Last weeks announcement of the Solidor takeover of Eclectic Systems and Window Widgets was not just paradigm change for the group, but part of a larger paradigm change for the industry in general. You see, since the recession there have been particular companies that have made considerably more money than others. There are some that have faired less positively. And now the wealthy companies are flexing their financial muscle.
Taking a leaf out of the tech book
If you’re into your tech and keep half an eye on the tech industry, you’ll know that in that sector, just as in ours, acquisitions take place. Except at rather quicker intervals than in ours. Almost every week companies like Google, Facebook and Apple snap up start-ups which have products they want and can make their already massive companies that bit better, hoping they get gain an edge over their rivals. Only last week there were rumours that Google might be thinking of buying Twitter!
Well if you ask me our industry is entering a similar pattern. We’ve got the bigger companies snapping up the start-ups and smaller businesses in order to grow their own, enter new markets, fill gaps in their current business in an instant. This is what you saw with Solidor. They have a large pot of money to spend, purely with the aim of starting rapid growth and entering of new markets. I guess you could call Residence 9 a start-up, given that it only entered the market in 2011. So in just four short years in grew from obscurity to industry fame, and value. Solidor wanted that, and no one would blame them.
It’s not just Solidor. Other industry giants such as Synseal have been flexing their financial muscle too in recent times. Snapping up companies to help instantly grow their industry presence and power. And this trend is going to continue.
Groups to get bigger, industry to get smaller
The industry is still too big for the amount of business in circulation right now. There are far too many very small fabricators for example. Surely in these conditions it would be better to buy in if you’re a small installer with fabrication capabilities? A post for another day maybe. But there is still too much slack in the industry right now. What that makes then is for a competitive buyers market for companies looking to acquire other companies.
This is how the theme will continue over the next few years I think. The companies good at making big profits will continue to expand their groups by taking over others. The successful start-ups will find themselves targets of the bigger groups who feel they could add to their businesses. The companies who have stood still for the last few years and failed to innovate will fall by the wayside.
Over those next few years we’ll see the size of the industry by numbers decrease, but the size of the super-groups, along with their power and influence, grow. Which isn’t a bad thing, so long as that power and influence is used in the interests of the industry, and not greed or excessive power.
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