Merger activity is (finally) slowing down
By Jack Keough -- Industrial Distribution, 3/1/2000
It was just a few years ago that distribution was the second most active industry for mergers and acquisitions. But in the past year, the frantic pace of merger activity finally seems to be slowing down.As we report in this month's issue, major U.S. acquirers have not been buying companies as they once had been. There are many reasons for this, of course. Stock prices have plummeted for
some publicly traded distribution companies and the recent rise in interest rates has caused other prospective buyers to adopt a wait-and-see attitude.
International players, however, are picking up the slack. In recent months, Netherlands-based N.V. Hagemeyer bought Vallen Corp., the largest safety distributor in the country, along with Tri-State Electrical and Electronics Supply Co. And Texas Mill Supply, another one of ID's Top 100 distributors, was purchased by Wilson Industries, a subsidiary of Smith International. In addition, Adam Fein of Pembroke Consulting, who has been following the distribution consolidation efforts for several years, points out that there are many international, non-domestic distributors starting to move into the U.S.
Germany-based Würth Group, for example, has been active in buying U.S. fastener distributors, and just a few years ago the French company Descours and Cabaud bought Dillon Supply and Associated Industrial Supply. Another giant U.S. corporation is also flexing its acquisition muscles. Home Depot recently purchased Atlanta-based Apex Supply Co., a distributor of plumbing and HVAC products, which has 21 locations in three states. This comes on top of HD's purchase of Georgia Lighting, a well-known company in the Southeast. Could the latest purchase be indicative of HD's decision to establish a foothold in the wholesale distribution business? Many observers think it is, and believe that Home Depot could be entering the field of industrial distribution, something that's been rumored for years. HD certainly has the money to finance new acquisitions.
It is true that merger activity, on the whole, has subsided somewhat. But with a number of well-capitalized corporations looking for distribution outlets, the merger activity certainly is not over. Consolidation is taking a breather. The question is, for how long?
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