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This article is part of the 2012 Distribution Trends Report, an annual update for MDM Premium subscribers. Access the full distribution trends report here.
1. Regional distributors continue to consolidate. Growth has been significant for regional consolidators over the past several years in this sector. For example, Lewis-Goetz and Co., the largest in the sector, grew from $340 million in revenue in 2010 to $402 million in 2011. Houston, TX-based GHX Industrial grew from $133.6 million in 2010 to $216.7 million, both through acquisitions and organic growth focused on oil & gas markets.
Acquisition activity has been fueled by private equity investment in the sector. Lewis-Goetz was owned by The Audax Group before selling to ERIKS at the end of 2011; The CapStreet Group invested in GHX; and Singer Equities is backed by AEA Investors. Singer Equities was formed to exploit the consolidation opportunities in the industrial rubber products industry and as of the end of 2011, had completed 10 acquisitions of companies with less than $30 million in annual sales over 11 years.
2. New end-market opportunities in oil & gas. Fracking technology has opened up a slew of new geographic opportunities for hose and accessories distributors, many of which have seen strong growth serving the shale oil & gas production supply chain. This has shifted some distributor product mix to meet the unique needs of that market.
3. Demand for safety-related services remains high. This includes site audits, training and other services that ensure that customers are using the products these distributors sell correctly. The main organization in this sector – the Association for Hose and Accessories Distribution (NAHAD) – developed the Hose Safety Institute and Hose Assembly Guidelines to meet demand from members for better training and educational material so that they could better meet customer needs in this area.
2011 and the first half of 2012 marked a continual ramp-up of acquisitions in this sector. Here are some of the major deals executed in 2011 and the first part of 2012.
Dutch distributor ERIKS acquired Lewis-Goetz and Co. in November 2011, doubling its presence in North America. Lewis-Goetz was owned by The Audax Group, a private equity firm.
GHX Industrial acquired McCarty Equipment Co. in 2011, and more recently Key City Warehouse Sales in June 2012.
Singer Equities changed hands at the end of 2011. AEA Investors and management acquired the holding company from LLR Partners.