The 2015 edition of Chain Store Guide’s Directory of Home Center Operators & Hardware Chains has just published. The front-end of the directory as usual, features an in-depth statistical analysis of the industry’s year, along with several handy pages revealing information on the industry’s major trade associations, accompanied by an annual calendar of industry events. One page in this year’s front-end stands out with more events than we’ve experienced in several years. That would be the annual listing of industry Major Mergers & Acquisitions.
This year Chain Store Guide lists 16 unique transactions on this list. Since the beginning of the subprime/recessionary era, significant company expansion has been extremely rare, save the internally-inspired rapid growth of companies such as Tractor Supply and Fastenal.
In recent years, industry giants Home Depot and Lowe’s have issued growth projections well under double digits or barely over that mark. Just under a decade ago Home Depot divested itself of its many former regional pro dealer acquisitions in order to right its financial ship and return to its mantle of focusing on serving do it yourselfers.
This year’s list is significant not only for its unusually imposing length but also for the quality of its makeup. It offers insight into several acquirers who have hit this list for multiple transactions in recent years, essentially ushering in this new era of expansion through acquisition. Additionally, this current list for 2015 features two rather stunning merger/acquisitions in terms of the size of both corporate participants, plus a merger of two major buying groups, a true rarity in this day and age.
Founded in 2011, essentially as a holding company, Central Network Retail Group LLC (CNRG) has been on CSG’s mergers list every year since, last year twice, as an acquirer. Since its founding, CNRG has been on an active mission to acquire solid regional pro dealers, in order to build a formidable base through which to grow these companies.
The most active acquirer on CSG’s list in recent years has been US LBM Holdings, LLC. Like CNRG, US LBM methodically seeks out prominent regional and independent pro dealers and weighs many factors to determine their viability for acquisition.
On this year’s list, US LBM lists four distinct acquisitions. These range from the prominent single-unit dealer- Boland Maloney, to their most recently listed acquisition, the actively expanding Rosen Materials, of South Florida. Interestingly, USLBM was founded just two years prior to CNRG, in 2009. With all the news the company has made through its many significant acquisitions, it seems as if this company has been around forever.
US LBM’s growth through expansion has been so successful and rapid that it is now a rumored target of takeover itself. Recently US LBM received inquiries from at least one private equity firm as to the viability of a partnership (takeover). With all the financial struggles this industry has experienced during the past decade, the intrusion of capital investments from outside is an indication of a true new upside the industry is entering.
The recent news that Texas-based regional Builders FirstSource has reached an agreement to acquire the significantly larger national power ProBuild Holdings, again portends a likely rosy future financial picture for the industry as a whole. As Builders FirstSource is publicly traded, federal regulatory scrutiny remains a potential obstacle. In this instance most observers expect the FTC to launch few objections. In any case the idea of a public company investing in a much larger entity is a string indication that this industry has turned a tough financial corner.
Similarly, longtime top industry pro dealers, Stock Building Supply and Building Materials Holding Corporation also recently announced plans to merge operations. This too awaits the normal channels of approval. As Stock is publicly held, the deal is expected to close in the fourth quarter of 2015.
From the distribution side of our industry, ENAP Inc. and The Progressive Affiliated Lumbermen Co-op plan to merge to an entity to be known as LBM Advantage. The plan is for these two major buying groups to maintain their current headquarters locations and add an additional office to better serve their combined clientele. This is the first such merger of buying groups since Hardware Wholesalers, Inc. (HWI) joined forces with Our Own Hardware, to form the Minnesota-based regional co-op, Do It Best as the industry’s second largest co-op after Ace.
All this aggressive activity indicates a rather healthy bent for our industry. The above companies see these investments as enhancing combined corporate strengths as well as buying power. This should allow these companies to better compete in a world, not just an industry, where buying power leads to more than merely better purchasing terms. It stands for better margins and increased customer sales and loyalty. Buying power now equals greater control of a corporate destiny.