The past few years have been especially brutal to many of the dealers in our industry. This industry was centrally located at the crosshairs of the subprime crisis and then as most segments of our economy, was walloped by the recession. Demand for new building dropped to near nothing in most of the country as housing prices sunk. Consumers were hurting and so were the dealers.

On the distribution side of the business, there are distributors and co-ops. As cooperatives are based on membership, their customers tend to remain loyal. As many of their customers have been affiliates for years, a strong symbiotic relationship has often developed. Members rely on the co-ops for attractive pricing on product, insight on new products and their applications and superior merchandising and marketing. Some might think this a recession-proof formula.

Back in January of this year, Handy Hardware Wholesale filed for bankruptcy protection. Two months later Handy submitted a plan for reorganization. At that time the co-op member dealers that it had received overtures for acquisition. Thus there was speculation and concern that should an acquisition be realized, Handy Hardware might have to give up its structure as a co-op and compete only as a distributor.

Under the likely terms of an acquisition it was expected that Handy Hardware would become a subsidiary of its parent or simply be integrated into another distributor. Handy’s board stated decisively that it had hoped to emerge from bankruptcy as a cooperative and continue the mutually beneficial relationship it had long maintained with its membership. Should the structure of the co-op ultimately be lost, the board stated that it had hoped its members would stay on as customers, though they would no longer possess any aspect of ownership. They would no longer share in the control of Handy.

Now an acquisition of Handy has been announced. If approved by the court, private equity firm Littlejohn Management Holdings would acquire Handy and run it as a subsidiary, an independent distributor. The deal has the announced support of Handy’s board of directors, its member advisory committee and member equity committee. Court approval isn’t expected at least until July. Handy management feels that members might stay on board as they had hoped that despite the conversion in business model, Handy will continue to be independent and offer customers a lean, low-price, no-frills business model with history of strong interactive relationships. This is then actually anticipating a new era. It will be interesting to see how the post-bankruptcy Handy Hardware Wholesale and their clientele react to a changing business structure.