Home Depot bought Hughes Supply in January 2006 with an EBITDA valuation above 12X, a number still ringing in the ears of many distributors. A scant year later HD announced its intentions to focus on retail and explore alternatives for its $12-billion distribution unit. It sold the unit this past June.
As distributors ring in this year, the competitive landscape looks vastly different than even six months ago. While there is still a lot of private equity money searching for deals in distribution, debt markets have tightened.
As a result, valuations are dropping fast, and the level of deal-making activity dropped significantly in the last quarter of 2007. In 2008, we will likely see strategic buyers execute smaller add-ons, rather than the blockbuster deals spawned …
