The Keys to Successful Transformation: Vision, Leadership and Strong Management

What does it take to transform a company into something larger than itself? To shape an industry? To prepare for future success? For Wesco International, a leader in business-to-business distribution (B2B), logistics services and supply chain solutions, the answer is an aggressive growth strategy driven by vision, leadership and strong management.

The world’s best chief executive officers (CEOs) think beyond tomorrow’s share price, or the next earnings call to create lasting value. That’s what Chairman, President and CEO John Engel set out to do when he took the helm of Wesco International in 2009 after serving as the company’s Chief Operations Officer for five years.

As a B2B distributor, Wesco is an essential part of the supply chain for its customers. Engel understood that digitalisation was accelerating as a disrupter, presenting a huge opportunity for Wesco and the industry as a whole. “We recognised early on that digital transformation was key to future growth and value creation,” said Engel. “We set an ambitious growth strategy to transform our business and the overall supply chain so we could in turn help our customers transform theirs.”

That vision led to Wesco’s acquisition of Anixter International in June 2020. The combination of two equally sized Fortune 500 B2B distributors with complementary offerings and capabilities has been a catalyst for Wesco’s transformation efforts.

“We’re actually building a completely new company,” said Engel. “We’re looking front to back across the business and taking a best-of-the-best approach in order to create the world’s most comprehensive supply chain solutions provider.”

This combination has also led to incredible growth, creating more than $2 billion in cross-sell synergies to date. What’s more, the company’s scalable global distribution network and centralised order fulfillment centers provide key competitive advantages that have catapulted Wesco into the pole position when it comes to servicing large, multinational customers anywhere in the world.

Vision Matched with Excellence

Since 1994, Wesco has executed some 50 strategic acquisitions, though none as sweeping and complex as the combination with Anixter. As the company nears the end of its three-year integration plan, it is exceeding those targets. Enter Dave Schulz, Wesco’s Executive Vice President and Chief Financial Officer (CFO), who has been foundational to the financial success of the deal and the integration process with Anixter.

“Dave’s leadership and strong financial acumen have led to Wesco’s outsized financial performance,” said Engel.

Since joining Wesco in 2016, Schulz has transformed the finance function at Wesco, adding rigor to financial controls as the company has rapidly expanded. During his tenure, he has overseen what can only be called a streak of exceptional financial performance.

Wesco celebrated its 100th anniversary in 2022 with record sales. In its 2022 year-end annual report, Wesco reported annual sales of $21.4 billion, up 18% from the prior year. The company also recorded net income of $803 million, up nearly 97%. That translates into a 19.2% return on equity, an important barometer of overall profitability.

Since the Anixter deal, Wesco has continued to lead its industry, increase its global scale and accelerate digital transformation. The success of Wesco’s business model and integration effort with Anixter for the past three years tells the story in black and white. Consider the following highlights taken from Wesco’s latest annual report in 2022:

  • Record adjusted EBITDA of $1.7 billion, up 47% year-over-year,
  • Record adjusted EBITDA margin of 8.1%, up 160 basis points year-over-year,
  • Record adjusted earning per diluted share of $16.42, up 65% year-over-year and leverage of 2.9x,
  • And an impressive 233% stock price return since the completion of the Anixter merger, creating significant stockholder value.

In many ways, the company’s exceptional financial performance through this period is just the beginning of the story.

Supply Chain Leadership and Agility

Wesco’s emergence as a supply chain powerhouse coincides with a broader change in the global marketplace. In the aftermath of the paralyzing disruptions that upended global supply chains during the pandemic, global enterprises have put a premium on finding dependable partners who can help them navigate safely. Given the challenging uncertainty of the last few years, “supply chain” has become a C-suite and boardroom priority with a focus on supply chain integrity, resilience and sustainability.

That also happens to be Wesco’s sweet spot.

Wesco sits in the middle of the value chain between its customers and supplier partners, putting the company in a position to help them succeed in leveraging advanced technologies like Artificial Intelligence (AI), Machine Learning (ML), and the Internet of Things (IoT).

As a leading provider of B2B distribution, logistics services and supply chain solutions, Wesco serves an array of customers across industrial, construction, utility, commercial, institutional and government markets. Wesco is also the market leader in electrical and utility in North America, as well as a global leader in data communications and security.

Trending Opportunities

Wesco’s vision is to become the best tech-enabled supply chain solutions provider in the world. And it is well on its way toward reaching that goal.

In May, Wesco announced the expansion of its IoT advisory services business. Consider that since 2018, the number of IoT connected devices has tripled to more than 40 billion worldwide. That presents a myriad of new opportunities as Wesco develops new capabilities and innovation around IoT and automation to help its customers and supplier partners harness leading edge technologies to solve operational and supply chain challenges.

Wesco also stands to benefit from the reversal of a decades-long shift in U.S. manufacturing to Latin America and Southeast Asia. In fact, Engel said, “we’re seeing the unfolding of a ‘dramatic’ shift toward re-shoring and near-shoring,” to which he added are also likely to be enduring secular trends.

“Wesco sells directly to ninety percent of Fortune 500 companies, so I can tell you this shift is underway, and it represents a huge business opportunity for all of us,” Engel said.

That sets Wesco up to extend its reach, particularly when it comes to higher-growth markets. In coming years, the company’s leadership position will benefit from secular mega-trends, such as electrification, automation and Internet of Things (IoT), green energy, 24/7 connectivity, digitalisation and security. All these changes are permanently reshaping supply chains, altering how businesses operate and how people live and work. Along the way, companies will require complex solutions and a higher degree of expertise than ever before and Wesco is positioned to deliver.

Pan Finance is a print journal and news website providing worldwide intelligence on finance, economics and global commerce. Known for our in-depth analysis and opinion pieces from esteemed academics and celebrated professionals; our readership consists of senior decision makers from across the globe.

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