Be careful not to get a sugar high from the HD Supply spin-off announced this past week. After a deal of this magnitude, it’s easy to get excited about what it means once the dust settles. But the dust won’t settle on HD Supply. If anything, the non-contributing or distracting units will be shed and a leaner, more focused business will emerge. It was not purchased to be gutted or dismantled. The remaining entity, while smaller in size, will likely continue as the lead consolidator in a narrower band of distribution verticals.
The deal will have a large impact in a few sectors, and virtually no impact in others beyond the perceived valuation halo effect. Some had anticipated the price for HD Supply might cool slightly due to the weakness of residential markets in North America. …
