Home Depot in $18.25bn deal for SRS

June 2024 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

June 2024 Issue

Home Depot has announced it is to acquire building materials supplier SRS Distribution in an $18.25bn deal.

The deal, which is subject to customary closing conditions, including regulatory approvals, is expected to be completed by the end of fiscal year 2024. The transaction is expected to be funded through cash on hand and debt and will be the largest acquisition in Home Depot’s history.

The deal for SRS is set to bolster Home Depot’s service offerings to renovators and modellers, establishing it as a key player in specialty trade distribution. SRS Distribution has a sales force of over 2500 professionals and more than 760 branch networks across 47 states in the US. At present, Home Depot has more than 2000 US stores and distribution centres. The deal will also allow Home Depot to take advantage of SRS’ more than 4000 truck fleet and jobsite delivery capabilities. SRS Distribution, which provides supplies to roofers, landscapers and pool contractors, has grown rapidly over the last 16 years by buying local and regional distributors.

Upon completion of the deal, SRS will continue to operate as an independent business within Home Depot, the company said in a statement. SRS’s role will be to grow what Home Depot calls its ‘pro business’, which includes contractors working on more difficult and lucrative projects who typically purchase supplies wholesale or through specialty distributors. For Home Depot, the acquisition is expected to bolster its e-commerce sales and attract more professionals while retaining its ‘do it yourself’ customers.

The company has made a number of acquisitions to its ‘pro’ space in recent years, including the $8bn addition of HD Supply in 2020 and two other acquisitions made last year: International Designs Group, which owns Construction Resources, and Temco, an appliance delivery and installation company. The company has also announced plans to open four new distribution centres catering to professional contractors, in addition to opening 12 new retail locations during the current fiscal year. The acquisition of SRS is expected to increase Home Depot’s total addressable market to around $1 trillion.

Upon completion of the deal, Dan Tinker, president and chief executive of SRS, along with his senior leadership team, will continue to lead the company. SRS is currently owned by two private equity firms, Leonard Green & Partners and Berkshire Partners.

“We plan to access the debt capital markets to raise incremental indebtedness in support of this acquisition,” said Richard McPhail, executive vice president and chief financial officer of Home Depot. “We expect the acquisition to create significant shareholder value over the long term.”

“SRS is an industry leader with a proven track record of profitable growth across verticals,” said Ted Decker, chair, president and chief executive of Home Depot. “SRS’s ability to build leadership positions in each of its trade verticals while generating significant revenue growth is a testament to its strong vision, leadership, culture and execution. SRS has built a robust and successful platform that will accelerate our growth with the residential professional customer while presenting future opportunities with the specialty trade pro. SRS’s branch network, coupled with The Home Depot’s 2000-plus US stores and distribution centres, comprehensive product offering and extensive pro brands, provides the residential pro customer with more fulfilment and service options than ever before. I look forward to welcoming the entire SRS team to The Home Depot and capturing the exciting opportunity ahead.”

“Our team is thrilled to join The Home Depot,” said Mr Tinker. “We are looking forward to combining our differentiated assets and capabilities, including our extensive branch network, experienced sales team, robust trade credit offering, and order management system, geared at serving the complex project purchase occasion, with The Home Depot’s competitive advantages. We believe this will enable us to better serve pros and continue growing in our large and highly fragmented market.”

The acquisition of SRS comes after Home Depot announced in February that it expects slower sales trends to continue. The company said it anticipates total sales for the full year to grow about 1 percent, including an additional week in the fiscal year. Yet it expects comparable sales, which take out the effect of store openings and closures and do not include the additional week, to drop by around 1 percent.

Richard Summerfield