There's a succession problem among distributors. According to Stephen Hoffmeister, a partner with Advent International – the private equity firm that recently made a majority investment in HVAC and plumbing supplies distributor Morrison Supply Company – the recession exacerbated a problem that already existed: Many of the owners who want to move onto the next stage of their lives just don't have a plan in place to make that a reality.
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"Many of those same companies had hoped to find a solution, an exit, something … and then the market turned down," Hoffmeister told me in a recent interview. "Now it’s been three, four years of very difficult conditions, no opportunity for an exit."
The answer may come from consolidators, such as Morrison Supply, Hoffmeister says.
Chip Hornsby, CEO of Morrison Supply and former CEO of Wolseley, agrees. "I think we can offer an alternative to that ownership to become a part of our organization."
And there seems to be growing interest among consolidators, some back by private equity – such as BlackHawk Industrial Distribution or US LBM Holdings – to maintain the identities of these acquired companies and build on the already established reputations of the companies they acquire. (Read about the role of private equity in distribution in this MDM special report: Private Equity Drives Deal Demand)
Going forward, there will be even more options for owners of distributors looking to move on, as the prices consolidators are willing to play come more in line with the prices distributors want. And if your company is solid, the odds are even more in your favor.
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