Harris Williams professionals regularly attend industry conferences and events. On the flight home, they share three key takeaways to help shape your priorities.
Event: NAW 2020 Executive Summit: Innovate to Dominate
Report by: Bob Baltimore and Graham Gillam, both of the Harris Williams Specialty Distribution Group
Event Overview: The annual NAW Executive Summit, presented by the National Association of Wholesaler-Distributors (NAW), brings together executives and entrepreneurs to explore new ideas, business models and practices in wholesale distribution.
Why is this an important event for professionals active in the industry?
Baltimore: NAW serves 30,000 leading U.S. wholesalers and distributors, which provide a vital link in the supply chain among manufacturers, retailers and end-users. The NAW Executive Summit brings together the best and brightest in the industry to discuss key trends and drivers shaping the industry today and in the future.
Which trends, companies or business models were top of mind at the event?
Gillam: Labor is a big concern. In terms of continued challenges wholesalers and distributors see on a day-to-day basis, talent was at the top of everyone’s list. The labor market is evolving, and the industry is attempting to appeal to younger workers as boomers retire. As part of this dynamic, executives are grappling with changes in younger workers’ expectations of what work looks like—for instance, there’s a greater expectation among younger people for work-life balance and flexible working arrangements.
Baltimore: Another key topic is the role of marketplaces. Platforms such as Amazon have excelled at enabling third parties to create a virtual marketplace for resellers and distributors, but that’s creating some uncertainty among wholesalers and distributors. They need to figure out what role marketplaces might play in their business, and what impact they could feel if consumers and, increasingly, business purchasers look to marketplaces as a preferred model for certain types of products.
Gillam: From an economic standpoint, the impending recession fears many felt during the second half of 2019 appear to have subsided somewhat. In our conversations with executives, many were optimistic about the outlook for 2020.
What opportunities are these dynamics creating for strategic buyers and private equity investors?
Baltimore: The specialty distribution sector continues to appeal to a broader range of investors. It’s highly fragmented, with considerable acquisition and consolidation opportunities. As private equity capital has flowed into the sector, and management teams have become more sophisticated, there are a growing number of attractive platforms.
Gillam: There are more assets available that have undergone some of that initial journey: replacing legacy ownership with private equity owners, demonstrating the ability to execute on M&A opportunities, and implementing new systems, processes and technologies to accelerate growth. Yet there remains a long runway to grow these companies and consolidate the industry, whether it’s nationally, regionally or internationally. On the other hand, the whole sector has become more competitive. The biggest challenge for buyers is that once they hear about a new opportunity, it can be too late. That makes it more important to have good insights into attractive opportunities and access to management.
Baltimore: In this increasingly competitive market, investors can find it very beneficial to work with a firm like ours that has a deep understanding of both the sector and of what makes a best-in-class distribution business. We can help investors get in front of the right management teams at the right time, which yields a better outcome for both buyers and sellers.
Published February 2020