Distribution sector headwinds are starting to ease
Distribution Spot On
The sector has faced a range of headwinds in recent times, including significant supply chain disruptions. Although these are starting to ease, uncertainty caused by global factors such as higher interest rates, inflationary pressures and economic slowdown mean the sector could struggle to see growth in the near future.
The good news is that many recent supply chain and distribution disruptions have begun to rationalize. However, we’re not totally out of that storm yet, and another storm may be on its way in the shape of higher interest rates and the slowing of the world economy. Some distribution sectors, such as building materials and furniture, have either flattened or turned down. Additionally, chip shortages, especially at the high end, continue to limit the availability of many products, hurting distributors. However, that shortage appears to be coming to an end. Most sectors remain relatively strong as we come out of the COVID-19 era, but the jury is still out on the prospects for 2023. With luck and appropriate government action, the hope is that interest rate increases and inflation will moderate, and the economy will recapture its previous growth trend.DON WIGGINS, DISTRIBUTION SPECIALIST, OAKLINS
As we report in our latest Spot On, M&A activity in the sector fell in Q3 2022, but the average closed deal value rose slightly compared to Q3 2021.
Our distribution specialist, Don Wiggins, provides a market overview by looking at four different subgroups in the industry, exploring valuations and trends from the past three years. Our Spotlight feature focuses on Beacon Roofing Supply, Inc., a publicly traded distributor of building and complementary products, and its growth strategy for the coming years.
In addition, the case study covers one of Beacon’s recent acquisitions as part of that strategy: Coastal Construction Products, an independent distributor of waterproofing, concrete repair, caulking/sealant, and fire protection products.
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