KROLL Specialty Distribution Industry Summary
Core Industry Insights
- M&A Activity: M&A activity in the North American Specialty Distribution industry slowed in the TTM Jun-24 period, with a year-on-year (YoY) decrease of 9% compared to TTM Jun-23.
- Market Challenges: Elevated interest rates, macroeconomic uncertainty, and differing value expectations between buyers and sellers posed challenges.
- Strategic Buyers: Strategic buyers represented approximately 92% of acquisition activity in TTM Jun-24, consistent with historical trends.
- Positive Outlook: Despite the slowdown, the M&A outlook remains positive due to accumulated dry powder, pressure on private equity to deploy capital, and the fragmented nature of the industry.
- Sector Performance: The specialty distribution sector underperformed the S&P 500 by 9.0% year-to-date (YTD) through August 2024.
- EV/EBITDA Multiple: The industry had an average EV/TTM EBITDA multiple of 10.4x.
Market Trends and Subsectors
Subsector Overview
| Subsector |
Median EV/TTM EBITDA Multiple |
Description |
Key Industry Participants |
| Consumer Discretionary |
13.4x |
Distributors of nonessential consumer goods and services. |
The Chefs' Warehouse, PVH, V.F. Corporation, Pool Corporation |
| Consumer Staples |
12.8x |
Distributors of essential goods, including food, beverages, and personal care. |
Kimberly-Clark, P&G, United Natural Foods, Sysco |
| Health Care |
13.5x |
Suppliers of medical products and pharmaceuticals. |
Cardinal Health, Owens & Minor, McKesson, Patterson |
| Industrial |
10.2x |
Distributors of industrial products and components across various end markets. |
Fastenal, Ferguson, MRC Global, WESCO, Grainger |
| Technology |
12.9x |
Distributors of hardware, software, and technology services. |
AVX, e+ Insight, TD SYNNEX, Arrow Electronics, Avnet |
Performance by Subsector (YTD Aug-24)
- Consumer Discretionary: -7.4%
- Consumer Staples: 13.7%
- Health Care: 11.1%
- Industrial: 10.1%
- Technology: 12.8%
- S&P 500: 17.9%
Recent M&A Transactions
| Buyer |
Target |
Subsector |
Date Closed |
Enterprise Value (EV) |
Implied EV/EBITDA Multiple |
Target Description |
| The Home Depot |
SRS Distribution, Inc. |
Industrial |
June 2024 |
$18.3 Billion |
16.6x |
Leading residential specialty trade distributor. |
| WT Microelectronics |
Future Electronics |
Technology |
April 2024 |
$3.8 Billion |
16.7x |
Global leader in electronics distribution. |
| Clayton, Dubilier & Rice |
Veritiv |
Industrial |
November 2023 |
$2.3 Billion |
6.1x |
Full-service provider of packaging, JanSan, and hygiene products. |
| Sysco |
Edward Don & Company |
Consumer Staples |
November 2023 |
$970 Million |
NA |
Leading distributor of foodservice equipment and supplies. |
Public Companies Analysis
Key Performance Metrics
| Company Name |
Price at 08/28/24 |
% of 52-Week High |
Median EV/TTM EBITDA Multiple |
YTD Performance |
| The Chefs' Warehouse, Inc. |
$42.19 |
94.6% |
13.4x |
-7.4% |
| A-Mark Precious Metals, Inc. |
$35.98 |
84.7% |
13.4x |
-10.2% |
| V.F. Corporation |
$18.25 |
88.2% |
17.1x |
-10.2% |
| Pool Corporation |
$349.63 |
82.7% |
21.6x |
-7.1% |
| PVH Corp. |
$97.75 |
69.3% |
7.2x |
-0.5% |
| Capri Holdings Limited |
$35.90 |
67.7% |
15.2x |
-8.7% |
| Tapestry, Inc. |
$40.70 |
83.4% |
7.6x |
0.2% |
| Weyco Group, Inc. |
$34.17 |
97.0% |
6.0x |
-14.1% |
Key Performance Metrics (Health Care Distribution)
| Company Name |
Price at 08/28/24 |
% of 52-Week High |
Median EV/TTM EBITDA Multiple |
YTD Performance |
| Avantor, Inc. |
$25.56 |
91.3% |
13.5x |
-4.9% |
| Cardinal Health, Inc. |
$111.04 |
95.7% |
9.7x |
-10.3% |
| Cencora, Inc. |
$236.45 |
95.5% |
13.5x |
-6.3% |
| Henry Schein, Inc. |
$70.48 |
85.3% |
14.8x |
-0.9% |
| McKesson Corporation |
$556.70 |
87.3% |
15.1x |
-5.7% |
| Patterson Companies, Inc. |
$22.48 |
69.0% |
7.8x |
-3.4% |
| W.W. Grainger, Inc. |
$968.34 |
93.6% |
17.6x |
4.6% |
| Watsco, Inc. |
$472.51 |
90.8% |
23.8x |
-5.9% |
| WESCO International, Inc. |
$163.71 |
83.8% |
8.8x |
-11.7% |
Key Performance Metrics (Technology Distribution)
| Company Name |
Price at 08/28/24 |
% of 52-Week High |
Median EV/TTM EBITDA Multiple |
YTD Performance |
| Arrow Electronics, Inc. |
$133.61 |
98.7% |
7.6x |
-17.2% |
| Avnet, Inc. |
$54.47 |
97.6% |
7.6x |
-10.5% |
| CDW Corporation |
$224.50 |
85.2% |
17.9x |
-6.4% |
| ePlus inc. |
$94.24 |
97.3% |
13.3x |
0.7% |
| Insight Enterprises, Inc. |
$214.36 |
94.0% |
14.3x |
-6.9% |
| TD SYNNEX Corporation |
$122.28 |
91.4% |
8.2x |
-7.4% |
Key Transactions
- Sunrise Electric Supply was acquired by Sonepar in October 2023, signaling Sonepar's commitment to grow in the second-largest electrical market in the country.
- Microcel was acquired by Bain Capital Private Equity.
- Tristar Industrial was acquired by Venturi Supply, a portfolio company of Trive Capital.
- Triple F Holdings was acquired by Venturi Supply, with Kroll as the exclusive financial advisor.
Conclusion
The specialty distribution industry experienced a slowdown in M&A activity in the TTM Jun-24 period, primarily due to macroeconomic challenges and high interest rates. However, the outlook remains positive, driven by the availability of private equity capital and the industry's fragmented nature. The sector underperformed the S&P 500, with varying performance across subsectors. Strategic buyers dominated the market, and several notable transactions highlight the ongoing consolidation and growth opportunities within the industry.
