ABB now “Walking in Memphis” with Thomas & Betts, after singing “Georgia on My Mind” with its 2010 purchase of Ventyx and the “Song of Arkansas” for its 2011 acquisition of Baldor Electric.
After ABB’s May 2010 acquisition of Ventyx that now appears to have strengthened its hand somewhat in the control center-based systems market for EMS, SCADA and DMS (see www.newton-evans.com/?p=646 ), and the company’s follow-on purchase of Baldor Electric Company (Fort Smith, Arkansas), a leader in electric motor manufacturing, ABB has now announced its intent to acquire Thomas & Betts. T&B is a leading supplier of low voltage gear, and a respectable share participant (via its own recent acquisition of Joslyn Hi Voltage) in the market for medium voltage switchgear. Among its products serving the utility and construction markets are: digital static transfer switches, integrated systems – dual feed & static switch PDUs, power distribution systems, circuit management, industrial UPS, surge protection devices and power quality services are among its MV/LV products.
Joslyn Hi-Voltage manufactures power transmission and distribution equipment for electric utilities. The company’s offerings include reclosers, sectionalizers, capacitor switches and controls, transfer switches, distribution automation equipment, disconnect switches, load break switches, underground switches, and VacStat vacuum interrupter monitors. Fisher Pierce distribution products manufactured by Joslyn Hi-Voltage include Powerflex and AutoCap capacitor controls and Smartset software, faulted circuit indicators (FCIs), line post current sensors, and Smartlink communications.
So, what’s behind the spate of U.S. acquisitions made by ABB over the past 24 months? Here are four solid reasons that we think support ABB’s strategic and decisive actions:
First, the strategic planners within ABB are certainly looking to strengthen the company’s position in the three related utility-centric markets of power generation, transmission and distribution. Ventyx has helped with the company’s total array of “smart grid” related offerings with its IT and OT capabilities. Baldor had provided ABB with additional inroads to the motor market, and now T&B will provide the company with access and distribution channels for low voltage products, and help fill in product line gaps with its Joslyn HV/MV product offerings.
Secondly, look at the gain in ABB’s access to the construction and industrial segments, both of which may see some upswing by mid-2012. T&B plays an important role as well in serving the needs of mid-size utilities across the country and to some extent, internationally. This provides ABB with additional openings into the public power utilities and cooperative utility communities.
Thirdly, I think ABB has correctly identified the “new elephant” in the global electric power marketplace as Schneider Electric. This acquisition marks the first significant industry reaction to Schneider’s key role around the world in low voltage equipment (as well as some MV offerings by virtue of the division of assets of the former Areva T&D) and Schneider’s extremely well-developed marketing channel strategy.
Fourthly, is ABB’s response to the near-term global economic outlook. By virtue of its continuing focus on North American acquisitions, ABB is avoiding the as-yet unresolved Euro-crisis in terms of purchase prices and values, and near-term European market outlook. Coupled with the fact that North American construction and industrial activity will likely pick up the pace this year (given what we have seen thus far into 2012), the acquisition certainly makes sense to me.
As far as downsides to the string of acquisitions, the biggest complaint I have seen among financial analysts commenting in the press for all three acquisitions, is the premium paid for these companies, relative to earnings, market value or recent year revenues. On the other hand, ABB has the financial resources and the access to capital markets that together enable the company to take these decisive strategic actions to improve its overall market position in North America, and around the world.
– Chuck Newton
summary reviews and highlights from completed studies
