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TTI-Sager: A Good Fit at First Glance

{complink 12888|TTI Inc.} and Sager Electronics aren't saying much about their impending merger until the deal is done. (See: TTI Buying Sager Electronics.) But at first glance, the acquisition should cause minimal disruption to customers and suppliers and should be a net positive across the board.

Both companies are specialty distributors, meaning they focus on interconnect, passive, and electromechanical products. Though some of these devices cost less than a penny each, both distributors have carved out a strong niche in the IP&E market. TTI has matched its extensive product line with supply chain management services that are consistently executed on a global basis. Sager, which has focused its efforts in the Americas, has developed a reputation for engineering expertise. It spends a lot of time with suppliers understanding every aspect of their components, backed up with additional in-house training.

The distributors also have similar cultures. Sager has been a family-owned business for more than 100 years. The privately held company is closely managed by a group of executives who have been there for decades. TTI has remained private for the most part. Although its parent, Berkshire Hathaway, is publicly traded, TTI's operations have not noticeably changed since the 2006 acquisition. TTI's founder, Paul Andrews, still calls the shots in a typically low-key manner.

TTI and Sager carry nearly all leading IP&E brands, including Amphenol, Molex, TE Connectivity, Honeywell, and ITT. There will likely be some overlap of offices in the Americas. Within the past decade, Sager has been expanding in regions where its customers are concentrated. Even if TTI and Sager have significantly different customer bases, office consolidation in the US still makes economic sense.

TTI has not been an acquisitive company. Its most significant previous acquisition was the catalog distributor {complink 12816|Mouser Electronics Inc.} in 2000. The companies have operated as separate businesses and still report separate revenue for industry lists such as the EETimes Top 25 Distributors. In 2010, TTI reported global revenue of $1.4 billion. Mouser reported $498 million, and Sager reported $205 million.

10 comments on “TTI-Sager: A Good Fit at First Glance

  1. _hm
    March 21, 2012

    It will nice to see this merger provides more technical sales services. I wish they also provide their speciality parts to Mouser for easy prototype development.

     

  2. hockeymom
    March 22, 2012

    Should be a major win for customers!  Great companies + great people + inventory, expertise & execution = success!

  3. Houngbo_Hospice
    March 22, 2012

    @hockeymom:

    Should be a major win for customers!

    I wish you were right. But it will be a major win for investors first, including Warren Buffet (owner of TTI mother company) who is reputed to spot the best deal before his competitors. 

  4. syedzunair
    March 22, 2012

    @hockeymom: On paper it looks like it will be a major win for the customers as both the companies have been in the industry for a while. With the professional resources at TTI & Sager and the competitive advantage each firm has the future seems to be bright. 

  5. Barbara Jorgensen
    March 22, 2012

    Warren Buffett clearly does what is right for his investors, but he also has a reputation of letting good businesses “mind their own business.” There is a quirky furniture store in the Boston area that gave away free furniture the year the Red Sox won the World Series. They take their employees to Bermuda every so often. So BH is pretty hands-off. I doubt either of these moves was great for the bottom line, but it was great for the brand.

    If BH and TTI maintain their model, the best things about Sager will be retained. One of those things is customer service and Sager customers are very loyal to the company.

     

  6. syedzunair
    March 23, 2012

    @Barbara: WB principle of letting good businesses 'mind their own business' is the key to success. Even the best business minds aren't capable of delivering in every business scenario. If the people who have been running an enterprise for awhile are good at it we should let them continue. 

    Mergers and acquisitions are tricky. One needs to be extremely careful and devise a strategy to ensure that both companies retain their consumer base and competitive advantages while doing away with their lackings. 

    So WB like you said is actually looking after the investors by making sure that the business keeps on running like it did before. 

  7. Eldredge
    March 26, 2012

    Sometimes (hopefully more oftern than not) what is best for the customer and for the investors are one in the same. It will be interesting to see how this merger plays out.

  8. Barbara Jorgensen
    March 26, 2012

    What is good for the customer can certainly translate into what's good for shareholders–in fact, it absolutely should. Distribution is in the unique position, though, of serving two masters: customers and suppliers. Sometimes an acquisition can mean two suppliers sharing a distributor and one supplier drops out. But in general, those situations are much less frequent than they used to be.

  9. Tim Votapka
    March 27, 2012

    Barbara – It's a good match today, and it would have been a good match 20 years ago when many distributor acquisitions were driven by geographic expansion. Both distributors have demonstrated an ability to hold their position during enturbulating times of consolidation and expansion. Their customers – and the industry at large – knew what these distributors provided, what their expertise was and why they were worth using. Buyer Preference studies backed that up time and time again which made the annual Top 50 write ups a quick cycle!

  10. Barbara Jorgensen
    March 28, 2012

    Tim: The more I think about it, the more the cultures of these two companies seem a great fit. And I agree–that would have been true 20 years ago as well. I think TTI and Sager have been able to mold their cultures by remaining private (TTI is de facto private as far as I can tell) and not having to answer to shareholders in the public market. Both companies have invested during downturns, both have had very little management turnover and both have great reputations with customers.

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