Within the last few weeks I found out that Pittsburg based Incline Equity had acquired Cleveland based AFC Holdings. To fastener people, this means that AFC of the Cincinnati area and Dell Fastener from the Pittsburgh area, both are now owned by a different holding company. Yeah, I know, we are still going to be calling on Dave and Denise and Joanne and Jen. Most likely, few things will change in the short run, and maybe even the long run. But, I’m guessing, somebody with deeper pockets now owns those fastener distributors. I recently visited the Anixter Fastener group in Glendale. They too were recently purchased by an equity firm, or holding company. Some big suppliers are in the same boat. Lindstrom has been referred to in publications as “a Harbour Group company” which suggests they are at least partly owned by a holding company. I’m sure there are probably other fastener companies with outside investors.
Long gone are the days when out industry was filled with family run fastener companies. Sure, there are still some around, but more and more you hear about these companies being bought out. It used to be where one fastener company would buy another fastener company. That happened a lot. It just seems to me that, more and more, holding companies are buying out one or several fastener companies. And, for these investment groups, the fastener companies are just one of several other unrelated businesses that they own.
I’m sure this has happened in a lot of other industries but it seems to be happening more frequently now in OUR industry. We used to talk about consolidation, but that usually meant one fastener guy buying out another fastener guy. Not so much anymore. And, the stakes seem higher. Bigger money and bigger players are dipping their toes into the water. I’d like to see an industry association group sponsor a speaker that could talk more about this and the implications of this trend.
TS- There seems to be penchant for equity groups to fill some perceived gaps in their investment lineups, as if they’re creating the picture of a supply chain. This is why having an MBA without the benefit of field experience is a dangerous thing. As investments go, I’d pick an “As Seen On TV” franchise before buying out any regional hardware distributor. Cost-cutting continues to trump value-adding and killing distributor margins. These investors keep finding out the hard way. A bad purchase is inevitably followed by knee-jerk policies until the spirit that really defined these companies is crushed. The fire sales will start soon after the legacy staffs are let go. Seen it too many times already.
Been a while Charlie, glad to see you back. It’s gotten even crazier even in just the last week since I posted. I listened to Fully Threaded Radio this week and Marc Standquist of Wurth stated that he expects Wurth to complete 3 or 4 additional acquisitions before the end of the year. Almost every week I hear of fastener companies wanting to acquire other companies. Just this week, I had that happen again where someone inquired, “if you know anybody looking to sell”. I think we are going to see a feeding frenzy.
The equity companies are here and they are hungry. Pretty much a sure thing they are stalking other companies immediately. Bet the Incline Group is already talking. Wonder how many NFDA members will still own their companies in five years? Get big or get out. Seems like the way the fastener distribution model works right now. And yet, there are still small guys working out of their houses. And ex-Fastenal employees trying to go out on their own, though that seems to have slowed. Interesting to watch the supplier side as well as the distributor side as things progress.
Great observation TS! Is this the beginning of the end for the family owned & operated fastener company? Let’s hear from an M&A expert on the subject.