Kevin Sargent, a Director at BGL and leader of the firm’s Industrial Distribution practice, states that, “Asset-light business models with flexible cost structures and working capital, combined with market fragmentation, are continuing to drive investor interest and consolidation.”
The report examines the state of the Industrial Distribution market and resonating themes in a COVID-19 world, supported by executive insights gathered through primary research. Key findings include:
- Select distribution markets are demonstrating resilience while others are seeing a surge in demand through the crisis. Those tied solely to heavily impacted end markets remain depressed. Agile distribution companies with broad portfolios, diversified end markets, and strong balance sheets have sustained business performance through the market dislocation.
- Product, end market, and geographic market diversification remain essential, as does technology in continuing to enhance distribution models, all predicted to be drivers of M&A as participants look to build end market and customer diversity and capabilities. Marquee industrial distribution transactions and middle market activity illustrate strong investor demand.
We anticipate an uptick in M&A activity during the balance of 2020 and through 2021 with a focus on add-on transactions. Appetite for deal flow in the private equity and lending communities is continuing to gain momentum, with the middle market active, as financing requirements and greater asset selectivity favor smaller transactions in the current environment.
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