Who will be the Next IDG? - Modern Distribution Management

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Who will be the Next IDG?

Sonepar's recent acquisition highlights the "unique" targets companies seek in M&A deals.

A favorable merger and acquisition market played a key role in Sonepar's acquisition of Industrial Distribution Group in September, but the transaction also is representative of the types of targets acquirers may be looking for right now, according to Jason Kliewer, managing director for the investment banking firm Baird in the recent MDM article, IDG’s Journey to Sonepar.

The scarcity of targets in this valuation band increased the attractiveness of the deal – IDG’s established scale and growth strategy allows Sonepar to quickly build on the synergies between the two companies – and this formula could signal future acquisitions in the industry, Kliewer says.

In IDG, Sonepar saw a "unique asset" worth pursuing, Kliewer says. The company was an enticing target for the Paris, France-based global electrical distributor, which for several years, through acquisition and growth, has expanded its North American footprint, mostly in electrical distribution but increasingly adding capability in industrial MRO.

Not only had IDG repositioned its financials for an exit strategy, but a unique climate made for a strong sellers’ market as reported valuations went back to – and even exceeded – pre-recession levels, according to a range of MDM sources. This created an ideal scenario for M&A activity in general and a Sonepar-IDG deal in particular.

"It fits with the broader theme around consolidation in distribution in that the number of middle market or upper middle market distributors is actually very limited," Kliewer says.

IDG also had created a solid foundation for continuing growth across its businesses, particularly through the integrated supply and the oilfield supply businesses. Though regional right now, its oilfield sector could be expanded into a national business serving other developing oil and natural gas areas, which also enhanced IDG's appeal.

Read more about the intricacies of the Sonepar-IDG deal and how more large-scale M&A activity could be on the horizon in IDG’s Journey to Sonepar.

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