GMS, whose name stands for “Gypsium Management and Supply” and which is based in Tucker, Ga., is hardly the sexiest acquisition target. But then again, it has a wide network of some 320 distribution centers that offer thing like wallboard, ceilings, steel framing, and other construction items. What’s more, GMS operates roughly 100 tool sales, rental and service centers for residential and commercial contract customers, all things Home Depot covets.
The deal follows Home Depot’s $18 billion landmark acquisition last year of SRS Distribution (which is the entity actually buying GMS). That was the largest acquisition in the company’s history, aimed at helping Home Depot win a much bigger share of the mammoth professionals contractors segment. Those customers have typically made little use of Home Depot and Lowe’s and worked more closely with home improvement retailers that cater to professionals.
“Growing Pro is a key part of our growth strategy,” Ann-Marie Campbell, senior executive vice president of U.S. stores and operations at Home Depot, told Wall Street analysts in February. And it is the cornerstone of Home Depot’s CEO of three years, Ted Decker, in his efforts to perpetuate the success of a retailer that had succeeded wildly under his two predecessors.
The deals are a reminder of how thoughtful Home Depot has long been in its M&A strategy. About 20 years ago, Home Depot focused its M&A on acquiring brands to fill out its in-store assortment. Then in the 2010’s, it invested in its e-commerce firepower and logistics, and equipping stores to supper digital sales. More recently, the focus was on modernizing its assortment for growing areas like smart home products.
That M&A approach has served the famously disciplined retailer well and helped it long outperform arch-rival Lowe’s in terms of sales growth: last year, its annual sales topped $159.5 billion, almost double what they were a decade earlier.
And it is refreshing when one looks at so many of the deals in the retail and consumer goods world that have not transformed companies but instead led to big write-downs.
And on and on it goes. Some 70% of M&A deals end up being failures. A good many of them can feel like Hail Mary passes by a brand desperate for growth, or a way to take out a rival, or simply the result of one company overestimating its ability to turn around another. Yes, there are concerns that an M&A cycle could pinch Home Depot’s margins in the short term. But Home Depot’s deliberate and thoughtful approach to M&A has largely paid off over the long term, and should serve as a model to big companies in how to do successful dealmaking.
