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Through its wholly owned subsidiary, SRS Distribution, Home Depot (HD) announced that it will acquire GMS Inc. (GMS) for approximately $4.3 bln, with SRS commencing a tender offer to purchase all outstanding shares of GMS at $110/share in cash. The news has driven GMS shares sharply higher, with the acquisition price representing a 14% premium to last Friday's closing price. On June 19, the Wall Street Journal broke a story that HD was aiming to make an offer for GMS, which sent the stock rocketing higher.

This acquisition also follows reports of a competitive bidding environment, with QXO Inc. (QXO) previously offering $95.20/per share, valuing GMS at $5 bln, and unconfirmed speculation of an earlier HD bid.

• GMS is a specialty distributor of building products, focusing on wallboard, ceilings, steel framing, and complementary construction products, operating over 320 distribution centers and nearly 100 tool sales, rental, and service centers across the United States and Canada. Its primary end markets include commercial and residential construction, serving contractors, builders, and professional remodelers. GMS’s business aligns seamlessly with SRS Distribution’s portfolio, which specializes in roofing, siding, and other exterior building products for professional contractors.
• The acquisition enhances SRS’s product offerings by adding GMS’s interior-focused product lines, creating a more comprehensive platform for professional customers. For HD, this bolsters its fast-growing professional business, which has been a strategic priority since the $18.25 bln acquisition of SRS in 2024. By integrating GMS’s network and expertise, HD strengthens its position in the $950 bln professional contractor market, diversifying beyond its core retail business and capturing higher-margin, recurring revenue from professional clients.
• GMS reported FY25 net sales of $5.5 bln, with a marginal yr/yr increase, though organic sales declined 5.4% on a same-day basis. At a P/E ratio of 34.3x, the acquisition price is significantly above GMS’s historical averages, suggesting a lofty valuation. However, the 9.7x trailing twelve-month EBITDA multiple (based on QXO’s $5 bln offer) is reasonable within the context of strategic acquisitions in the specialty distribution sector. Given GMS’s stable cash flows and market position, the premium appears justified to secure a leading player in a fragmented market, though it may reflect competitive bidding pressure from QXO.
• For HD, the immediate financial impact of the GMS acquisition is unlikely to significantly move the revenue needle, given its massive $153 bln in trailing twelve-month revenue. GMS’s $5.5 bln in sales represents roughly 3.6% of HD’s top line, suggesting a modest contribution to overall revenue. The deal’s impact on earnings accretion remains uncertain, as potential margin dilution due to GMS’s lower-margin profile compared to HD’s core operations could create a headwind.

Overall, the acquisition aligns with HD’s strategy of expanding its professional contractor ecosystem, following prior acquisitions like HD Supply and SRS, which could drive long-term synergies through cross-selling opportunities and operational efficiencies. The addition of GMS strategically strengthens its professional contractor business by adding a leading distributor of interior building products, enhancing its competitive position. While near-term earnings accretion may be limited, the deal enhances HD’s scale in the professional segment, potentially boosting profitability over time as integration matures.