New Owners: HD Supply Will Maintain Acquisitive Strategy

HD Supply's new owners said that it is premature to say whether they will divest any of the $12 billion distributor's assets after taking full ownership, said David Novak, a partner at Clayton Dubilier & Rice, one of the three private equity firms that have agreed to buy the unit from The Home Depot Inc. for $10.3 billion.

Bain Capital LLC, Carlyle Group and CD&R are splitting the investment evenly, Novak said.

Though there are no immediate plans for HD Supply's current assets, the new owners do plan to continue building the company through acquisitions. "That we will certainly do," Novak told MDM. "Local scale is very important for productivity and service levels."

That means that HD Supply, with $12 billion in sales in 2006, will continue as a major player in the distribution M&A market.

This follows CD&R's growth strategy with other distributors it has invested in, including the $12 billion electrical distributor Rexel, which has made 15 acquisitions since CD&R (with a team of firms) invested in it, and WESCO International Inc., which acquired more than $500 million in annualized sales over four years of CD&R investment.

Joe DeAngelo and other key members of management will be staying with HD Supply, Novak said. In addition, there are no immediate plans to change HD Supply's name.

Novak said well-run distributors continue to be an attractive investment opportunity for private equity because the risk is spread over a number of customers, product lines and manufacturers.

HD Supply's new owners plan to make the distributor a long-term investment. "With distribution, you can't make changes overnight," Novak said.

Novak said that the purchase of HD Supply is a "great example of how private equity can help businesses like these make needed changes to go to the next level of profitable growth."

Beyond the HD Supply Factor: Order the CD and transcript from MDM's recent audio conference to gain more perspective on how HD and other big players' moves have affected the market and the impact of outside investment on the channel. Also learn practical tips from industry experts such as what it's like to work for a private equity firm and median valuations for big, medium and small businesses.

Also available, order the CD from MDM's audio conference on Succession Planning.

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