Industrial Distribution Trends to Watch in 2024

The industrial distribution M&A market is looking ahead to 2024 with resilience, according to the BGL Industrials Insider: Industrial Distribution M&A Strong Amid Overall M&A Market Slowdown report for November 2023. In the report, the firm’s Industrials investment banking team reveals that distribution executives are expressing optimism and reporting steady demand despite some challenges.

Erik Gershwind, CEO of MSC Industrial Direct, noted in the company’s FQ3 2023 earnings call that the environment on both demand and pricing fronts seems to be leveling. “Regardless of the environment, I remain confident about our prospects for continued growth,” he remarked. MSC’s average daily sales saw an impressive 11.7% year-on-year increase to $1.054 billion in the third quarter.

Furthermore, Gershwind indicated that supply chains have normalized, and pricing conditions have moderated. However, he also pointed to market softening due to factors such as interest rates and recessionary fears affecting consumer spending. “The tone on the ground is one of leveling rather than significant declines,” he said.

Similarly, W.W. Grainger CEO Donald Macpherson reported a strong quarter in the company’s FQ3 2023 earnings call. Macpherson credited the company’s “advantaged supply chain, strong digital capabilities, and ability to solve complex problems” as critical drivers of market share expansion.

Rexel CEO Guillaume Texier highlighted inflation and positive volume trends as contributors to “growth well above our guidance.” The company’s sales rose 7.5% over the same period last year. Texier expressed optimism for acquisitions as a value creation lever, citing consolidation opportunities and adjacencies as exciting prospects for value creation.

Despite near-term challenges in the residential market demand, Ferguson CEO Kevin Murphy signaled attractive market fundamentals that could drive growth in new residential construction over the medium term.

Data from the U.S. Census Bureau through September 2023 projected full-year baseline revenues for 2023 to be down 1.4% from 2022, an improvement from a 2.1% decline reported in July. Compiled for Modern Distribution Management (MDM) by Brian Lewandowski, Executive Director of the Business Research Division at the Leeds School of Business, revenues for 2024 are forecasted to increase by 3.3%, up from the 2.7% reported in July. The Q3 2023 Baird-MDM Industrial Distribution Survey findings revealed slowing growth, with distributors reporting an annualized growth of -0.5% in Q2 2023, a slight improvement from the -0.8% in Q2 2023 but down from the +3.2% reported in Q1 2023.

How will these trends and others shape the future landscape of the Industrial Distribution market? Download the full BGL Industrial Insider report to dive deeper into comprehensive interviews with industry leaders and discover more about the evolving dynamics of the industrial sector.   

Led by Kevin H. Sargent and Andrew K. Petryk, BGL’s Industrial Distribution investment banking team leverages its industry knowledge and global relationships to execute highly effective and efficient transactions on behalf of our middle-market clients. Please reach out via our contact form to learn more.