Behind the Deal: Why Did Rexel Acquire Mayer Electric — and Why Did Mayer Sell?

• The acquisition is sure to shift MDM’s Top Electrical, Data & Security Distributors list for 2022 — Rexel was No. 5 and Mayer was No. 12 in the 2021 rankings.
• Rexel’s addition of Mayer gives the electrical distribution giant a strong presence in the Southeast U.S., where it had some gaps in coverage.
• Mayer’s decision to sell seems odd, according to analysts, given the company’s history of being proudly family-owned.

Last week, French publicly traded electrical distribution giant Rexel announced it was acquiring family-owned, Birmingham, Alabama-based Mayer Electric for $456 million.

The move clearly made sense for publicly traded Rexel (RXL: PA), which will add key markets in the Southeast and complement some of the holes in its national map. But it also raised eyebrows across the category because many suspected that if family-owned Mayer ever sold, it would sell to another privately held distributor, rather than a public one. The union is also sure to shake up next year’s ranking of the Top Electrical, Data & Security Distributors.

In this installment of “Behind the Deal,” in which MDM takes a deep dive on a high-profile distribution transaction, we examine how the Rexel-Mayer deal will alter the Top Distributors ranking, outline the benefits for Rexel, and ask why a staunchly proud family business like Mayer sold to a public company.

The deal by the numbers

Rexel’s 2020 global revenues were €12.6 billion (US$14.6 billion). North America revenues for its Rexel USA/Rexel Canada division were $5.3 billion, placing it No. 5 on the 2021 Top Distributors list for the electrical channel.

With the addition of Mayer, ranked No. 12 with $1.1 billion in 2020 revenue on the latest list, the new-look Rexel should jump ahead in the rankings. And with Mayer being rolled up into Rexel’s portfolio, that leaves an opening at the tail end of the list.

The move follows a much bigger deal — one that also caused a more seismic shift among top distributors — that occurred last year in the electrical space. In 2020, WESCO International Inc. acquired Anixter International Inc. for $4.5 billion, which, at the time, united the second- and third-largest electrical distributors on MDM’s 2019 Top Electrical Distributors Market Leaders list.

Anixter ranked No. 2 in 2019 with $8.4 billion in annual revenue and WESCO ranked right behind it at No. 3 with $8.2 billion (Sonepar was then the top player in electrical with $10.6 billion). Once the ink was dry on that contract, WESCO rose to No. 1 on the list with $11 billion in annual revenue for 2020, surpassing Sonepar USA and its $10.8 billion in 2020 sales.

This deal doesn’t match the size and scope of WESCO-Anixter — its enterprise value is a tenth of what WESCO paid — but its impact will be felt across the channel, says John Gunderson, vice president at epaCUBE, a longtime electrical industry veteran and former MDM Analytics executive.

“This acquisition is a pretty big rock in the pond,” he says. “It will create some ripples.”

What’s in it for Rexel?

Like WESCO’s purchase of Anixter, Rexel’s addition of Mayer makes sense on a few fronts. Rexel said the acquisition will provide “several strategic benefits to both parties,” including:

• It will reinforce Rexel’s presence in the Southeast and Mid-Atlantic regions, with a specific focus on high-growth areas. Mayer’s physical footprint is very complementary to Rexel’s, and Mayer’s well-established reputation in the marketplace will benefit both companies.
• It will extend and reinforce Rexel’s relations with key suppliers.
• And Mayer will be able to leverage a series of tools developed by Rexel to accelerate its digital presence and sales, develop new services and enhance operational efficiency.

“The acquisition of Mayer will allow Rexel to expand its footprint in North America, the biggest market in the world for electric supplies and a key pillar of our strategy,” said Guillaume Texier, CEO of Rexel in a release. “The two companies’ strengths in the regions where Mayer operates are very complementary and should allow for a smooth integration. We are impressed by the quality and reputation of Mayer’s team and are looking forward to starting to work with them, under the leadership of Jeff Baker, CEO of Rexel USA.”

Texier added that the transaction is “fully in line with both the strategy and the financial objectives” that Rexel announced at its February Capital Markets Day.

It’s a good deal for Rexel, says David Gordon, president of Channel Marketing Group, a distribution strategy and marketing consulting firm helping distributors, manufacturers and representatives in the industrial and construction industries generate insights and ideas to drive growth.

“From the Rexel viewpoint, it’s a strong brand, it’s got the premier distribution equipment line across all of its branches with Schneider Electric, it’s contractor-oriented, and it’s in the South, which is a growth area and is business-friendly,” Gordon says. “Mayer is in a growth market, so if you’re Rexel, you want to be there. And they paid a price that worked for them.”

Gunderson adds that the acquisition is “more additive for Rexel, as the Mayer-Hite footprint fills in some holes that the Rexel-Gexpro locations may not cover well. The Mayer-Hite locations do not have a huge overlap with the Rexel and Gexpro locations that cover the Eastern U.S. In many Southern states, Mayer is a top dominant distributor in many of their location markets. In Florida, Rexel is a leading distributor in the state except for the panhandle, but Mayer is strong in the panhandle.”

(Rexel wasn’t able to comment by press time, but we should know more about the company’s plans for Mayer when we speak with Rexel USA CEO Jeff Baker at the end of this week. Look for that Q&A on mdm.com later this month.)

Mayer sold? And for how much?

Mayer wouldn’t comment on the deal beyond the company’s official statement. When MDM contacted Wes Smith, the distributor’s president and CEO, he told us the press release spoke for itself.

“We are honored and excited to join the Rexel Group, a forward-thinking, innovative leader in the electrical distribution industry,” Smith said in the release. “Maintaining the Mayer brand and culture, alongside and as a part of the Rexel brand and culture, will create strategic value for our customers, suppliers, communities and stakeholders. Our combined geographic footprint, offering best-in-class products, services, solutions and digital capabilities, will help our customers and suppliers grow and be successful.”

The move, however, was surprising on several fronts, according to longtime electrical professionals and analysts. For one, Mayer has been a proud, family-owned business since its founding in 1930 and routinely touted its conscientious succession planning processes. Selling to a public company after nearly 100 years caused some head-scratching.

“People were surprised that Mayer sold,” Gordon says. “One reason is that for the last few years, they’ve been vocal about telling people, ‘We’ve got our succession all planned out. We’re going to have multiple next generations running the business. We’re investing in technologies. We’re investing in services.’ And then they go and sell.”

The other sticking point for industry analysts like Gordon was the price. Mayer is a $1.1 billion company that sold for about 40% of annual revenue, which Gordon says seems low.

“We don’t know what their EBITDA is, but that means it was bought at a discount,” he says. “Why would you sell at a discount?”

Sign of more deals to come?

Like any mega-deal in distribution, Rexel’s acquisition of Mayer sparks questions about additional consolidation in the electrical channel and beyond. Gordon says that when discussing the news of the deal with a distributor, that executive told him, “Well, that’s a signal that I should sell.”

“There will be other potential sellers who look at this deal and say, ‘Maybe I’d like to sell, too,’” Gordon adds. “The challenge for some of them is, where do they fit with a strategic acquirer? If someone is in a major market and all the strategic acquirers are already there, who needs them? But there will be more deals in 2021.”

Gunderson agrees that this transaction is likely to fuel M&A, and even cause some shifts in the buying group landscape, of which Mayer is a major player.

“The biggest ripple in the pond that I see will be in the buying groups, as Mayer is one of the leading distributors in IMARK,” he says. “Does that partnership continue, and if it doesn’t, how does that affect distributors who are part of IMARK and Affiliated Distributors? It could cause more distributors to move between the groups or consider selling. To me, this move is like a Texas or Oklahoma moving to the SEC. It will probably cause more distributors to change conferences.”

We always welcome suggestions for “Behind the Deal,” MDM’ series that takes a deep dive into market-shifting moves in wholesale distribution. Email eric@mdm.com to be featured.