We thought 2021 and 2022 were strong years for mergers and acquisitions in distribution, which was true.
But 2023 was on a whole other level.
During certain months of this past year, it was a challenge just to keep up with the volume of M&A news. At times our staff would be busy writing up new announcements as several more of them reached out email inbox.
M&A has been a key industry driver in distribution for at least a century, and as evidenced by 2023, this industry is thriving when it comes to companies finding business partners that will enable further prosperity.
In this MDM Premium piece, let’s examine the figures behind 2023’s mega year in M&A activity that encompass industrial, commercial and building supply distributors, as well as manufacturers that sell into the channel. We’ll also highlight some of the biggest news of the past year, and look to what 2024 may have in store.
2023 M&A Volume
First, let’s preface 2023’s figures with the context of the previous two years. In 2021, we published news involving 258 different M&A transactions involving distributors and relevant channel manufacturers. 2022 was nearly identical with 263.
That’s an average of about 22 deals per month in those years. Again, a healthy clip by industry standards.
Those numbers were blown away by 2023, in which we posted news covering a whopping 403 transactions. That’s a 53.2% jump from 2022 and an average of 33.6 M&A deals per month — better than one per day.
2023 started gangbusters, with an incredible 50 transactions covered by MDM in January. That’s the most I’ve seen in my 9 years covering distribution. No other month matched January, but four other months reached 40+, including December bookending the year with 40 transactions. The weakest volume month was March with 22 transactions, compared to 2022’s lowpoint of 13 deals in February.
The visual speaks for itself in terms of M&A activity in 2023 vs. 2022. Again, 2022 was a healthy dealmaking year by any recent historical measure. And it’s likely that the first five months of 2022 were still hamstrung by conservative measures coming out of the COVID-19 pandemic. But even accounting for the pandemic, 2023 was a major step up.
Big Deals
The numbers above illustrate the remarkable M&A volume of 2023. And while the vast majority of transactions we covered last year were small, tuck-in deals by platform distributors — often backed by private equity — there were plenty of high-profile deals.
Let’s touch on some of the biggest deals of 2023 by disclosed transaction terms, or ones that were the most-viewed by the MDM audience.
- In December, Dallas-based private equity firm Trive Capital announced that it had acquired six distributors of pipe, valves and fittings and combined them to form Venturi Supply. It is comprised of BPS Supply Group, Producers Supply Company, Tri Star Industrial, Ameripipe Supply, Industrial & Construction Enterprises, and Albuquerque Pipe & Pump Supply.
- On Nov. 30, private investment firm Clayton, Dubilier & Rice closed on its $2.3 billion purchase of packaging, JanSan and print products distributor Veritiv Corp. Veritiv had 2022 total revenues of $7.1 billion, while its JanSan revenue was large enough to place the company on MDM’s 2023 Top JanSan Distributors List. CD&R has been behind a handful of the largest deals in the distribution sector over the past decade.
- On Oct. 31, BradyIFS and Envoy Solutions announced the completion of their landmark merger that results in a Jansan, foodservice and packaging supplies distributor with combined revenues of nearly $5 billion.
- On Aug. 1, HD Supply completed its acquisition of Houston-based flooring supplier Redi Carpet, which had 2022 sales of $457 million, according to Floor Covering Weekly. It marked HD Supply’s first acquisition since it was re-acquired by The Home Depot in late 2020.
- In early June, MRO supplies, OEM and electronic test equipment distributor Distribution Solution Group completed its acquisition of industrial/electrical distributor Hisco for $269 million. That deal may still have a final purchase price of up to $319 million. DSG was formed through the 2022 merger of Lawson Products, TestEquity and GexPro Services.
- On May 30, electrical supplies distributor Rexel’s announced it would acquire HVAC distributor Watsco in a deal valued at $518 million. In September, Watsco acquired plumbing and HVAC distributor Gateway Supply for $103 million.
- On April 25, electrical supplies distributor Graybar announced it would acquire Valin Corp., a well-known distributor of automation, filtration, fluid handling, heating and process control products and systems. Valin had 2022 revenues of $153 million.
- In January, plumbing distributor Hajoca announced a partnership with HVACR distributor Gustave A. Larson in which Hajoca took majority ownership. In GA Larson, Hajoca added a family-owned distributor with over 500 employees across 50+ locations to its network.
Our most-viewed M&A news item — by far — covered plumbing and industrial supplies distribution giant Ferguson’s trio of acquisitions it announced on Aug. 2. That involved Ferguson acquiring plumbing distributor Bruce Supply Corp. (Brooklyn, NY); waterworks distributor The Kennedy Companies (Mount Laurel, NJ); and HVAC distributor S. G. Torrice (Wilmington, MA). Ferguson stated that those three companies generate aggregate annual revenues of approximately $450 million.
As covered in our Top News of 2023 blog, that Ferguson item was MDM’s most-viewed news item published during 2023, and by a wide margin.
Large deals involving manufacturers with disclosed terms included private equity firm KKR buying Burlington, MA-based flow control products manufacturer CIRCOR for $1.6 billion; pumps and compressors maker Ingersoll Rand buying Howden Roots from Chart Industries for $300 million; Stanley Black & Decker’s intention to sell its attachment tools unit to Sweden-based Epiroc AB for $760M; Ingersoll Rand to Buy Howden Roots Brand for $300M — On June 12, global pumps and compressors manufacturer Ingersoll Rand announced it has agreed to acquire Howden Roots LLC from Chart Industries, Inc. for an all-cash purchase price of approximately $300 million.
Frequent Headliners
Besides the biggest deals, there were a handful of distributors that frequented our headlines by making numerous tuck-in acquisitions:
- Foodservice packaging, industrial and JanSan supplies distributor Imperial Dade acquired 18 companies in 2023
- Roofing and other building materials distributor Beacon made 10 deals in 2023;
- Fluid power, automation, flow control and compressor products distributor Motion & Control Enterprises made eight deals in 2023;
- Industrial rubber and fluid power distributor Singer Industrial (formerly SBP Holdings) made eight deals in 2023;
- AFC Industries made seven deals in 2023;
- BradyIFS (5) and Envoy Solutions (6) made a combined 11 acquisitions before the two distributors merged at the end of October, and they announced another three deals since.
- Building products distributor SRS Distribution made five deals in 2023
2024 Slowdown?
With the calendar now turned to 2024, it’s interesting to try and predict how activity volume will compare with 2023. While I think we’ll see volume that is ahead of 2022’s, it’s unlikely that it’ll come close to matching 2023, only due to the consensus economic forecasts for a soft landing or light recession for much of the year. Private equity is said to be behind at least half of all M&A activity in distribution, but even if investment banks have plenty of dry powder left to spend, they may be a little less eager to pull the trigger on M&A investments as they watch distributors’ profit margins and EBITDA shrink in 2024.
Nevertheless, I’m expecting another busy year of dealmaking in the industrial, commercial and building supply sectors that are on MDM’s radar. As always, stay tuned to MDM for all the latest M&A news!
2023 Monthly M&A Roundups (number of deals):
- December (40)
- November (28)
- October (43)
- September (24)
- August (40)
- July (23)
- June (27)
- May (37)
- April (40)
- March (22)
- February (29)
- January (50)
Recommended reads:
Check out our 3Q23 M&A Report — released mid-October — which features exclusive metrics on U.S. deal volume, trading multiples and the stats on 25 publicly-traded industrial distributors, courtesy of investment bank Houlihan Lokey. Our 4Q23 M&A Report will publish in mid-January.
Check out the following MDM Premium pieces that extracted key takeaways from our 2023 virtual M&A Summit this past February:
