Distribution

The Distribution sector is comprised of air freight, courier, and logistics services. It also includes packaging, mail delivery, and customs agents. In the current marketplace, distributors face increased competition and customer expectations. As distribution channels become more diverse, distributors are also faced with a variety of choices on vendors, suppliers, logistics, and greater opportunities for cross-selling. Distributors occupy an important node in the supply chain, connecting producers to retailers. As an intermediary, distributors create value through quality logistics and the breadth of their supplier and retailer networks. This sector has seen growth in relation to the Consumer markets, as the Distribution sector is heavily influenced by the Consumer sector. Thus, the two share a number of factors which has attributed to the growth historically, including an accommodating monetary policy, potential productivity gains, as well as continued room for growth.

Value of Closed Domestic M&A Transactions ($mm)

Sector Performance vs. National GDP

Mergers and Acquisitions (M&A) activity in the Distribution sector appears to be in somewhat of a decline compared to previous years. Top players in many lines of trade suffer from low margins and stagnant or slipping market share, which is a result of limited domestic expansion opportunities, regulatory constraints, structural impediments, and other obstacles. However, a few top players are making meaningful, large-scale acquisitions that could provide impetus to their market growth and help strengthen distributors’ position with upstream and downstream partners. A low level of market concentration and a stagnant industry expansion shows that M&A may present a significant opportunity for growth and value creation for these large companies. Distributors may need to size up to survive and prosper in the coming years. When properly assessed and executed, strategic and transformational M&A can serve as a powerful engine for that much needed growth.

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