How mergers and acquisitions force distributors to digitally transform
Independent distributors are growing up to be regional distributors. Regional distributors are aspiring to be mini-nationals. Mini-nationals are trying to go global. Big distributors are getting bigger. Given recent M&A news, this trend isn’t slowing down anytime soon.
No one could have predicted the massive implications of the Coronavirus on the distribution industry. However, many distributors saw impacts to budgets, sales and even products.
At the beginning of 2020, we predicted that distributors would continue to increase their reach, expand their product catalogs, develop value-added services and join forces with each other through mergers and acquisitions. However, as companies navigated the global pandemic, much of the M&A activity seemed to slow down. That is until recently, where we’ve seen some market-shifting deals.
Merger and acquisition activity has accelerated across many distribution verticals, but consolidation in the building material vertical has kicked into high gear, culminating with the acquisition of HD Supply to Home Depot on November 16, 2020. Other M&A deals involving building material distributors like US LBM and Foundation Supply have gained major attention as well.
What does this activity mean for small to medium sized distributors? We have to reference the 1960 drama, David and Goliath. The major players, a.k.a. the Goliath’s of the distribution industry, will continue to get stronger. While the smaller players, a.k.a. the David’s, will need to identify ways to differentiate.
Namely, the David’s will need best-in-class ecommerce, content and experience technology in order to compete. They will need to build their brands, improve their digital presence and build an experience that is hyper-focused on driving value for their customers.
On the flip side, if you’re part of a consolidation, there’s opportunity to do things differently. You can use this time of transition to challenge old ways of doing business.
For example, it may be time to invest in better technology. As you’re consolidating systems you might decide that now is the time to upgrade your ERP. Maybe your business has never needed a CRM before, but with eight new branches you need a better way to track all your important data. You’ll want to merge disparate systems. Of course, you might also consider switching ecommerce platforms.
In addition, mergers and acquisitions give you the opportunity to welcome new team members and a new focus. Now is the time to rethink your strategy and get your team onboard for any new initiatives.
No matter what you do, you cannot remain stagnant. The ebb and flow of mergers and acquisitions could be a major disruptor if you don’t act now.