Big expansion for leading home improvement retailer: $4.3B acquisition

Home Depot is big-time thinking again. The home improvement giant said it’s buying GMS Inc., a specialty building materials distributor, for $4.3 billion. It’s Home Depot’s second giant acquisition in more than a year, and the message is clear: Home Depot is expanding deeper into pro building and materials supply territory.

This new emphasis arrives as the pandemic-driven home improvement retail boom loses momentum. Home Depot has been concentrating on pro builders and contractors, who need a steady supply of wanted building materials.

 What is GMS and why it matters

GMS Inc., based in Tucker, Georgia, sells products like drywall, steel framing, and insulation—all of which end up on single-family and commercial building projects. These aren’t the sorts of items that you’d find at an average Home Depot store. They’re dealing with big construction projects, so GMS is a major supplier to the pros that Home Depot is now looking to get into.

GMS will be acquired by SRS Distribution, which was recently acquired by Home Depot. The purchase price is $110 per share, and the enterprise value of the transaction, including debt, is approximately $5.5 billion.

 SRS and GMS: A good combination

SRS Distribution already enjoys a strong footprint in the professional materials arena. It doesn’t only distribute roofing material but also landscaping material and even pool hardware. Were it to merge with GMS, the network thus formed would have:

•  Over 1,200 locations
•  Over 8,000 trucks
•  The ability to service tens of thousands of job sites every single day

SRS CEO Dan Tinker says the acquisition will offer both residential and commercial professionals more delivery and service options than ever before.

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A billionaire bidding war

Home Depot didn’t overlook that. It was just over two weeks ago that QXO, a billionaire-backed firm by Brad Jacobs, offered to purchase GMS for $5 billion. QXO is a newly created company that was formed solely to acquire building products firms. It has already this year purchased Beacon Roofing Supply for $11 billion.

Even with QXO’s offer, Home Depot chose GMS. The deal is expected to be complete by the end of Home Depot’s fiscal 2025.

 Related to home depot

Home Depot is doubling down on its professional customer base, not only servicing more than the DIY customer, but attempting to be a one-stop shop for contractors throughout the entire U.S.

Since the acquisition was announced, GMS shares rose nearly 12%, while Home Depot shares fell. The company hopes the acquisition sets it up for long-term growth—albeit in a home-improvement boom that is decelerating.

The growth is all about future-proofing Home Depot’s business and staying relevant in an ever-changing retail landscape.