Industrial Distribution Industry Insights

Industry vertical

This industry wholesales general-use supplies for manufacturing and warehousing industries. The industrial distribution vertical includes supplies industrial goods to refineries, plants, construction companies, manufacturers, and industrial facilities of all types.

Consolidation

High competition and fluctuating profit have led to company exits. Larger companies have taken advantage of low profit during the pandemic to acquire struggling smaller wholesalers. An increasing trend of vertical integration has resulted in some manufacturers undercutting wholesalers in the supply chain.

Data Insights

After analyzing over 300 transactions using PitchBook (restricted to sales price between $5M and $30M) in industrial supplies which happened since the beginning of 2018, we found that the number of deals fell slightly in 2022 to 65 from a high point in 2018 of 99.

Median deal size for those transactions held close to the median post deal valuation, demonstrating that the sales prices for these transactions were closely related to the valuations.

The chart below shows the regression analysis of industrial distribution company transactions using data from PeerComps. Each diamond represents a company that has sold and its location shows the price that it sold for (left axis) as compared to a financial metric on the bottom axis (EBITDA).

In the equation that describes the line that best fits the observations, “y” is the value and “x” is the financial metric (EBITDA). The number is the multiple. R-squared is a statistical measure that tells how well the equation fits the actual outcomes, it ranges from 0 (uncorrelated) to 1.0 (perfectly correlated).

Actual company multiples and value achieved in a transaction depend on a number of factors and will be determined in an arms-length transaction and will be subject to market and economic fluctuations during the year as well as Company specific performance