The Home Depot to Acquire SRS Distribution, Inc - So, What's Next?

The Home Depot to Acquire SRS Distribution, Inc - So, What's Next?

In dozens of conversations since the announcement of The Home Depot's pending acquisition of SRS Distribution Inc., there seem to be more questions than answers. Here’s what we're hearing throughout the industry:

In dozens of conversations since the announcement of The Home Depot's pending acquisition of SRS Distribution Inc., there seem to be more questions than answers. 

Here’s a recap:

  • THD acquired SRS for $18.25B
  • That's a 16.1 x multiple based on 2023 EBITDA
  • SRS has 760 locations, 47 states
  • SRS has 11,000 employees of which over 2,500 are sales
  • SRS has 4,000 delivery trucks
  • THD believes its total addressable market is now ~$1 Trillion, an increase of $50 Billion.

The Hunt for Pros' Dollars Continues to Ramp Up

It’s no new news that THD along with Lowe's Companies, Inc. and other major suppliers have developed long-term strategies to increase their share of business among contractors. 

Pro customers genuinely do represent strong growth opportunities in the coming years.

In fact, the Home Improvement Research Institute (HIRI) estimates the pro market growth rate at 5.4% between 2025-2028, ~2% more than DIY.

Aging housing stock, pent up demand, high home equity, and the “lock in effect” are undercurrents for larger remodel projects that will involve Pros.

Plus, there is increasing demand as a large share of the population is hitting the average age of a first-time home buyer. Consider that

  • The median age for a first-time home buyer in 2023 was 35 according to Bankrate
  • Over 60% of mortgages are less than 4% according to Federal Housing Finance Agency
  • The median age of owner-occupied homes is over 40 years according to the American Community Survey
  • Total home equity in the U.S. is estimated around $30 Trillion, amounting to about $200,000 per homeowner according to the St. Louis Federal Reserve.

SRS serves small and large pro businesses, home builders, and specialty contractors. At The Farnsworth Group we study the behaviors and attitudes of these hard to reach pros daily for our clients. What we know from talking to them day in and day out is that their needs, expectations, and demands of a supplier are much different than the expectations of a smaller contractor that may be using THD or Lowe’s as their primary source. 

Top of Mind Questions

There are several additional questions that have come up in my conversations with clients and others in the building products industry, including:

  1. Pros have differing perceptions of these two brands, so what will happen with branding?
  2. How will Pros' perceptions and experience of THD change? How will use of SRS change?
  3. What is the impact of buying power and vendor relationships?
  4. How will brand and category breadth be impacted? Who/what will be cross sold?
  5. Depending on the category, type and size of pro, reps may play an important role. How will the SRS in-field teams be leveraged, or will they, for the THD pro customer?
  6. Order transparency, frequent communication, and increased job efficiency is more critical than ever with pros. Much of this is being addressed through technology and logistics. What is the impact of tech and logistics with the combined resources of both organization?

Shop Talk with Max Rakhlenko

We wanted to unpack some of these questions further, so Grant Farnsworth, President of the Farnsworth Group spoke with Max Rakhlenko, Equity Research Analyst at TD Cowen, to get his take on the news:


0:00 - 1:10 | Introductions

1:10 - 3:35 | Overview of Implications with The Home Depot's Pending Acquisition of SRS Distribution

3:35 - 5:55 | The Home Depot's Long-Term Strategy Among Pros

5:55 - 11:00 | How THD May Leverage SRS's Strengths

11:00 - 12:15 | Will the Pace of M&A Activity Change?

12:15 - 14:40 | Unpacking The Customer Service Component

14:40 - 16:25 | Final Thoughts on the State of the Building Products and Home Improvement Industry

What are your thoughts on how this merger will impact our building products and home improvement industry? We're genuinely interested to know what you're seeing and thinking about how this move will impact the industry at large, and your business more specifically.

Grant Farnsworth, President of The Farnsworth Group
Schedule A Meeting

Written By Grant Farnsworth

President, The Farnsworth Group

Grant has worked on every area of market research at some point – coding paper surveys, running tabs, programming surveys online, getting sample, managing fielding, generating reports and preparing analysis and presentations. Grant has been working with The Farnsworth Group since he was a teenager, learning the craft of custom market research and how to uphold the highest of standards in research design and data collection.  

For the past 20 years, Grant has been involved with various associations, trade shows, committees, publishers, manufacturers, retailers, and suppliers in the home improvement, lawn & ranch, and building products spaces. For Grant, one of the most satisfying feelings is to know they helped a client to succeed when he sees the results of The Farnsworth Group work on store shelves, on new homes, and in the homes of friends and family.