2015: Another Active Year for M&A
[GUEST COLUMN] C. A. Burkhardt
For the first 9 months of the year, HT Capital tracked over 90 transactions in all industrial distribution segments. Both strategic and private equity buyers –
either with existing platform companies or seeking a new
platform company – were very aggressively seeking acquisitions. In general, the 2015 industrial distribution merger-acquisition market was a “sellers” market, with multiple
buyers seeking acquisitions and offering valuations and
terms attractive to potential sellers.
Four Big MRO Transactions
The blockbuster transformational industrial distribution
transaction in 2015 was the acquisition of private equity
owned Interline Brands, Inc., a distributor of an extensive
line of MRO products. The buyer was The Home Depot, the
world’s largest home improvement retailer with revenues
over $83 billion. A major driving force behind the transaction was The Home Depot’s goal to better serve the contractor market. Interline gives it an experienced outside
and national salesforce, extensive MRO fulfillment capability, and a distribution network of 90 branches throughout
the U.S., and in Canada and Puerto Rico. Additionally:
• France-based Sonepar substantially enhanced its existing MRO business with the acquisition of Industrial
Distribution Group (“IDG”). Based in North Carolina,
IDG has 42 branches, and over 170 on-site customer
locations in North American, Europe, and Asia.
• W. W. Grainger, the broad line MRO distributor with
$10 billion revenues, went abroad to acquire Cromwell Group, Ltd., the UK’s leading MRO distributor for
$484 million (1.1x revenues of $440 million).
• Fairmont Supply, a long time MRO supplier to the coal
industry, was acquired by a private equity firm. The
seller was Consol Energy, a major coal producer. As a
free-standing company with private equity backing,
Fairmont will likely be on the prowl for acquisitions.
Gas & Welding Supply Consolidation
The long term consolidation trend of gas and welding
supply distribution continued in 2015. The leading players,
Airgas and Praxair, were active buyers, as were the platforms of two private equity funds. A company with over
$5 billion in revenues, Airgas acquired 9 companies with
total revenues of $74 million. Airgas expanded its South-
ern Texas footprint with the acquisition of WeldingHouse,
Two private equity backed platforms completed acquisi-
tions to enhance their U.S. footprint. Connecticut-based
Tech-Air acquired U.S. Oxygen Supply in Arlington, TX and
Specialty Air Technologies in California, as bases for fur-
ther expansion in the large Texas and California markets.
Memphis-based NexAir expanded its geographic footprint
in Georgia with the acquisition of M&A Welding Supply
with four branches, and in Alabama with the acquisition
of Welder’s Supply and Equipment Co. with two branches.
Matheson Tri-Gas also acquired Sam’s Welding Supply in
Long Beach, CA.
Private Equity’s Fastener Acquisitions
Prime Source, the largest distributor of screws and nails
in the U.S. with 42 distribution centers, was acquired by
global private equity firm, Platinum Equity. Terms were not
disclosed, but informed sources estimate that the price was
about $800 million. The seller was Japan’s ITOCHU Group,
which had acquired the company in 1998.
Another large fastener transaction was Anixter International’s sale of its OEM fastener unit, a worldwide
distributor of highly engineered fasteners sold to many
industries. The price was $380 million (.42x the unit’s estimated revenues of $900 million). With the backing of the
buyer, private equity firm American Industrial Partners, it
will probably seek to grow through acquisitions, and will
compete for acquisitions with Fastenal, Bossard, and other
major fastener distributors.
Plumbing And HVAC/R Acquisitions
Ferguson Enterprises, the world’s largest plumbing
and HVAC/R distributor, continued it aggressive growth-through-acquisition strategy with the acquisition of 13
companies in 2015, which enhanced its U.S. geographic
footprint in many areas. One of the larger transactions
was the acquisition of Redlon & Johnson, based in Portland, ME with 10 branches in Maine and New Hampshire.
Fort Worth, TX-based MORSCO acquired NC-based Murray
Supply, which has four plumbing and three MRO branches,
and an industrial PVF branch. Murray is MORSCO’s first
acquisition in the Southeast, and its management has