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This is a part of the 2017 Distribution Trends Special Issue. The annual feature was researched and written by MDM based on interviews with dozens of distributors, industry experts and manufacturers. MDM also conducted a survey of its readers to uncover the trends outlined in this issue.
2017 Distribution Trends Special Issue
ABC Supply reclaims top spot on Market Leaders list. The ever-consolidating building materials & construction distribution sector saw another year of movement among the top 10 companies, most notably following ABC Supply Co. Inc.'s acquisition of L&W Supply Corp. from USG Corp. for $670 million. This deal combined two of the nation's largest building materials distributors – ABC Supply was No. 2 on last year's and L&W was tied for No. 10 – and helped ABC Supply reclaim the No. 1 spot, which it held from 2011-2015. ABC Supply replaced last year's No. 1, Builders FirstSource.
High-dollar acquisitions – some of which occurred in 2015 but whose financial impact wasn't immediately reflected on balance sheets – helped the top 10 distributors in this space average 27.7 percent revenue growth last year. The sector was also aided by favorable weather and mostly positive residential and commercial construction, which continues its steady climb from the depths of the Great Recession.
What we talk about when we talk about infrastructure investment. HD Supply CEO Joe DeAngelo mentioned President Trump's commitment to infrastructure in recent earnings calls while other distributors say they remain hopeful that new projects will spark even more activity for the sector. The new administration proposed a $200 billion investment in infrastructure spending over 10 years, part of a larger $1 trillion plan. Though the plan hasn't passed, the prospect of large-scale construction projects has building materials & construction distributors bullish for the rest of 2017 and beyond.
Labor at contractor level will limit growth. Labor shortage is creeping into the customer channel, says Dan Tinker, CEO, SRS Distribution, McKinney, TX. Not only does distribution as a whole struggle to find qualified talent, but homebuilders and remodelers have a shortage of tradesmen to handle everything from installation to framing to plumbing to electrical. While this will cause some project delays, there is a silver lining – it could keep the market from bubbling over, Tinker says. "It does feel like new construction is not going to be able to lift significantly from where we are, which I think is good thing because it will make the cycle of new construction last longer," he says. "Slow and steady growth for a longer time."
Merger & acquisition highlights in 2016:
ABC Supply Co. Inc. paid $670 million for L&W Supply. The company also acquired GK Building Supply Corp., T&C Supply, Sidewinder Supply Inc., Ace Aluminum Distributors Inc., Trumbull Vinyl Products Inc.
Beacon Roofing acquired five companies.
US LBM made four acquisitions.
BlueLinx sold its Jackson, MS, Little Rock, AR, and Shreveport, LA, facilities.
SRS Distribution was acquisitive in 2016, adding six companies to its portfolio.
Average growth for companies on the Building Materials & Construction Market Leaders list: 27.7%