Mergers and acquisitions have long played a role in driving growth in distribution, just as it has for many other industries. "No matter the industry, as markets mature they will consolidate," says J. Michael Marks, managing director of Indian River Consulting Group, in Distribution M&A Playbook, pt. 1: Unlocking Shareholder Value.
But as the industry changes, distributors will have to think about what their role will be. Just look at the numbers:
In 2016, there were more than 244,000 wholesaler-distributors in the U.S. with average revenues of just over $21 million, according to U.S. Census data. More than 200,000 of these firms have fewer than 20 employees and fewer than 200 have revenues exceeding $1 billion. The majority are owner-operator entrepreneurial businesses.
The historical role of the distributor is to provide a reliable anchor in a complex supply chain, connecting the manufacturer down to the end user through retailers and contractors. But as technology improves transparency between partners and eases many of the barriers that have existed to selling more directly, you have to ask yourself if the market really needs 244,000 distributors going forward, Marks notes.
"The entire industry is in a shakeout as each distributor grapples with the transition to digital and multichannel. It is too early to determine the ultimate winners and losers, but current size has historically been a poor predictor."
Acquisitions can help strengthen your company and its position, but only if it's approached carefully and correctly. Done right, it can unlock significant value within your organization; done wrong, it can topple even the most established ones.
Read more about the role M&A will play in changing the distribution landscape in Distribution M&A Playbook, pt. 1: Unlocking Shareholder Value.
Join MDM and IRCG for the first-ever Distribution M&A Executive Workshop, Oct. 9-11, 2017, in Austin, TX. Learn more at distributionMAworkshop.com. Early bird pricing for this event ends July 31!
