What We’re Reading

Don’t Just Ride the Economic Wave1

"It would be easy to say that distributors are having a great year based solely on the economy. After all, growth is easy to come by when everyone is operating at full throttle. One of the biggest contributors to industrial and contractor supplies distributors’ growth this year is the overall strength of the U.S. economy, which was growing at a 4.2 percent annualized rate in the second quarter. The construction and oil-and-gas markets have been especially strong.

MDM recently compiled the results of the NetPlus Alliance quarterly Industry Outlook survey. As with distributors in many sectors, its members are experiencing significant growth and are optimistic for the rest of 2018. Specifically, 72 percent of distributor survey respondents expect sales growth, with 39 percent expecting growth of more than 8 percent at year-end. However, many of its distributor members are experiencing growing pains, reporting talent shortages and, in some cases, long lead times. The survey also found that suppliers are raising the prices of products affected by tariffs or the threat of them."

Read more from this article here.

Walmart Unveils High-Tech Grocery Warehouse to Bolster Food Push2

"Walmart Inc. is building a high-speed grocery warehouse to solidify its position as the nation’s biggest grocer.

The new distribution center in Shafter, California -- halfway between Los Angeles and Fresno -- is set to open in the fall of 2020 and will move products in and out 40 percent faster than the company’s existing warehouses, Walmart said in a blog post Thursday. The building will be equipped with automation technology from Witron, a German supplier of logistics services.

The new center is Walmart’s latest investment to grow its grocery business, which accounts for more than half of U.S. sales and is a bulwark against Amazon.com Inc.’s encroachment. The retailer has improved the presentation and quality of its fresh food, and is expanding curbside pickup and home-delivery options. But getting strawberries and cantaloupes from fields to stores is still a complex, expensive process, and any time saved along the journey translates into increased sales and profits."

Read more from this article here.

What is the Purpose of Distribution in the Digital Age? – Distributors in the Digital Era3

In this article, Mark Dancer, NAW Institute for Distribution Excellence Fellow, shares his impressions from The World Innovation Network’s TWIN GLOBAL 2018 conference, led by Professor Robert C. Wolcott, Professor of Innovation at Kellogg School of Management. Dancer reveals the three critical questions he believes all distributors should answer in today’s dynamic environment:

1) What is the purpose of distribution in the digital age?

2) What is the role of individual distributors for creating value?

3) How can we measure the combined impact of all distributor innovations for our economy and society?

Read more from this article here.

Should You Sell on the Amazon Business Marketplace? Definitely Maybe1

In the last year, MDM President Ian Heller has given keynote speeches in Milwaukee, Orlando (twice), London, Las Vegas, Cleveland and Miami. He’s also participated in dozens of calls, webinars and conference calls with distribution executives, management teams, analysts and students studying distribution. The most common question he gets is, “Do you think distributors should sell on the Amazon Business Marketplace?”

Heller wishes he had an easy answer, but there is none. Instead, his answer usually depends on who’s doing the asking.

Read more from this article here.

Public Comparables & Trading Valuations

Key Trading Stats

As of October 31, 2018
($ in millions, except per share amounts)

Specialty Distribution Public Comparables4

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Stock Prices

As of October 31, 2018

Trailing Twelve Months Stock Price Performance4

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M&A and Public Market Trends

Distribution Trends

LTM EBITDA as of October 31, 2018

TEV / EBITDA Multiples for Public Comparables5

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Net Debt / EBITDA5

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EBITDA Margins5

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M&A Trends

Recent M&A And Private Equity Trends6

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  • Middle market deal count is down 7.9% YoY, with 5,063 deals
  • Financial sponsors represented nearly 35% of all completed M&A deals in 3Q 2018
  • The most active financial acquirers in 3Q were Apax Partners (18 acquisitions), Genstar Capital (16 acquisitions), HarbourVest Partners (16 acquisitions), and Audax Group (16 acquisitions)
  • Mega-deals representing $5B or more in transaction value sustained their steady march into next-to-normal territory, with 45 of these deals closing for the year through 3Q 2018

M&A Transactions

Announced M&A Transactions5

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Economic Update

A Snapshot of Key Economic Indicators

As of October 31, 2018

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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. Modern Distribution Management

2. Industry Week

3. National Association for Wholesaler-Distributors

4. Factset Transcripts

5. FactSet

6. Pitchbook

7. United States Census

 

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