Catalyst

Private equity buyers have conducted about 80% of the M&A in the distribution sector in the last year, Marc Fermont of DistriConsult told attendees at the National Association of Chemical Distributors’ (Arlington, VA) annual meeting, held this week at Fajardo, P.R. There are both positive and negative implications of this change, he says. These include the creation of some “dynamic” companies, like Azelis, as well as an emphasis on a “buy and build” strategy rather than organic growth, Fermont says. There is also likely to be pressure on private equity-owned distributors to reduce their inventory levels and increase customer prices, he adds. While the entire distribution sector remains vast with many small- to mid-size firms, some argue that the major global players are the force to be reckoned with, the ones that ultimately shape the industry. The fact that private equity firms are in the driver’s seat at most of the major distribution firms has raised at least one pressing question: Is this necessarily a bad thing? What do you think?