Honeywell buys Burtek from Richardson

$100m distributor will be combined with ADI in the U.S., Canada, Latin America and Europe
Thursday, April 12, 2007

LOUISVILLE, Ky.--Honeywell on April 9 announced an agreement to purchase Burtek Systems and Security Systems Division, the distribution arms of Richardson Electronics, for $80 million. The deal is subject to regulatory requirements, but is expected to close in the second quarter.
Burtek and SSD combined for more than $110 million in sales in 2006, and Burtek is the largest electronic security distributor in Canada, according to a presentation made at this year's Security Growth Conference by Wendy Diddell, executive vice president and general manager for the security division at Burtek. She said the company has 16 total branches, 11 of them in Canada, along with three sales offices each in Europe and Latin America.
Honeywell will fold these operations into its ADI distribution business.
Randy Teague, ADI's vice president of marketing, said ADI sees "a lot of opportunity" in the Canadian market. "It gives each of us a chance to broaden our portfolio and reach out to new customers and vendors in Canada."
Teague described Burtek as having a presence across all security categories, but traditionally strongest in CCTV product distribution, "and they've grown a good presence in A/V as well," he said. "We see a lot of dealers looking to move into home automation, A/V and networking. It's an extension of what's going on in IT right now." He said ADI is also seeing dealers from the traditional home electronics channel, like CEDIA members, looking to use ADI for security products.
William Lynch, vice president of investment firm ProFinance Associates, said this migration is important to the future of distribution. "It will involve other businesses that people have not traditionally associated with electronic security distribution," he said. Successful distributors will bring "new technology and knowledge to the dealer, or provide a new channel for IT-based manufacturers while servicing other VARs that aren't necessarily electronic security dealers."
This also means that size matters. Lynch said the distribution space is already "pretty tightly consolidated," and that smaller distributors are going to have to come up with a better business model if they're going to compete with consolidating big players. "The reality is," Lynch said, "many of the large players are just going to keep getting bigger and more efficient."