Progressive Distributor - The heat is on

The heat is on

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News concerning another blockbuster acquisition may have dashed many distributors hopes of spending a lazy summer at the beach. The planned sale of U.S. distribution powerhouse Cameron & Barkley to a European distribution group serves as a wake-up call.

Some industry watchers think it may only be the beginning of a flood of new merger and acquisition activity.

This deal is the first of many blockbuster transactions and will trigger a feeding frenzy among the larger companies, says Adam Fein of Pembroke Consulting in Philadelphia, an industry consultant with expertise in mergers and acquisitions. In the near term, we will also see many smaller deals that will create strong regional players. These regional roll-ups will become attractive acquisition targets for the strategic buyers during the next few years.

Dont be surprised if more suitors appear on U.S. shores from overseas.

International distributors are moving into the U.S. with very aggressive acquisition programs, says Fein. The global consolidators have proved they can master country-to-country market variations. They will develop into tough competitors for U.S. distributors.

Many European consolidators already have larger revenues and greater profits than the biggest U.S. distributors. They will deploy these resources to grow quickly in North America. Companies like Hagemeyer, Rexel and Sonepar have already evolved into global consolidators, Fein says.

Other industry observers agree with Fein.

This acquisition puts a lot of the domestic players squarely in the cross hairs of the Europeans and could very well set off a rash of activity on the M&A side, says Holden Lewis, a senior analyst following industrial distribution companies for CIBC World Markets, a major North American investment bank. We keep hearing threats about globalization becoming a reality. Well see if this causes anyone to care. This definitely raises the stakes.