Writing in PBM’s November issue, editor Paul Davies discussed the recent flurry of mergers and acquisitions that are changing the shape of the merchant sector:
As we discuss later in the issue (pages 10-11), it has been yet another incredible month in terms of transformational activity within the merchant sector with both the merger of Grant & Stone and the Independent Builders Merchants Group (IBMG) and the confirmation of Travis Perkins’ sale of its Plumbing & Heating division to an affiliate of H.I.G Capital, the Highbourne Group.
Given all the interconnected upheaval in the industry — from the pandemic, increased digitalisation, the impact of Brexit, supply chain difficulties and an alarming shortage of HGV drivers to name but a few — it has perhaps been a little easy to have lost sight of just how much has changed in terms of the composition of the nation’s largest merchant firms since the turn of the year.
Looking back to PBM’s most recent ‘Top 20’ merchant countdown (published in our April edition), the majority of those featured including almost all of the ten biggest players have experienced significant change in terms of ownership or through major acquisitions or disposals. We’ve covered TP who led the way, but second placed Saint-Gobain Building Distribution’s decision in July to divest its own plumbing & heating operation of Graham can arguably be considered more of a surprise. Like its Northamptonshire-headquartered compatriot, SGBD said the move — with the majority of branches moving to UK Plumbing Supplies and a smaller number to Wolseley — was part of its “continued portfolio optimisation strategy to enhance the Group’s growth and profitability profile.”
“It has been yet another incredible month in terms of transformational activity within the merchant sector.”
Ferguson plc’s longstanding plans to sell off Wolseley UK (third on our list) were finally realised in January, with global private investment firm Clayton Dublier & Rice paying a “net cash consideration of approximately £308m” for a network of approaching 550 branches.
In a crowded field, the decision of the Grafton Group — following the conclusion of its “comprehensive strategic review” — to divest its ‘GB Traditional Merchant Business’ to the Huws Gray Group was arguably the biggest headline story. In recent months, Huws Gray has also snapped up the likes of TBS Building Supplies, Builders Supplies (West Coast) and Higgins.
Elsewhere within the Top 10, MKM has continued to add to its expanding branch network which, with the opening of a new depot in Peterhead in October, now extends to 89 across the UK — ten more than recorded on our April rundown. Lords Group Trading, meanwhile, has also made a number of acquisitions in 2021, however its successful listing on the LSE’s AIM market was the standout news.
The AIM admission delivered “gross proceeds of £52.0 million in an oversubscribed Placing” as part of its strategic plan to “raise new equity to provide flexibility to accelerate growth… through a variety of organic and inorganic strategies, including geographic reach, product expansion, the active expansion of e-commerce platforms and the continued investment in logistical capability”. Lords now operates from 33 sites with a combined turnover in excess of £288million, and the Group’s stated aim is “to become a £500million turnover building materials distributor group by 2024” as it grows its national presence.
It is a statement that can surely be applied more generally to demonstrate that the industry shake up is nowhere near its end point. And whilst there are all manner of implications at the local level for ‘other’ merchant firms, for all the talk of the challenges confronting the sector — from digital suppliers to disintermediation — that it is external and / or private equity money fuelling the transformation ‘at the top’ can only be a positive sign of the sector’s broader long-term profitability.