Specialty Distribution Practice Overview

Introduction

Harris Williams is pleased to present our Specialty Distribution Industry Update for May 2020. This report provides commentary and analysis on current capital market trends and merger and acquisition dynamics within the global specialty distribution industry.

We hope you find this edition helpful and encourage you to contact us directly if you would like to discuss our perspective on current industry trends and M&A opportunities or our relevant industry experience.

Our Practice

Harris Williams’ Specialty Distribution Group has experience advising companies that provide a range of specialty distribution services. 

This particular report focuses on trends and metrics in the following areas:

  • Automotive
  • Building Products
  • Consumer
  • Foodservice
  • Healthcare
  • Industrial
  • Specialty Chemicals
  • Technology

Representative Specialty Distribution Transactions

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What We’re Reading

M&A Learnings from Past Economic Disruptions

If history teaches us anything, it’s that every period of economic disruption is unique. The challenges we’re experiencing now vary in important ways from those we lived through from 2000 to 2002 and from 2007 to 2009.

Even with these differences, it is possible to study past downturns and uncover clues about how the near future could play out. In this article, we analyze U.S. M&A activity and Harris Williams data and their relationships with economic growth during both the tech bubble and the Great Recession. Our goal in studying the past is to inform our view of COVID-19’s potential impact on M&A going forward.

Read more here.

Looking Back to Go Forward

In M&A Learnings from Past Economic Disruptions, we studied M&A activity during the tech bubble and the Great Recession—incorporating Harris Williams’ experience during both periods—to inform our view of COVID-19’s potential impact on M&A.

In this piece, we take a similar approach, analyzing data and experience at the sector, company, and deal-specific levels. We have studied a selection of Harris Williams transactions from 2008-2010, and tapped into our bankers’ insights on the secular trends that will continue to create opportunities going forward.

Read more here.

Managing Sales through COVID-19: Immediate Actions and Long-Term Tactics

Modern Distribution Management  05/12/2020

"Sales organizations have felt COVID-19’s seismic impact more than most, if not all, functional groups. Most distributors’ sales forces live on the road or behind a counter. Shelter-in-place orders have forced sales resources out of their familiar routines and surroundings. Executives and sales leaders are managing sales forces on a day-to-day cadence and are often at the mercy of governmental decrees and supply chain health. Nevertheless, distributors are confident that a return to normalcy is inevitable, possibly soon in some end-markets."

Read the full article here.

How COVID-19 is Transforming Automotive and Industrial Supply Chains

Industry Week  05/11/2020

"Although it may be difficult to predict the exact consequences of COVID-19 and how to handle the immediate impact, supply chain organizations have to start planning for after COVID-19."

Read the full article here.

Parcel Carriers Expanded Payrolls as Homebound Consumers Shopped Online

WSJ  05/08/2020

"Package-delivery companies added jobs last month as homebound consumers ramped up online purchases amid a crumbling U.S. employment market. Courier and messenger companies that deliver to homes and businesses added 1,800 jobs in April, according to seasonally adjusted preliminary employment figures the U.S. Bureau of Labor Statistics released Friday. It was the only industry in the transportation and warehousing sector where payrolls expanded in a month when coronavirus lockdowns cost the economy a record 20.5 million jobs."

Read the full article here.

Demand for PPE Softens the COVID-19 Sales Impact for Some Distributors

Industrial Distribution  05/07/2020

"The vast majority of publicly traded industrial distributors have reported year-over-year sales declines amid a plummet in demand during the second half of March and throughout April. But at Fastenal, April sales of $491.5 million actually increased 6.7 percent year-over-year. Sequentially, April sales were up 3.9 percent over March and up 14.0 percent from February. March sales likewise were an improvement from February."

Read the full article here.

Amazon Profit Falls as Pandemic-Related Costs Rise

Transportation Topics News  05/01/2020

"Amazon’s sales soared in the first three months of the year, as more homebound people shopped online amid the coronavirus pandemic. But getting millions of packages to shoppers’ doorsteps is expensive. The rising costs pushed Amazon’s first-quarter profit down 29%, and its earnings missed Wall Street expectations."

Read the full article here.

Distributor CEOs Named to Trump Economy Group

National Association of Wholesale Distributors​  04/15/2020

"NAW President Dirk Van Dongen has been named by President Donald Trump to one of his industry advisory groups on reopening the economy. Key distribution industry CEOs also named include Mike Kaufmann of Cardinal Health, Bryan Tyler of McKesson, Kevin Hourican of Sysco and Marc Casper of Thermo Fisher Scientific."

Read the full article here.

Public Markets1

Historical Stock Prices – Last 5 years

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Historical Median TEV/LTM EBITDA Multiples – Last 5 years

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Notes: Sub-sector indices weighted by stock price. Comparable company sets listed in sources.

Public Markets1

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Note: Data presented as 5/8/20

M&A Market Trends1,2,3

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Economic Trends

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Note: A Manufacturing Inventory Index figure greater than 50 indicates expansion;
A Backlog Index figure greater than 50 indicates expansion

1. S&P Global Capital IQ

2. Modern Distribution Management

3. Pitchbook

4. St. Louis Fed

5. Institute for Supply Management

 

Public Comparable Companies:

Automotive & Heavy Duty Aftermarket: AutoZone, O’Reilly Automotive, LKQ Corp., Genuine Parts Company, Dorman Products, Uni-Select

Building & Construction Products: CRH, Watsco, Beacon Roofing Supply, Builders FirstSource, Boise Cascade, GMS, BMC, Ferguson, Hardwoods

Consumer: Fortune Brands Home & Security, Pool Corp., SiteOne Landscape Supply, Central Garden & Pet Co., Colabor Group, AMCON Distributing

Industrial, MRO & Safety: L’Air Liquide, Fastenal, WW Grainger, HD Supply, MSC Industrial, Applied Industrial Tech, MRC Global, SPX Corp., NOW, DXP Enterprises

Healthcare: McKesson, Cardinal Health, AmerisourceBergen, Henry Schein, Patterson Companies, Owens & Minor

Specialty Chemicals: Brenntag, Univar, DKSH Holding, IMCD NV

Technology: Arrow Electronics, Rexel, SYNNEX Corp., Awnet, WESCO International, Anixter International, Tech Data Corp., ScanSource

Foodservice: Sysco, Performance Food Group, Bunzl, US Foods, United Natural Foods, Core-Mark Holdings, SpartanNash, Veritiv

 

The information and views contained in this report were prepared by Harris Williams LLC (“Harris Williams”). It is not a research report, as such term is defined by applicable law and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities or financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Harris Williams to be reliable but Harris Williams makes no representation as to the accuracy or completeness of such information. Harris Williams and/or its affiliates may be market makers or specialists in, act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide, may have provided, or may seek to provide investment banking services for those companies. In addition, Harris Williams and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products of companies discussed herein. Opinions, estimates and projections in this report constitute Harris Williams’ judgment and are subject to change without notice. The securities and financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, past performance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, or redistributed, without Harris Williams’ prior written consent. 

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