Industrial Distribution M&A Market Update: November 2023
The Industrial Distribution M&A market is a mixed bag of trends, according to a recent industry report by the BGL Industrials investment banking team. Despite an overall slowdown in the broader M&A market, the value-added Industrial Distribution sector remains resilient, maintaining consistent deal activity across major sub-verticals.
Sectors such as industrial, commercial, and residential services; infrastructure-related; aerospace & defense, industrial technology; and healthcare and life sciences continue to exhibit strength. In contrast, residential building products, consumer, and oil & gas sectors are adopting a more cautious “wait-and-see” approach, with stakeholders seeking greater clarity into the macroeconomic landscape before committing to transactions.
Higher interest rates have made financing more costly, leading to more cautious lenders and tighter borrowing criteria. However, the need to deploy capital keeps lenders actively on the lookout for promising opportunities. Despite these fluctuations, value-added distribution remains an attractive sector for investors, thanks to its low capex requirements, cash flow generation, and fragmented markets.
As we moved into 2023, strategic and financial buyers remained equally active in M&A, demonstrating a strong appetite for new platforms and add-on acquisitions that have persisted into the year’s second half.
Significant capital is available in the market, keeping buyers engaged. Financial buyers started 2023 with over $850 billion in dry powder, around 15% of which represents funds with a vintage greater than three years, adding urgency to invest this capital in high-quality assets.
BGL’s Head of Industrial Distribution, Kevin H. Sargent, noted, “The bar is higher, but there is still a lot of capital looking for quality businesses.” The sustainability of earnings has become the key diligence item for investors.
How will these and other industry trends continue to shape the industrial distribution M&A landscape moving into 2024? BGL’s Industrials Group investment banking team has released a full report, now available for download. Learn more in the BGL Industrials Insider: Industrial Distribution M&A Strong Amid Overall M&A Market Slowdown.
Led by Andrew K. Petryk and Kevin H. Sargent, BGL’s Industrials investment banking team has the global transaction experience and domain knowledge to advise clients in navigating today’s dynamic M&A environment. Reach out via our contact form to learn more about how we can help you maximize your strategic objectives.