John J. Engel doubled down on WESCO’s customers in a market slowdown

“We spend a whole day with our board of directors, reviewing that and going deep into the organization, giving our board of directors insight into the quality and depth of our bench and how we’re developing talent,” Engel says.
Being public in a privately dominated market isn’t always an advantage, though. The transparency required by its investors means WESCO’s strategies, performance and initiatives are more readily available to its competitors. Also, private companies have the luxury of operating at lower profit margins.
WESCO has been able to turn one challenge into a key selling point, however. Engel says the company has a more disciplined, consistent operation because it follows additional regulations like Sarbanes-Oxley.
“We’ve tried to turn that into an advantage with our customers, saying because of that, we can inherently provide you better integrity as your supply chain partner,” he says.
That’s partly why WESCO sells to more than half of the Fortune 500 companies that are also publically traded.
WESCO’s ability to stick with its customers in tough times once again helped it when markets stabilized in 2017. Engel says both the company and its end-markets returned to growth.

“This year, we expect continued end-market recovery and WESCO to continue to grow faster than our markets,” he says. “We also expect to expand our profit margins and we provided an outlook to our investors: We expect to deliver double-digit growth in earnings per share and to continue to deliver strong free cash flow.”

 

Takeaways:

  • Double down on your customers when times are tough.
  • When challenged, see the reality, move with speed and act decisively.
  • You’re only as good as the strength and quality of your team.

 

The file:

Name: John J. Engel
Title: Chairman, president and CEO
Company: WESCO International Inc.
Born: Philadelphia
Education: Bachelor’s in mechanical engineering, Villanova University, and an MBA from the University of Rochester
What was your first job? Delivering newspapers in grade school. I had a paper route and was able to pick up more customers along the way. It was distribution (like WESCO), and it was great.
WESCO has completed more than 40 acquisitions since it spun out in 1994 and you’ve done many deals over your career. What advice would you give about M&A? Many times, the deal makes sense strategically on paper, but it’s the cultural integration, the integration aspects of the deal that always get in the way. It’s something I’m personally mindful of and I know our team is.
There’s a couple of key ingredients to our playbook that have been successful for us. It’s not episodic. It’s not event driven. We’re disciplined and we’re always looking at deals because we have this phase-gated process. It’s got five stages, and the deals are in the pipeline moving through continuously. But there’s N number where we’re saying no, and some of them are at the final gate. We have certain deals, companies that we’ve prioritized. The biggest acquisition we did, over $1 billion, was in Canada and we worked that relationship for well over five years.
Second, be very clear about how you’re going to integrate the deal and make the key decisions before the deal closes. Once it closes, we have a 100-day integration plan. For us, it’s particularly important because we’re buying private companies and that owner/operator wants to know what’s going to happen to the people, the brand name. We iron all that out before the deal closes, so there’s no confusion.
At the end of the day, when you’re buying a company, you’re buying the talent. If you’re a manufacturing company, you may be buying capital assets, a world-class manufacturing base. If you’re a biotech, you could be buying a patent portfolio. But what made all that happen is talent. So, we spend a lot of time on diligence around the talent of the acquisition.