Home Depot is set to acquire SRS Distribution, a provider of materials for professionals, in a deal valued at around $18.25 billion, including debt. This acquisition marks Home Depot’s largest in its history and signifies a strategic move into the rapidly expanding professional builder and contractor sector. As consumer retail sales, which surged during the pandemic, begin to wane, Home Depot is shifting its focus towards the professional market.
SRS Distribution caters to professionals such as roofers, landscapers, and pool contractors, positioning Home Depot to capitalize on the growing demand in the professional construction industry. This move is a significant bet on the housing market, which is grappling with a severe shortage of new homes, resulting in soaring prices. The median sales price for new homes in the United States has surged by 29.4% over the past five years, reaching $417,700 in the fourth quarter, according to data from the Federal Reserve Bank of St. Louis.
Despite a slowdown in the housing market due to a shortage of homes and rising mortgage rates, sales of previously owned homes saw an uptick in February, driven by a modest decline in mortgage rates. With mortgage rates remaining relatively high, many homeowners are investing in home maintenance and renovations, further bolstering the prospects of the Home Depot and SRS deal.
Home Depot sees the acquisition as an opportunity to expand its total addressable market, estimating it to be approximately $1 trillion, up by approximately $50 billion. According to Home Depot’s CEO, Ted Decker, the acquisition of SRS will accelerate growth with residential professional customers and unlock future opportunities in the specialty trade market.
SRS Distribution boasts a sales team of over 2,500 employees and operates more than 760 branches across 47 states. Additionally, it possesses a fleet of over 4,000 trucks and offers jobsite delivery services. SRS CEO Dan Tinker and his senior management team will continue to lead the company from its headquarters in McKinney, Texas. The acquisition is expected to enhance both companies’ capabilities and enable them to better serve professionals in the highly fragmented construction market.