The IP&E distribution market may be consolidating, but customers will be able to get a wider array of products and services from fewer distributors if history bears out.
Sager Electronics, which itself was acquired by TTI Inc. almost two years ago, closed its acquisition of PowerGate LLC on June 30. PowerGate is a specialist in power and related products, and Sager has been a longtime specialist in IP&E.
With the completion of this acquisition, Sager Electronics has added nineteen additional sales professionals assisting customers in the selection and design of power products. Sager will continue to make additional investments in power specialists in other key markets in North America as well as in inventory and operations to accelerate growth. Earlier in the year Sager communicated the expansion of its line card and field application engineering team in pursuit of its power strategy. 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.
Just after Sager announced its intention to buy PowerGate, TTI said it would buy Astrex Electronics, another IP&E specialist. Astrex 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 Mike Morton, Senior Vice President and President TTI Global Sales and Marketing. “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.
During the distribution industry’s M&A heyday of the 1990s, dozens of North American distributors were acquired by their peers. The largest consolidators of the market were Arrow Electronics Inc. and Avnet Inc., which are now global distributors that each post in excess of $20 billion in revenue. One of the effects of this M&A was the mingling of product lines that traditionally had not shared shelf with one another for competitive reasons. Ultimately, customers benefited from this trend by gaining the ability to buy multiple product lines through one distributor. At the same time, buyers that wanted to spread their risk – not buy all their products through one distributor—had fewer alternatives. Nevertheless, OEMs and EMS providers still have a variety of specialty distributors and broadlines to choose from.
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,” said Morton. “Astrex is the largest distributor for Smiths Connectors. With most any acquisition there is some conflict, but in this case was very minimal.”
Another effect of the 1990s M&A was the expansion of services within the acquiring distributors. Arrow and Avnet both acquired segments of VEBA, a collection of semiconductor specialty companies. The VEBA companies focused on a limited number of high-value, high-tech semiconductor lines. This ability has become essential as distributors have increased their focus on the engineering community.
With Astrex, TTI achieves both geographic and strategic expansion, according to Morton. “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.
“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 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.
“As you know TTI was originally built around the mil/aero business and it remains a significant percentage of our business today,” added 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.
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 siblings 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.”