B-to-B spending spree

Mar 01, 1999 10:30 PM  By

Catalogers completed 28 transactions during the fourth quarter of 1998, compared to 29 deals the previous fourth quarter. But whereas business-to-business catalogers had posted only four deals during the final three months of 1997, this time around they accounted for 57% of the transactions.

Niles, IL-based Ha-Lo Industries was the busiest acquirer this quarter. The $143.2 million promotional products manufacturer/cataloger nearly doubled its revenue by snapping up six firms: New York marketing agency Siebel Marketing Group; Paris-based Parsons International Trading Business; b-to-b ad specialties marketers Idea Man and Premier Pro-motions and Marketing, both of Los Angeles; Harrisburg, PA-based Smith Advertising Specialties; and Cleveland-based Incentive Merchandise Corp. According to Ha-Lo, these six acquisitions will add an additional $120 million to annual sales.

“In some of these acquisitions, such as Siebel Marketing and Idea Man, we were able to combine warehouse facilities,” says Michael Nemlich, Ha-Lo’s vice president of corporate development/financial relations. “Now we are better able to serve major corporations by offering more services, such as warehouse storage. Some of these companies did not offer their clients fulfillment capabilities; now they can. And with these acquisitions, we’ve been able to expand into markets such as Phoenix, Salt Lake City, and Seattle through the regional offices of both Idea Man and Premier.”

Indeed, among b-to-bers-which often rely on field sales teams and local distribution centers as well as catalogs to sell their product-the desire to expand their geographic reach motivated a number of deals. For instance, Plainview, NY-based industrial tools giant MSC Industrial Direct acquired Mississippi-based tool distributor Industrial Specialty of Tupelo, in part to establish a foothold in the South. “Before, we had only one small branch in Mississippi,” says Shelley Boxer, vice president/chief financial officer of $481 million MSC. The acquisition “brings us a presence in Meridian, Jackson, and Columbus, MS,” he says.

Like Ha-Lo and MSC, 20th Century Plastics is following a growth-through-acquisition strategy. In October, the Brea, CA-based holding company acquired $17.8 million Sunrise, FL-based G. Neil, a cataloger of human resources supplies, and $30 million Paw Paw, MI-based Duo-Tang, a manufacturer/marketer of presentation products such as report covers and portfolios. According to 20th Century Plastics, the two acquisitions are the first steps in a journey to become a $500 million company in the next few years.

Four for Fingerhut Minnetonka, MN-based general merchant Fingerhut Cos. was the most active of the consumer catalogers. It bought two catalogers outright: $100 million women’s apparel marketer Bedford Fair Industries, the parent of titles Bedford Fair and Willow Ridge, and $180 million general merchant Popular Club Plan (the latter from the J. Crew Group).

The $1.5 billion Fingerhut also acquired 19.9% stakes in online general merchant Freeshop International and Internet sporting goods marketer Zone Networks.

“Because Fingerhut is database-driven, it’s looking for more merchandise to sell to existing customers,” says Andrew Calimano, an analyst at New York-based Gruppo, Levey, and Co. Indeed, Fingerhut says it will use Bedford Fair to expand the product offerings of the apparel titles of its Arizona Mail Order division, which it bought in August 1998.-MDF