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Boom! Terex continues consolidation

Trailer/Body Builders,  June 1, 2003  

TWO years ago, National Truck Equipment Association executive director Jim Carney wrote an article in which he dissected the issue of consolidation.

He wrote that while many people in the industry view consolidation in a negative fashion, Webster's Dictionary actually defines it as "to make or become strong, stable, or firmly established."

So how do companies prosper in that environment? Carney cited Adam J Fein's book, Winning Strategies for a Consolidating Wholesale Distribution Industry, in which Fein theorizes that a company either has to "get big (grow and expand), get focused (move into specialized areas and excel), or get out (make plans to exit the business)."

Commercial Body Corp chose to get big. In February, it was sold - along with its interest in Combatel Distribution - to Terex Corp, a diversified global manufacturer based in Westport, Connecticut.

Kent Grist, whose grandfather started Commercial Body Corp in San Antonio, Texas, in 1934, says the decision was driven by the consolidation of the company's customers.

"A lot of our large customers have combined into large multi-state customers, and they would rather deal with one type of vendor," says Grist, who served as NTEA president before passing the gavel to Vic Tedesco in March. "They didn't want to have to contact four different dealers, depending on where their trucks were going in their territory, and get different pricing. Terex, the parent company of Telelect, wanted to control their distribution chain a little more, control the margin, and reduce some of the layers in getting their equipment to market."

The deal, finalized February 14, came 14 months after Terex's acquisition of Pacific Utility Equipment Co and leaves just two independent Telelect distributors in the United States - Dueco Inc and James A Kiley Co - along with Wajax Industries Ltd in Canada.

Dueco president Tom Dalum says he has heard the rumors that he will be selling to Terex, and he says they sound familiar.

"We're an independent, privately held company, and have been for 47 years," Dalum says. "Everybody has their own agenda. The rumors are always out there. I've (supposedly) done a lot of things in the past. I was bought by Penske. I bought Telelect. I bought Liftall. And none of those rumors were true, aren't true, and haven't been true. That's why you take it with a grain of salt."

Says Grist, "We still have a good working team relationship with the independent distributors. We're all getting along just fine. There's no ostracizing them just because they're independent. So it's working quite well."

Combatel included

As part of the Commercial Body deal, Terex acquired three other locations in Texas, Oklahoma, and New Mexico, along with Combatel Distribution, an entity with locations in Birmingham, Alabama, and Little Rock, Arkansas. Terex and Commercial Body previously had shared that ownership.

Commercial Body now is called Terex Utilities - South, combining with 10 locations to form a 19-state network that spans as far north as Missouri, as far east as Delaware, as far south as Florida, and as far west as New Mexico. Kent's brother, Gary, has become vice-president and general manager of the organization.

Commercial Body was doing $40 million in sales when Terex opened acquisition discussions. The company started out by building wooden stake bodies, then distributing them, eventually moving into full truck equipment in the late 1950s, then electrical utility equipment such as aerial devices and digger-derricks. Telelect has been the company's major vendor.

Grist, whose new title with Terex Utilities - South is western region sales manager, says the aerial-device industry has changed dramatically, with the number of manufacturers going from 15 to fewer than five.

"The consolidation of manufacturers and the consolidation of large electrical contractors has kind of put the independent distributors in the middle in a real squeeze," he says. "There are fewer vendors for independent distributors to choose from.

"The advantage to us with this deal is becoming part of a larger organization with a lot more assets and a lot more uniformed approach. You can draw from demonstrators, used equipment, and rental equipment. You can draw from a very large fleet spread out all over the country. We have the ability to draw on a larger pool of resources and ideas."

Chris Ragot, president of Terex Utilities, says the acquisition of Commercial Body and Combatel lets Terex offer customers increased capabilities and services over the entire southern region of the United States.

"The acquisition emphasizes Terex Utilities' goal of providing customers with single-source access to a variety of safe and reliable products and services to help customers who are looking for turnkey solutions and a life-cycle value proposition for their fleets," Ragot says. "It also gives us more control over the entire manufacturing process and enables us to better manage total supply-chain costs.

"With several independent facilities, we have an opportunity to streamline our operations and reduce our overall cost structure," he says. "We believe that with a lower cost structure and by working directly with Telelect, the Terex Utilities-owned distributors will be more efficient and competitive, and we expect to grow market share. It will also give us the ability to provide a one-stop alternative that many of the larger utilities are looking for."

Motivated buyer, seller

Pacific Utility president Rocky Chernow says the sale of the Portland, Oregon-based company - founded in 1967 by Ray Goecks and ultimately providing services to customers in Oregon, Washington, Alaska, Idaho, Montana, Utah, Wyoming, Nevada, California, Arizona, and Hawaii - was expedited because there was a motivated buyer and a motivated seller.

Pacific Utility was interested in finding a buyer for the company and had hired consultants to help with marketing. Chernow says Terex wanted to consolidate distribution nationally to coast-to-coast, border-to-border factory stores that would offer not only Telelect products, but also all the other products in Terex.

"We've become part of a large, well-capitalized organization that avails us of a much broader range of product," he says. "Since then, we've opened new branches, and our sales have dramatically increased. We're in a growth mode. This year, we're budgeting for a 20% increase in sales for Pacific Utility over the previous year, which was a growth year, too. So having new branches and new product just enabled us to reach into a lot of markets more aggressively than before.

"We're geared up with a strong company behind us," Chernow says, "whereas before it was a small, family-owned business, and that just doesn't afford you the resources you have when you're a big company. The territorial boundaries are still the same. What has changed for the distributors that were acquired is all upside."

Complementary products include both Terex products (RO boom trucks, loader backhoes, and Genie) as well as products from Terex Utilities Alliance members (Hogg & Davis, TSE, and Reedrill Texoma).

"Basically everything Terex manufactures is now available for utility companies and municipalities," Chernow says. "We try not to compete with existing Terex dealers, but for our core customers, we don't want to be all things to all people. We want to be more things to our core business focus group: municipalities, utilities, aerial companies. Now we can sell backhoe loaders, rough-terrain cranes, light towers. The Terex offering is enormous. Before, we were selling digger-derricks and boom trucks."