Street View: Home Depot steps beyond retail with 'strategic' $4.3 billion GMS deal

Home Depot HD.N said on Monday its unit SRS Distribution has agreed to acquire specialty building products distributor GMS GMS.N for about $4.3 billion, stepping up its efforts to capture more demand from professional contractors

GMS transaction is expected to close by the end of fiscal 2025 and will be funded through cash on hand and debt

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Morgan Stanley says HD is likely to succeed in serving complex professional and project-based customers over time, and being a “concierge distributor” for pros like home builders and commercial contractors is a shift from its traditional retail and Pro strengths

Telsey Advisory Group says the asset justifies the price, given GMS has a national presence and fits well with Home Depot’s strategy to grow its business with more complex professional customers

Truist Securities sees this deal as the next step in Home Depot’s strategy to consolidate professional distribution

"We believe GMS has limited product and contractor overlap with SRS, but at their core, both provide service to customers" - Truist

Stephens says the deal makes strategic sense and the premium acquisition price is not surprising since HD has historically been less sensitive to valuations in similar acquisitions