Wholesale Distribution M&A
Moving from transactional to transformational
The U.S. Wholesale Distribution (WD) industry appears to be stuck in neutral. Top players in many lines of trade suffer from low margins and stagnant or slipping market share – a result of limited domestic expansion opportunities, regulatory constraints, structural impediments, and other obstacles.
Mergers and acquisitions (M&A) may help shift the WD industry out of neutral and into drive. Certain segments are beginning to take advantage of its potential, as evident from increasing WD M&A activity. Yet, few top players are making meaningful, large-scale acquisitions that could provide impetus to their market growth and help strengthen distributors’ position with upstream and downstream partners.
To realize true transformational change, distributors likely need to approach the M&A process very differently than they traditionally have, moving from a focus on small or niche transactions to larger, more strategic deals that bring scale advantages and strengthen channel position. In addition, companies need to plan and execute transactions such that their investments are justified from an economic and strategic perspective.
In this paper, we outline the obstacles and drivers for strategic M&A in the WD industry, with references to select lines of trade. We also outline frameworks to determine if transformation M&A is the right thing for your organization.