Industrial Distribution represents a $750 billion market unto itself with 15 segments. Within that universe Akoya is most interested in the specialty chemicals, power transmission/motive control and metals distribution segments each representing markets of $223 billion, $54 billion and $120 billion respectively. In addition, Akoya is interested in Electrical, Industrial PVF and Safety Products distribution companies because:
- Industrial Distribution in general and the three target segments of specialty chemical, power transmission/motive control and metals are relatively unconsolidated and expected to grow in the U.S. at greater than trend GDP rates. There are 83,000 individual companies with 113,000 branches.
- Typical YoY organic growth rates for Industrial Distributors range from 6% to 14% which is typically at least twice the rate of growth of the underlying products being distributed.
- Increasingly manufacturers of products are relying more heavily on distributors as producers seek the economy of scale large transactions provide while relying on distributors to customize the product offering to smaller customer needs while providing inventory management skill demanded by today’s lean working capital operating models.
- Attractive investment opportunities exist for companies with sales of $25 million to $150 million and more. This segment makes up the vast majority of the operating companies in the Industrial Distribution market all of whom are privately held in this size segment.
- Target companies have broad market risk spreading customer bases that are seeking high quality value add suppliers.
- Ample opportunity to employ the Akoya buy, partner and build model to create and unlock value through organic expansion, management and marketing development, increase in value add activity as well as application of lean management principles.
- The segments targeted are mission critical components to their customer’s success and the industrial distributor can count on a preferred position on their customers’ vendor list as long as they providing a superior value proposition.
Target Segments for Industrial Distribution
- Specialty Chemicals
- Power Transmissions & Motion Control
- Safety Products
- Gases & Welding Equipment