Surviving and thriving in the M&A era
The LBM industry is undergoing a significant transformation from mergers and acquisitions. As larger companies and investment firms look to expand market share, independent dealers are increasingly faced with big decisions about how to position themselves in this landscape.
Drivers behind M&A activity
M&A activity in LBM is expected to continue in 2025 and beyond. The trend is driven by several key factors:
- A rapidly evolving business environment. Due to market stagnation of housing starts and interest rates, evolving customer expectations, and ongoing supply chain disruptions, small and large independent building supply dealers are being faced with the threat (or relief) of M&A.
- Industry consolidation. Large corporations and private equity firms are actively acquiring independent dealers to expand their geographic reach, integrate supply chains and improve operational efficiencies.
- Big names want B2B. Traditionally consumer-focused companies recognize the value of diversifying their revenue streams with commercial customers. By acquiring established, independent dealers with existing B2B relationships, these brands can accelerate their market entry and expand their offerings.
- Succession planning challenges. Many smaller independent dealers lack a clear succession plan, which makes M&A an attractive exit strategy. As business owners approach retirement or face financial uncertainty, selling to a larger company provides stability and long-term viability for their business.
Unique strengths of independent dealers
Independent dealers have distinct advantages that allow them to stay competitive in a market increasingly shaped by M&A. Those who choose to stay independent can leverage their strengths–and adopt efficient operational best practices–to thrive.
One of the biggest advantages independent dealers have is their ability to offer personalized service, strong customer relationships and local decision-making. These factors can instill deep customer loyalty, allowing independents to carve out specialized niches that large corporate acquirers cannot replicate.
Also, independent dealers often specialize in unique products or customized service offerings, which further differentiates them from larger, more generalized competitors. Their ability to pivot quickly, adopt new technologies, and implement modern business practices helps them remain resilient amid industry changes. By playing to these strengths, independent dealers can stay ahead of the competition.
How to stand strong against competitors who suddenly have excess resources
- Streamline the customer experience. Implementing online account management through digital transformation empowers customers to utilize self-service for their bill payments. Additionally, order tracking allows them to have the big-brand convenience with the additional tailored customer experience of independent stores.
- Offer an omnichannel experience. Ensure your brand stays competitive on every channel so the larger independents don’t become the default location – online or in-person – that your customers see and hear about. Investing in ecommerce that either simply showcases what products you supply or allows customers to order online from anywhere can make sure you stay competitive against big online brands.
- Investing in AR and business intelligence technology. Implementing enterprise resource planning (ERP) software with accounts receivable and business intelligence capabilities allows smaller dealers to remain independent. It also enables them to analyze where they can and where they can’t win so they can implement smart strategies such as pricing, margins, and rewards programs.
Conclusion
As mergers and acquisitions reshape the LBM industry, independent dealers must be highly adaptable to stay competitive. Long-term success depends on their ability to track industry trends, integrate emerging technologies and make strategic investments in their operations. Independent dealers who take these strategic steps to enhance their competitiveness will be well-positioned to navigate the changing landscape.
About the authors
Brian Bowerfind is president of LBM and Distribution Divisions at ECI Software Solutions, a global provider of cloud-based business management software and service. His focus is on identifying and capitalizing opportunities to accelerate the company’s growth trajectory through M&A, product innovation, strategic partnerships, and organic means.
Chris Fisher is VP of Global Ecommerce and VP of Partnership at ECI Software Solutions. He’s responsible for overseeing the software operations for building materials industries across multiple geographies, leveraging his proven track record in developing and managing B2B SaaS solutions.
