In the largest acquisition ever made by a home improvement business in the United States, Home Depot is set to pay $18.25 billion to acquire SRS Distribution, a supplier of building materials, in an effort to expand its professional clientele and better address the slowing demand.

Due to sticky inflation, the company and its competitor Lowe’s Cos. have predicted a slower rebound this year as American customers put off major house remodelling and restoration projects.

Due to the strain on the Do-It-Yourself (DIY) market, which accounts for roughly half of Home Depot’s revenue, the company has increased the emphasis on “Pro-customers” in an effort to boost sales, including licenced contractors and builders.

Home Depot will be able to better serve its current clientele by utilising SRS’s delivery fleet and warehouse network thanks to the agreement announced on Thursday.

Roofers, landscapers, and pool contractors are among the Pro-customers that SRS, a portfolio company of private equity companies Leonard Green & Partners and Berkshire Partners, predominantly serves. The company, which generated $10 billion in revenue in 2023, will run as a separate division of Home Depot.

In a $3.55 billion deal, Leonard Green acquired the majority of SRS in 2018, a person familiar with the issue told Reuters on Thursday.

According to the source, Leonard Green permitted certain fund investors to cash out of SRS in December at a price of roughly $16 billion, including debt. Home Depot approved the deal after the company went through a sale procedure.

“This is a great deal at a great time,” said Thomas Hayes, chairman at Great Hill Capital.

The Nasdaq decreased by a tenth, but the Dow and S&P both increased by a tenth of a percent.

“You need (to) only look to the housing shortage – and young demographics of our millennials – to understand that as rates moderate construction will boom,” he stated.

Home Depot’s stock fell 1%, despite the company’s $382.42 billion market worth, according to LSEG statistics. Home Depot will fund the transaction with debt in addition to cash on hand by taking on SRS’s debt.

Home Depot CFO Richard McPhail told analysts on a call that the deal is all about “driving the customer experience” in addition to sales and profitability.

Customers, especially larger contractors, have frequently criticised the corporation for order, delivery, and logistical errors that could delay project completion.

The CEO of roofing solutions company Gunner, Eddie Prchal, stated, “The issue with (ordering on Home Depot’s website) is when it comes to delivery, it’s very sporadic… the problem was always logistics.”

Home Depot will expand its network of over 2,000 U.S. shops and distribution centres by incorporating SRS’s network of over 2,500 professional sales force in over 760 sites through the agreement, which is anticipated to close by the end of fiscal 2024.

Additionally, Home Depot would be able to benefit from SRS’s fleet of more than 4,000 trucks and worksite delivery capabilities.

“SRS is very good at delivering those things. (They have) good customer service, deliveries on time… So Home Depot will be able to start servicing and have a whole new focus on contractors,” Prchal said.

(Adapted from FoxBusiness.com)