Home Depot acquisition bets on major construction projects ahead

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The Home Depot announced Thursday it’s buying Texas-based SRS Distribution for $18 billion, the biggest acquisition deal in its history.

It’s not exactly a household name because it doesn’t sell to household consumers. The company supplies building materials to large-scale professional contractors in roofing, landscaping and pool construction. It’s a market the home improvement giant is looking to take a bigger slice of as consumers pull back on DIY home renovations.

The early years of the pandemic were a bonanza for home renovations, said Carlos Martín at Harvard University’s Joint Center for Housing Studies. Since then?

“Well, it’s been a wild ride,” he said.

Mortgage rates were at record lows, and people were stuck at home with a lot of extra time and extra money to tinker around the house. He said spending on home renovations spiked in 2021 and 2022.

“Now what we’re going through is a correction and a stabilizing,” Martín said.

So The Home Depot is looking beyond its big orange warehouses for growth, said Michael Brown, a retail strategist at Kearney Consulting.

“This new acquisition, I think, gives them access to probably one area where they don’t play, which is the pool sector,” he said.

And other specialty construction. About half of Home Depot’s current business comes from contractors but — until now — the retailer hadn’t really served big construction firms that do complex projects requiring highly specialized materials at a massive scale.

“The move just continues to cement them as the place to go, from the everyday consumer, to the local contractor, to the regional contractors for their one-stop needs,” Brown said.

While professional construction firms have also been affected by the higher interest rates that have slowed down consumer renovations, there’s still a severe long-term housing shortage, pointed out Anirban Basu, chief economist at Associated Builders and Contractors. 

Not to mention the government is spending more than a trillion dollars on infrastructure projects.

“If you put it all together, professional construction firms stand to be very busy on average during the years ahead,” he said.

And he said Home Depot could get a big orange slice of that business.

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