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From what we are hearing from every sector of industrial distribution, valuations are nowhere near the levels of a few years ago, but there are still some win-win acquisitions. The article by Paul Smith points to the characteristics that will increasingly define successful mergers. The good points made in the article apply to buyers and potential sellers. By evidence of the lack of success of so many roll-ups over the past five years, value has a distinctly different meaning today than in 1997. That value may increasingly lie in the delicate and very difficult merging of great localized service with some of the capacities of large scale.
There will no doubt have to be fewer distributors competing for fewer customers in the traditional manufacturing sectors as the labor cost advantage in China and other parts of the world continue to reduce this long-time base. But that doesn't mean there won't be new opportunities and new growth industries that emerge over the next few years as we continue to move through this tough transition.
It's important to maintain a perspective about how fragmented this channel is. W.W. Grainger has not become the "Wal-Mart" of the industry. No other player, global or otherwise, has gobbled large chunks of market share across the industry. The thrivers in this industry are the entrepreneurs who continually find new customer needs and ways to fulfill those needs better than someone else.
That's a basic premise that doesn't seem to have changed.