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MDM 4Q 2023 M&A Report

The report features in-depth articles that recap the year that was 2023 in distribution dealmaking, a full rundown of every deal we covered in October-December, the latest EBITDA trading multiples and more.

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MDM 3Q 2023 MarketPulse Report

Find a wealth of data and analysis extracted from the 3Q23 Baird-MDM Industrial Distribution Survey, including trending charts and figures for revenue and expectations, plus plenty of interesting commentary.

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Our 2023 third quarter M&A report features in-depth articles on activity by Ferguson and Veritiv, and chronicles the overall quarterly pace of new deals.
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Top Distributor Sectors
Lessons from Avnet’s Rapid Growth

In November, Roy Vallee, executive chairman of electronics distributor Avnet (NYSE: AVT), will retire after 35 years with the company. He served as president and COO from 1992 until 1998, when he was promoted to CEO - a position he held until July 2011. During his tenure, Vallee saw Avnet grow from a $2 billion company to a $26 billion company. Vallee recently spoke with Associate Editor Jenel Stelton-Holtmeier about his career at Avnet and the role acquisitions played in the success of the distributor.

 

MDM: Avnet's growth is in large part attributed to its acquisition strategy. But integration can sometimes be a challenge - finding a balance between maintaining the culture and what attracted Avnet to the company while at the same time making the acquired company a part of Avnet. How did Avnet achieve success with this? And how can other companies make it a smoother process?

Roy Vallee: We did our first large-scale integration back in 1993. And we had to figure out then the best way to deal with it. But one of the first things we decided was that we'd document the process that we used so that with our next acquisition, we could ...

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Commentary: The Power of Segmentation

The wholesale distribution industry is about to experience a smack-down wrestling match with big data, and in many cases, big data is going to win. Why? Through no particular fault of any management role or responsibility within an organization, many companies don’t have a data management policy. That means there may be multiple records of customer bill-to and ship-to with dirty data – which may be as simple ...

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Make Your Data Work to Grow Profitability

MDM Editor Lindsay Konzak recently attended the Advanced Profitability Improvement Conference in Arizona, featuring some of the top speakers on wholesale distribution strategy and management, including Brent Grover, Bruce Merrifield, Tony Pericle, Jon Schreibfeder and more. The focus of the conference was how distributors can make smarter and more informed decisions about where to target their resources to boost margins going into 2013. Analytics should be the foundation of any move on this front, the speakers said. This article presents a summary of main ideas presented by some of the speakers at the conference.

Expenses exceed gross profit on too many sales, according to Randy MacLean of Waypoint Analytics. In fact, he says, “there is no correlation between gross margins and profit.” He was speaking at the semiannual Advanced Profitability Improvement Conference in September in Scottsdale, AZ. So what happens? Where do the profits go?

MacLean says there are five ways profits disappear before reaching the bottom line.

The cost to serve a ...

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2Q Shipments in Canada Up 0.7%
Source: Statistics Canada
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Manufacturing shipments in Canada tumbled in June, falling&nbsp ; 1.8% to&nbsp ; $48.6&nbsp ; billion. This was the largest decrease since January and the third consecutive monthly decline.


Despite these decreases, second-quarter shipments still managed to gain&nbsp ; 0.7% compared with the first quarter of&nbsp ; 2007. This was due to high shipment levels at the start of the second quarter after a particularly strong March. Examining the first six months of this year, manufacturing shipments were up&nbsp ; 0.1% compared with the first six months of&nbsp ; 2006.
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Using constant dollars, which take price fluctuations into account, the volume of manufacturing shipments decreased&nbsp ; 1.7% in June to&nbsp ; ...
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MAPI Forecast: Inflation-Adjusted GDP Growth Will Slow
In the face of continuing weakness in the housing sector, growth in the U.S. economy is expected to be slower than previously anticipated, according to a new Manufacturers Alliance/MAPI quarterly report.

The Manufacturers Alliance/MAPI Quarterly Economic Forecast predicts that inflation-adjusted GDP growth, 3.3 percent in 2006, will slow to 1.9 percent in 2007 before regaining some strength, rising to 2.5 percent in 2008.

The most recent forecast represents a pullback from the May 2007 report, when MAPI envisioned GDP to grow by 2.3 percent in 2007 and by 3.0 percent in 2008. By supplying major assumptions for the economy and running simulations through the Global Insight Macroeconomic Model, the Alliance generates unique macroeconomic and industry forecasts.

...
Top Distributor Sectors
June Machine Tool Consumption up 5.1%
June U.S. manufacturing technology consumption totaled $347.70 million, according to The Association For Manufacturing Technology and the American Machine Tool Distributors' Association. This total, as reported by companies participating in the USMTC program, was up 5.1% from May, and up 0.4% from the total of $346.47 million reported for June 2006. With a year-to-date total of $1,982.52 million, 2007 was up 7.7% compared with 2006.
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These numbers and all data in this report are based on the totals of actual data reported by companies participating in the USMTC program.
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Through the first half of this year, manufacturers have continued to increase purchases of advanced production equipment," said John B. Byrd III, AMT President. "These strategic investments ...
Top Distributor Sectors
Housing Starts Down 6.1% in July
According to the U.S. Census Bureau and the Department of Housing and Urban Development, privately-owned housing starts in July were at a seasonally adjusted annual rate of 1,381,000. This is 6.1 percent below the revised June estimate of 1,470,000 and is 20.9 percent below the revised July 2006 rate of 1,746,000.
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Single-family housing starts in July were at a rate of 1,070,000; this is 7.3 percent below the June figure of 1,154,000. The July rate for units in buildings with five units or more was 275,000.

Building Permits
Privately-owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 1,373,000. This is 2.8 percent below the revised June rate of 1,413,000 and is 22.6 percent (& plusmn; 1.3%) below the ...
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Industrial Production Up 0.3% in July
Industrial production rose 0.3 percent in July after an increase of 0.6 percent in June. At 113.9 percent of its 2002 average, total industrial production in July was 1.4 percent above its year-earlier level. In July, manufacturing output moved up 0.6 percent and mining output advanced 0.7 percent, but the output of utilities fell 2.1 percent.

Capacity utilization for total industry edged up to 81.9 percent, a rate 0.5 percentage point below the level in July 2006 but 0.9 percentage point above its 1972-2006 average.

Full industrial production/capacity utilization details <a href=/databank/ipcu0707.pdf" ...
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Wholesale Prices Up 0.6% in July

Wholesale prices advanced 0.6% in July, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported. This increase followed a 0.2% decline in June and a 0.9% rise in May.

At the earlier stages of processing, prices received by manufacturers of intermediate goods rose 0.6% in July compared with a 0.5% gain in June, and the index for crude materials climbed 1.2% subsequent to a 0.3% increase a month earlier.
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Among prices for finished goods, the index for energy goods rose 2.5% in July following a 1.1% decrease in June. Prices for finished consumer foods inched down 0.1% after declining 0.8% in the previous month. By contrast, slightly counteracting the upturn in finished goods prices, the increase in the index for finished ...
Economic Trends
Wholesale Revenues Rise 7.7% in First-Half 2007

Wholesaler-distributor revenues were $2.08 trillion in the first half of 2007, up 7.7% from the first half of 2006, unadjusted for seasonal variations. Wholesale revenues for durable goods were up 5.2%, and nondurable goods sales were up 9.6%. Here's the breakdown in sales changes by sector for the first half of 2007:



Durable.................................................. Change&nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ;
Automotive.................................................. 2.7%&nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ; &nbsp ;
Furniture................................................... 11.7%&nbsp ...
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Monthly Wholesale Trade – June 2007
June 2007 sales of merchant wholesalers, except manufacturers'sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $359.5, up 0.6 percent from the revised May level and were up 8.1 percent from the June 2006 level. The May preliminary estimate was revised upward $0.2 billion or 0.1 percent. June sales of durable goods were up 0.7 percent from last month and were up 4.9 percent from a year ago. Compared to last month, sales of computer and computer peripheral equipment and supplies were up 5.4 percent.
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Inventories. Total inventories of merchant wholesalers, except manufacturers'sales branches and offices, after adjustment for seasonal variations but not for price changes, were $398.5 billion ...
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MDM Inflation Index: June 2007
Modern Distribution Management's June Inflation Index, which measures a cross-section of industrial supplies, was up 0.18% from the previous month, and up 3.32% from June 2006.


Summary of&nbsp ; MDM Inflation Index for the past 12 months:
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June 2007 Index 271.7
May 2007 Index 271.2
April 2007 Index 270.8
March 2007 Index 269.6
February 2007 Index 269.4
January 2007 Index 268.7
December 2006 Index&nbsp ; 267.1
November 2006 Index 266.5
October 2006 Index 265.9
September 2006 Index 265.6
August 2006 Index 265.2
July 2006 Index 264.0
June 2006 Index 263.0

Please click below to view a print-ready pdf of the&nbsp ; MDM Inflation Index for June 2007, listing the ten individual product categories ...
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Marriages of Manufacturers, Distributors a Difficult Balancing Act
A few events do not make a trend. But I've noticed a few instances lately where manufacturers have bought up distribution in select markets. Examples: In July, a Swedish manufacturer of seals, Trelleborg, acquired AFM in Portland, OR, a $13-million distributor. HVAC manufacturer Carrier Corp. announced in June it was buying a $150-million distributor serving northern California and Nevada, E.B. Ward and Valair, with 140 employees.

It stirs memories of the difficult balancing act and sometimes rocky road cutting tool manufacturer Kennametal found when it operated an industrial distribution division while also managing independent distribution networks. It finally spun off its distribution units.

The reason given by Carrier for its purchase of distribution: The ...
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June Wholesale Revenues Up 0.6% from May
June 2007 sales of merchant wholesalers, except manufacturers'sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $359.5, up 0.6 percent from the revised May level and were up 8.1 percent from the June 2006 level. The May preliminary estimate was revised upward $0.2 billion or 0.1 percent. June sales of durable goods were up 0.7 percent from last month and were up 4.9 percent from a year ago.
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Compared to last month, sales of computer and computer peripheral equipment and supplies were up 5.4 percent. June sales of nondurable goods were up 0.5 percent from last month and were up 11.1 percent from last year.
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Total inventories of merchant wholesalers were $398.5 billion at the end of ...
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Manufacturing Expands in July
Economic activity in the manufacturing sector expanded in July for the sixth consecutive month, while the overall economy grew for the 69th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.
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Following a strong second quarter, the manufacturing sector moderated somewhat in the past month. In July, manufacturing expanded at its slowest pace in the last four months, but continuing strength in New Orders and Production indicate that third quarter performance should still be quite good, ISM reported. Upward pricing pressures now in their seventh month continue to be a major concern for supply managers.
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The 10 industries reporting growth in July & mdash; listed in order & mdash; are: Wood Products; Furniture ...
Economic Trends
U.S. Manufacturing Shipments Down in June
New Orders
New orders for manufactured durable goods in June increased $3.0 billion or 1.4% to $217.1 billion, the U.S. Census Bureau announced. This was the fourth increase in the last five months and followed a 2.3% May decrease. Excluding transportation, new orders decreased 0.5%. Excluding defense, new orders increased 1.9%.
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Shipments
Shipments of manufactured durable goods in June, down following three consecutive monthly increases, decreased $2.3 billion or 1.1% to $212.5 billion. This followed a 0.6% May increase.
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Unfilled Orders
Unfilled orders for manufactured durable goods in June, up 25 of the last 26 months, increased $10.7 billion or 1.5% to $736.5 billion. This was at the highest level since the series was first ...
Economic Trends
Canadian Distributor Sales Rise Slightly in May
Source: Statistics Canada
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Following April's sharp decline, Canadian wholesale sales posted a modest rebound in May with most sectors registering gains.


Overall sales rose&nbsp ; 0.6% to&nbsp ; $43.1&nbsp ; billion in May, offsetting some of April's large drop (-3.0%). Five of the seven wholesale sectors reported higher sales in May, with the largest gains observed in the machinery and electronic equipment (+2.1%) and other products" (+1.9%) sectors. More modest rises were recorded by wholesalers of building materials, personal and household goods and automotive products.

These gains were partially offset by lower sales in the food, beverages and tobacco products sector, which posted its first decline of&nbsp ; 2007, and the farm products ...
Top Distributor Sectors
Construction Spending Down Slightly in June
Construction spending in June 2007 was estimated at a seasonally adjusted annual rate of $1,175.4 billion, 0.3% below the revised May estimate of $1,178.4 billion. The June figure is 2.4% below the June 2006 estimate of $1,204.0 billion.
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During the first six months of the year, construction spending amounted to $550 billion, 3.5% below the $570.1 billion for the same period in 2006.
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Spending on private construction was at a seasonally adjusted annual rate of $890.9 billion, 0.3% below the revised May estimate. Residential construction was at a seasonally adjusted annual rate of $544.4 billion in June, 0.7% below the revised May estimate of $548.3 billion. Nonresidential construction was at a rate of $346.6 billion in June, 0.3% above the revised May ...
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Advance GDP Estimate: Growth of 3.4% in 2Q
Real gross domestic product -the output of goods and services produced by labor and property in the U.S. -increased at an annual rate of 3.4% in the second quarter of 2007, according to advance estimates released by the Bureau of Economic Analysis.&nbsp ; In the first quarter, real GDP increased 0.6%.
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The Bureau emphasized that the second-quarter advance" estimates are based on source data that are incomplete or subject to further revision by the source.&nbsp ; The second-quarter "preliminary" estimates, based on more comprehensive data, will be released on Aug. 30, ...
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Get Paid for the Value You Add

The last five years have been rough for distributors. Price pressure and intense competition have eliminated razor-thin margins, pushing many distributors to the brink. In addition, distributors have gotten into the habit of "giving away" value-added services in hope of winning deals, driving costs to historic heights. The solution: Revamp pricing based on the value you provide in each segment.

Many distributors believed that a resurgent economy would allow them to raise prices, but customers have been resistant. For most distributors, attempts at price increases are simply not taking hold.

Fortunately, there is a better, more profitable approach. The solution is to develop products and services that target unique segments with very specific offers. For most ...

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Monthly Wholesale Trade: May 2007

May 2007 sales of merchant wholesalers, except manufacturers'sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $357.2 billion, up 1.3 percent from the revised April level and were up 8.7 percent from the May 2006 level. The April preliminary estimate was revised upward $0.8 billion or 0.2 percent. May sales of durable goods were down 0.5 percent from last month, but were up 4.2 percent from a year ago. Compared to last month, sales of motor vehicle and motor vehicle parts and supplies were down 5.3 percent. May sales of nondurable goods were up 2.9 percent from last month and were up 13.1 percent from last year.


Inventories. Total inventories of merchant wholesalers, except ...

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Commentary: It’s Time to Shed Your Unprofitable Business

Despite pressures from commodity price increases the past few years, many distributors are finding it hard to raise prices. The traditional method of price increases has too often been to throw five percent (or another guesstimate) against the wall to see if it sticks.


The authors of the article in this issue argue that there is a better, more profitable approach. The solution is to develop products and services that target unique segments with very specific offers. For most distributors, this involves developing a range of offers from the high end (with all the bells and whistles) to the low end (no frills).


The key, the authors say, is to segment the market and build specific offers based on your unique ability to drive economic value (e.g. revenue growth or cost ...

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