While countless offices in this country have the NCAA Men's Basketball Championship pool sapping the life out of productivity this week, I'm guessing there are at least a few pools estimating the date of sale for Home Depot Supply. I don't know what the Vegas odds are, but the probability is close to 100 percent in my book that we see a deal happen. Here's why I think it will be sooner rather than later.
Home Depot CEO Frank Blake said that it was important to determine a course of action for HD Supply so that the company didn't have a foot on the dock and a foot on the boat, as MDM reported on the company's refocus on retail.
Let's get out the spyglass and look at that statement. If you are on the dock, i.e. coming from outside the distribution industry from the land of GE and juggernaut retail, the ship used to look not only unsinkable, but modular in terms of making it bigger in more attractive growth markets than the pond you've been dominating to the point of having little room to navigate. If you are on the deck, or captain of another ship in these waters, you start wondering if the parts fit together to build a big engine, or just create too much ballast to move forward.
There are some very different business models and profit-margin structures roped together to float this raft of some very solid companies. It's hard to imagine identifying and extracting the necessary synergies from suppliers and all the internal efficiencies at this scale and level of complexity unless you have a long-term commitment. At some point last year, there must have been an "ah-ha" moment somewhere in Atlanta, when it became clear that it was going to be a lot bigger job to digest the pieces and hit the numbers needed in that numbers-focused, publicly-traded company. So at this point, it's number-crunching and scenario time, to yield the maximum return on investment.
Any thoughts? Please comment on why you think the tide has shifted on the primary industry consolidator of the past few years.