact at all; but remember we also just announced the Sager acquisition of PowerGate as Sager begins to build a much stronger presence in power,” said Morton. “For Mouser, there are certain lines that Astrex represents that will likely make for good additions for Mouser also.” Suppliers have the option to authorize sibling distributors in such cases; for example, Mouser carries semiconductor lines that are not carried by IP&E specialist TTI.
Neither TTI nor Sager has been historically acquisitive; yet, as Morton points out, neither has been idle. “Most often TTI’s M&A activity is kept very low profile. The fact is this is TTI’s 12th acquisition of a distributor. Our interest in Astrex has been there for several years.” Other TTI acquisitions include Mateleco, Campbell-Collins, and Flight Spares in Europe; Net-Aye and Ray-Q in Israel; and NPCS Autotronics in Asia.
Astrex, a specialty distributor, will expand TTI’s military and aerospace offering, and also serves high-reliability markets such as medical. “As you know TTI was originally built around the mil/aero business and it remains a significant percentage of our business today,” said Morton. “Much like TTI, Astrex is a limited line specialist with very knowledgeable people a passion for servicing their customers, representing their suppliers, and maintaining some of the highest quality standards possible.” Astrex – through its acquisition of Tim-Co/Cal-RF – will bring to TTI low volume value-added capability of Hi-Rel, RF cable assembly and engineering resources. TTI brings to Astrex additional mil/aero connector lines and financial stability.
PowerGate will advance Sager’s position in the market as a power specialist, according to Frank Flynn, president of Sager Electronics, in a press release. “Sager Electronics will preserve and build upon PowerGate’s specialization by making significant investments in additional key markets and inventory in order to accelerate growth,” Flynn said.
Recent mergers haven’t spurred the kind of supplier fall-out the channel experienced in the 1990s when component makers refused to share shelf with competitors. There are still a few examples of that around, but they aren’t as dramatic as they used to be. Astrex and TTI share four product lines: Amphenol, Glenair, TE/Deutsch, and the Mil/Aero division of Delphi. “[Astex’s] largest line was Smiths Connectors (Hypertronics, Sabritec, and IDI) which was of great interest to us,” added Morton. “Astrex is the largest distributor for Smiths Connectors. With most any acquisition there is some conflict, but in this case was very minimal. “
TTI, Sager and Mouser are all part of the Berkshire Hathaway organization, which, like TTI, is known for not micro-managing its investments. TTI and its subsidiaries will continue to set their own acquisition agendas.
“Specific to TTI there is an acquisition strategy for each region,” said Morton. “In the Americas, where we have a strong market share, we look for companies with a niche of some kind; or for line card, customer base, or product portfolio expansion. In Europe, our acquisitions have allowed us to penetrate deeper into certain market segments; and in Asia our acquisitions have enabled geographic expansion and increased our customer base.
“It’s also of paramount importance that our acquisition strategy does not compromise our outstanding operational excellence in any way,” concluded Morton. “Our reputation is everything.”