Commentary: Year Ahead Looks More Positive, More Complex - Modern Distribution Management

Log In

Commentary: Year Ahead Looks More Positive, More Complex


As the lead article in this issue outlines, 2006 is looking more positive than six months ago. Good news. M& A activity is heating up. Most industry observers expect Home Depot’s 12X EBITDA purchase price (almost double valuation multiples of two years ago) for Hughes Supply will continue to reverberate through the industry.

Yet nearly every conversation with distribution executives, particularly those with a majority of larger customers, raises concern about the longer-term economic fundamentals and health of distribution markets. The auto industry may be the most visible, but many large customers are in a state of flux with their manufacturing strategies and supply chain (putting it nicely). That’s adding even more complexity for distributors to plan and manage a business plan that doesn’t look like a Disney movie.

There have always been dysfunctional customer relationships that distributors either managed profitably or not. But the luxury of perpetually trying to turn a dog into a stallion is gone. New business development has to be a core competency of a distributor today regardless of size.

As Adam Fein’s article shows, despite an uptick in consolidation activity in 2005, less than one percent of the 270,000 distributors in the U.S. are companies with annual revenues above $100 million. There are no magic wands, but there are great opportunities for financial buyers, as well as for smart distributors to grow strategically.

It has been the observation of this newsletter for decades that the smart strategic money in distribution tends to outperform the deep pockets. That doesn’t matter much to those with a short-term exit strategy, but a world of difference to those who are still hungry to innovate and find ways to grow.

Share this article

About the Author
Recommended Reading
Leave a Reply

Leave a Comment

Sign Up for the MDM Update Newsletter

The MDM update newsletter is your best source for news and trends in the wholesale distribution industry.

Get the MDM Update Newsletter

Wholesale distribution news and trends delivered right to your inbox.

Sign-up for our free newsletter and get:

  • Up-to-date news in a quick-to-read format
  • Free access to webcasts, podcasts and live events
  • Exclusive whitepapers, research and reports
  • And more!


articles left

Want more Premium content from MDM?

Subscribe today and get:

  • New issues twice each month
  • Unlimited access to, including 10+ years of archived data
  • Current trends analysis, market data and economic updates
  • Discounts on select store products and events

Subscribe to continue reading

MDM Premium Subscribers get:

  • Unlimited access to
  • 1 year digital subscription, with new issues twice a month
  • Trends analysis, market data and quarterly economic updates
  • Deals on select store products and events



You have one free article remaining

Subscribe to MDM Premium to get unlimited access. Your subscription includes:

  • Two new issues a month
  • Access to 10+ years of archived data on
  • Quarterly economic updates, trends analysis and market data
  • Store and event discounts

To continue reading, you must be an MDM Premium subscriber.

Join other distribution executives who use MDM Premium to optimize their business. Our insights and analysis help you enter the right new markets, turbocharge your sales and marketing efforts, identify business partners that help you scale, and stay ahead of your competitors.

Register for full access

By providing your email, you agree to receive announcements from us and our partners for our newsletter, events, surveys, and partner resources per MDM Terms & Conditions. You can withdraw consent at any time.

Learn More about Custom Reports

Request a Market Prospector Demo

  • This field is for validation purposes and should be left unchanged.