Sunday, December 11, 2005

Volume 15 - 'Big Boxes' getting bigger

Rumors are rampant on possible acquisition talks between The Home Depot and the industrial distributor Hughes Supply. "The speculation was fueled by the announcement a couple of weeks ago that Hughes Board of Directors has authorized the company to consider strategic alternatives for the company to maximize shareholder value." (from an article written by Lindsay Young)

Two things simply jump out at me, one involving the future impact on Contract Door Hardware Distributors and Locksmiths, and the other involving a totally different subject " maximize shareholder value".

Hughes Supply is a distributor of construction, repair and maintenance-related products. David Manthey, a Senior Distribution analyst who follows Hughes for Robert W. Baird & company Inc., Milwaukee, Wisconsin, says acquiring Hughes would fit with Home Depot's strategic mandate to expand beyond retail in the U.S. Recent acquisitions by Home Depot include White Cap Construction Supply, National Waterworks, Inc., and Williams Brothers Lumber Company. According to a news release from Home Depot earlier this year, the company is focused on building a leadership position in markets that serve business to business customers such as Commercial Builders.

If I were a Contract Door Hardware Distributor or Locksmith and my present suppliers were selling the 'Big Box Houses', I would have to cease and desist my purchase practices with those suppliers/manufacturers for the business strategy is now very evident on where the 'Big Box Houses' desire to move. The handwriting is on the wall! And, although there is nothing wrong with a strategy that promotes growth within one's company, it should not be done at the expense of your own customer group, whose past loyalties are obviously disregarded and mean nothing to the supplier/manufacturer who exhibits their lack of caring for you as a customer, nor do they care that they are doing their best to run you out of business, as opposed to seeking new revenue opportunities in available untapped markets, even if their products are labeled under a different name. Why, as a entrepreneurial business, would you continually feed those that are positioning themselves to destroy your very business?

The other news is that the magic words of "to maximize shareholder value" are used. Translated that means the financiers are collecting huge fees and the principal shareholders have access to new money while ordinary shareholders and absorbed employees, from the acquired company, just got screwed.

Have a very Merry Christmas and a great Holiday Season