An Acquisitive New Year?

Earlier this week, {complink 453|Arrow Electronics Inc.} completed its acquisition of {complink 3916|Nu Horizons Electronics Corp.} In December, {complink 577|Avnet Inc.} gave analysts an update on its integration of {complink 671|Bell Microproducts}, which Avnet acquired late last year.

While the distribution industry hasn't begun to approach the pace of consolidation it saw in the 1990s, these acquisitions still knock two of the industry's largest distributors off the increasingly sparse Top 10 distributors list. I won't be surprised if the list is a little shorter next year.

After Arrow and Avnet divvied up the former Veba Electronics Group in 2000 there seemed to be little left in the distribution industry to acquire. Distributors acquire for a handful of key reasons: to gain franchises they don't have; to tap into new customers; or to expand into new geographies. As Arrow and Avnet each carry most major component lines in all product categories (active, passive, and IT), sell in all major geographies (the Americas, EMEA, and Asia/Pacific), and reach a vast customer base in major electronics end-markets, I figured the acquisition craze was over.

In December, I had a chance to speak with Harley Feldberg, Avnet Electronics Marketing (EM) president, global, about the Bell integration. Bell seemed like a strange fit to me on the components side of Avnet's business — Bell looked more like an IT/systems distributor in recent years and is a natural fit into Avnet's Technology Solutions (TS) division. But Feldberg explains that Bell has a lot to offer Avnet EM as EM moves into the embedded systems business.

“One of the ways for a distributor to add market share is to migrate up the supply chain, and adding solutions to discrete products is part of that migration,” he says. “We move a lot of products — disk drives, SSD, and panels — and now we are moving into development boards. So if you look at Bell as a company, they developed into a sizable business somewhere between a chip division and a systems division. But most of their focus was on embedded systems, and we can use that to put some volume behind our embedded systems efforts.”

Arrow just completed the Nu Horizons acquisition and hasn't talked much yet about its plans. One of the things that distinguish Nu Horizons is its focus on design services and on high-margin semiconductor products. Nu Horizons has also expanded aggressively into the Asia/Pacific region. Both attributes fit well with Arrow's strategy of expanding design services and building its presence in Asia/Pacific. As long as Arrow and Avnet can integrate their acquisitions in a cost-effective manner, both make a lot of sense.

A real coup, as my colleague Bolaji Ojo pointed out earlier this year, would be for either company to merge with Asia/Pacific's largest indigenous electronics distributor, World Peace Group. (See: Deals I’d Like to See, Part 1: Avnet or Arrow Merge With WPG.)

While I agree it would be a great deal for WPG and its buyer, I don't see this happening. I don't have any really good reason for this, but I do think it's good for the market to have a strong local or specialty player as an alternative to the behemoths. That's not a shot at Arrow and Avnet — they are both outstanding organizations. But a little competition is good for everybody.

2 comments on “An Acquisitive New Year?

  1. Mydesign
    January 5, 2011

         Barbara, you are right, the trend shows that many companies may get merged or acquired in 2011. For the last couple of years, we had seen that many small companies are merged or acquired with big companies or brands. During recession time almost all small and medium level companies strived hard for their existence. In such a scenario, only globally players or those who having major market shares, can survive. Merging and acquisition are good for the companies in many ways such as capturing the market share, wide networks of supply, global presence etc.

         At the same time, it can make a lot of drawbacks in market also. In my opinion this trend leads to the global monopoly of certain brands and may force the customers to accept, what they are offering. The healthy competition between different brands may get diluted and the choice of common peoples are going to be loose, because there may not be any alternative for them. Some other drawbacks are no price competition, lesser challenges etc.

  2. mfbertozzi
    January 5, 2011


    Good point Toms. Merging and acquisition seem the trend in 2011, as similar events happened also in other markets, I mean Cars/Vehicles  or Telecommunications Market. Possibile risk is related to time reaching full operations of merged companies and if merged companies will be competitive as alone. What lessons could be learned from Nokia-Siemens or Alcatel-Lucent history?

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