MANY TOP-50 DISTRIBUTORS REMAIN OPTIMISTIC FOR 2008

In interviews with the executives of the largest distribution firms for our Big 50 report this month, it's clear that the economic slowdown (insert the word recession here if you want to) has not severely affected these firms.

“We're just not seeing the softness that everyone keeps talking about,” says Steve Cloud, president of IBT.

A majority of these executives told us their business in 2007 was strong and that they are cautiously optimistic about 2008. In fact, the earnings for a number of Big 50 firms have grown this past quarter.

So what's going on out there?

Although the automotive and construction markets are weak, distributors tell us there is still strong activity in infrastructure, food processing, government and military sectors. Business for many distributors serving the oil field industry was good and will continue that way as long as prices remain high, they say.

Other distributors, particularly in the power transmission field, say they're seeing increased activity in the wind-turbine area, which may translate into increased sales for products such as motors.

More than one executive mentioned plans to expand geographically by acquiring other distributorships.

“This actually is a great time to buy,” one executive told us. “We've got plans to acquire at least three companies this year.”

Airgas continued its rapid expansion in 2007, acquiring 18 companies with $510 million in revenues. Even more significantly, the trend toward acquiring companies with complementary product lines seems likely to pick up this year—a motion control distributor buying an MRO-type distributor, for example.

Other companies opened branches in new regions or expanded operations in existing territories. For example, Kaman Industrial Technologies, which bought Industrial Supply Corp. earlier this year, opened nine new branches in 2007.

Of course, any distributor serving the construction sector in the United States would tell you this current downturn in housing is one of the worst they've experienced. Some distributors expressed amazement about the speed at which the housing market has deteriorated. Yet many of these distributors report that their business has been somewhat cushioned by sales to the industrial/manufacturing sector.

All in all, distributors continue to be optimistic about their business in 2008.