The electronics distribution industry has been in consolidation mode for two decades, so it’s notable when an acquisition doesn’t turn into an operational merger. A year after being acquired by specialty distributor TTI Inc. parent Berkshire Hathaway, Sager Electronics reintroduced itself to the industry at the EDS trade show this week, reporting business carries on as usual.
There has been some back-end consolidation, Sager President Frank Flynn told an assembly of electronics component suppliers, but the customer-facing business has not changed. Sager, which has been in business more than 125 years, is retaining its specialty focus on interconnect, passive and electromechanical (IP&E) components and expanding into adjacent markets such as power.
Berkshire Hathaway and TTI have acquired competitors before that have remained independent businesses. Mouser Electronics, a catalog distributor that carries semiconductor lines, was not folded into TTI, which is an IP&E specialty distributor. There is a compelling financial argument for consolidation: overall distribution industry sales in 2012 were flat compared with the prior year, said Michael Knight, TTI senior vice president, Americas; and forecasts for 2013 aren’t overly optimistic. Knight cited estimates for the 2013 electronics market ranging from a year-over-year decline to slight growth.
TTI reported $1.56 billion in global sales in calendar 2012; Mouser, $615 million; and Sager, $217 million (in North America).
The pace of distributor mergers and acquisitions in the Americas and the EU has slowed in recent years, but consolidation is by no means over. Following a decade of mega-mergers—in which the industry’s top two distributors, Arrow Electronics Inc. and Avnet Inc. acquired most of their mid-sized competitors in North America and Europe – acquisitions have been deliberate, strategic and in some cases at arm’s length. Top-tier distributors are now turning their eye toward Asia-Pacific distributors as acquisition targets. Many component makers have said they would welcome consolidation in Asia-Pacific, where a large population of small, narrowly focused distributors is the norm.