Transaction Spotlight


Overview: Leading nationwide distributor of high purity and corrosive fluid conveyance, measurement, and control products

Key Learnings & Transaction Takeaways:

  • Unique value proposition, offering customer an extensive product offering and bundling capabilities
  • Critical partner for suppliers due to highly trained sales force, broad customer base, and complexity of customer needs
  • Clear and compelling opportunity for inorganic growth through consolidation

Read the press release here.

HW&Co. Specialty Distribution Observations

  • Quality specialty distribution assets continue to receive broad-based interest from financial sponsors, sponsor-backed strategic platforms, and large multi-national strategic buyers
  • Strategic buyer appetite for acquisitions remains elevated as companies seek to spur growth
  • The distributor landscape in many industries remains highly fragmented, and platforms of scale with proven management teams are attracting broader interest from the private equity universe which is eager to pursue aggressive consolidation strategies
  • Increasing the mix of business that relies on a more technical and consultative sales process remains a priority for many distributors across industries, with M&A seen as a key tool to add these capabilities

Representative HW&Co. Specialty Distribution Transactions


What We’re Reading

Deal Analysis: Essendant and S.P. Richards Merger Offers Hope and Time1

Essendant and Genuine Parts Company have entered into a merger agreement to combine Essendant and GPC’s S.P. Richards business in a deal valued at $680 million, including a one-time cash payment to GPC of $347 million. The merged business products wholesaler has pro forma 2017 net sales of about $7 billion and more than $200 million in adjusted EBITDA. It elevates the long-time competitors serving independent office-products dealers into the top tier of the increasingly brutal business products channel.

The deal buys Essendant time to build a differentiation strategy to combat a long list of competitors – digital, retail and otherwise – that have decimated traditional distribution channels for office products. Those in the sector view the deal as practically inevitable – a combination of competitors that serve a shared market of smaller, independent office products dealers.

Read more from this article here.

Manufacturing Economy Continues to Expand in March1

Economic activity in the manufacturing sector expanded in March and the overall economy grew for the 107th consecutive month, say the latest Manufacturing ISM Report On Business. The March PMI registered 59.3%, a decrease of 1.5% points from the February reading of 60.8%, but still above the 50-point mark indicating growth in the manufacturing economy. “Demand remains robust, but the nation’s employment resources and supply chains are still struggling to keep up,” according, chair of ISM’s Manufacturing Business Survey Committee"

Read more from this article here.

What We’ve Been Hearing

Excerpts from Q1 2018 earnings calls2


“…The freight pressures are really coming from the fact that people don't believe as much as they used to that they need to pay freight. There's freight and everything. You go to the grocery store, if your bill used to be $100 a week, now, it's $102, it's because of freight. The food didn't get really any more expensive but the cost of moving it there. Freight is a constant battle, 85% to 90%, depending on what white paper you read, moves on a semi. Semis are more expensive due to emissions today than they were 10 years ago. Trailers are more expensive than they were 10 years ago. Drivers are more expensive than they were 10 years ago.”


“…[The] industrial recovery, after a few tough years, clearly in 2015, 2016, 2017, industrial started to recover. It's progressing nicely. And so, when you look at our industrial end market…the large majority of our global accounts verticals grew. And so, it's balanced and strong growth. Bidding activity levels are very strong. And I'll tell you that we're beginning to see customers releasing small projects...So, that's very encouraging.”


“…Recently, Section 232 tariffs targeting steel imports and related quota measures have been put in place…In addition, anti-dumping suits in certain product categories have been filed recently. Our costs have also been influenced by various other inflationary pressures, mostly raw material cost increases. Transportation and freight costs have also increased due to higher demand, regulation, and limited driver resources. The market continues to adjust to these measures as there are many moving parts in our global supply chain and many of these elements continue to evolve.”


Public Comparables & Trading Valuations

Key Trading Stats

As of April 30, 2018

($ in millions, except per share amounts)

Specialty Distribution Public Comparables3




Stock Prices

As of April 30, 2018

Trailing Twelve Months Stock Price Performance3


M&A and Public Market Trends

Distribution Trends

LTM EBITDA as of April 30, 2018

TEV / EBITDA Multiples for Public Comparables3


Net Debt / EBITDA3


EBITDA Margins3


Recent M&A and Private Equity Trends4


  • 1Q 2018 saw 619 middle market transactions completed, a 17% increase over the prior year
  • Approximately 30% of PE-backed companies now undertake at least one add-on acquisition, compared to less than 20% in the early 2000s
  • Average hold time for companies has stabilized at 5.3 years, after peaking at 5.8 years in 2014
  • Approximately 50% of middle market exits came via secondary buyouts in 1Q 2018, consistent with levels seen in 2016 and 2017
  • Covenant-lite loans were seen in 37% of middle market deals in 4Q 2018, compared to 26% for 2017 as a whole and 9% in 2016

M&A Transactions

Announced M&A Transactions3


Economic Update

A Snapshot of Key Economic Indicators

As of April 30, 2018




1. Modern Distribution Management

2. Factset Transcripts

3. FactSet

4. Pitchbook

5. United States Census

6. U.S. Federal Reserve