The move is another instance of consolidation in the electronics industry; last year, the so called M&A frenzy saw some $160bn spent on acquisitions galore. NXP bought Freescale, Avago bought Broadcom, Intel bought Altera and so on. But that was a drop in the ocean; some $5.4trillion was spent on all acquisitions last year.
Where some of the deals appeared to reduce the choice of suppliers, the Dätwyler/Premier Farnell deal looks to be more complementary. Dätwyler is, predominantly, involved in engineering products, although it owns a couple of electronics distributors. Premier Farnell, while having a reasonable interest in the maintenance, repair and overhaul – MRO –sector, is better known for electronics distribution.
We know that more and more electronic engineers are spending more time on engineering design and vice versa. So it makes sense to offer them a ‘one stop shop’.
Dätwyler’s move is, however, unusual for the electronics distribution sector, where we have become accustomed to one big electronics distributor buying a smaller one and reducing choice significantly.
The markets served by the broadliners and high service companies used to be well delineated and had reasonable space between them. Today, those boundaries have blurred significantly and overlapped in some areas, making previously ‘safe’ companies look vulnerable.
Pasquale Pistorio, the legendary ex CEO of STMicroelectronics, had a saying which sums things up. He said there were companies who were ‘too big to be small and too small to be big’.
Quite a few companies meeting Pistorio’s definition operated in something of a distribution ‘no man’s land’ – the space between the broadliners and the ‘high service’ sector. Almost without exception, those companies have been picked off by one of the two big broadliners – who remembers Jermyn, ITT, Abacus, Macro, HB Electronics? Those left in the middle ground will face even tougher challenges.
One element that has been overlooked so far is Asia. Last year’s M&A frenzy saw a number of companies targeted by Chinese and Asian groups. Two of the top five electronics distis in the world – WPG and WT Microelectronics –have yet to target the west. So will we see further consolidation in the distribution sector? The answer, in all probability, is ‘yes’.
