Positioning for an even brighter future

Vito Pelagio was facing a big decision as he weighed the future of Amperage Electrical Supply, Inc., the business he built and grew as sole owner for 25 years. He had taken the company as far as he believed he could since 1997, with sales rising from $3 million in its first year to more than $110 million in 2022, and his number of employees growing from five to 115.

While forever grateful to his mother for helping him secure his first bank loan when he was 26, Pelagio came to realize he needed a new financial strategy beyond taking on new debt to get the firm to the next level. He also realized it was time to turn to outside advisors to help determine and secure the right future for Amperage.

Challenge

Amperage’s growth had been steady since its inception as a full-line electrical supplier and distributor for small and midsize independent contractors. The company took on sizable debt to finance the construction of a new headquarters and warehouse/distribution facility in late 2019. During the COVID-19 pandemic, Amperage was able to rely on a deep bench of vendors to circumvent supply chain issues and grow its customer base. Revenue more than doubled in that three-year period alone.

But these gains brought issues that couldn’t be ignored: To keep up with customer needs and ensure growth was on track, Amperage needed to replace its computer system and implement other technology advances. The company lacked an adequate e-commerce platform.

Solution

Pelagio reached out to Wipfli Corporate Finance Advisors in the summer of 2021 to begin exploring options for third-party interest based on an industry colleague’s positive experience with the firm during their own acquisition. Wipfli Corporate Finance recommended a valuation study to see where Amperage’s business was trending.

Initial conversations focused on seeking private equity or family office investors to turbocharge new investments rather than finding a strategic business partner. But soon it became clear that an acquisition by a select large player in the electrical supply vertical could help Pelagio increase the longevity of the firm, boost the Amperage brand and ensure the management role that Vito sought to maintain.

In seeking this strategic acquisition, the focus turned to competitors with a very strong reputation in the local market who could provide additional value. The criteria included a strong operating infrastructure and financial balance sheet, in addition to an electrical supply distribution product line card complementing Amperage’s offerings.

Following the valuation process, Wipfli Corporate Finance created a detailed investment memorandum and market study of possible suitors. After six months of market exploration and meetings with the most qualified prospects, Amperage’s criteria best aligned with Consolidated Electrical Distributors (CED).

There was good chemistry between the two companies from the start. CED was eager to grow its presence in Chicago, and it believed it would benefit from the customer base of small and mid-size contractors that was Amperage’s sweet spot. Amperage believed that it had a strong purchasing operation, which it believed made it a highly attractive candidate, along with its contingent of specialists in lighting products and on the commodity side of the business.

CED did not require any bank financing contingencies, which made its offer stand out among other suitors amid a climate of economic uncertainty. CED knew and respected the Amperage brand and recognized the value of keeping the business operating as Amperage with Pelagio continuing to run it.

The transaction closed smoothly in November 2022.

Results

Pelagio achieved his goal of finding a partner company that recognized the value of the team he built and has the financial wherewithal to retain the modern distribution facility that Amperage efficiently operates in in Roselle, Illinois. CED offers Amperage a wide runway for growth and continuity for all employees and has indicated opportunities for internal advancement will rise across the 700+ CED distributor network.

Pelagio noted: “Sometimes it can be lonely running a large business, trying to finance it on your own and making all the decisions on your own. Now we’re part of something larger with resources to allow us to get to the next level. The Amperage brand stands for all we’ve worked for and the relationships we developed and the commitment to taking care of our customers and employees.”

The deal has empowered Pelagio to pursue faster growth supported by a large corporate team. Currently processing about 500 orders a day, Amperage is cautiously optimistic about its prospects for 10% growth in 2023. Right away it’s been able to add five trucks to its existing fleet of 30 delivery vehicles.

“The process of working with Wipfli Corporate Finance on this deal was very smooth and educational. The sale to CED was going to allow us to maintain our independence and continue building our brand that we've worked hard to build. It gives us additional horsepower to grow the in the Chicago market.“

Vito Pelagio, founder of Amperage Electrical Supply, Inc.

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