Table of Contents
When most people think of Home Depot, they picture aisles of lumber and weekend DIY projects. But its latest move — folding GMS into its SRS distribution arm for $5.5 billion — signals something different: the company isn’t just stocking shelves anymore. It’s building the supply chain itself.
A Hedge Against Fragility
The pandemic exposed how brittle global supply chains could be, with contractors waiting months for basic materials. By acquiring GMS, one of the largest distributors of drywall and steel framing, Home Depot secures a buffer between global volatility and its Pro customers. It doesn’t just sell building products; it owns the pipeline that moves them.
Why It Matters
Fewer middlemen: Controlling distribution reduces reliance on outside wholesalers who might prioritize other accounts.
Pricing power: By managing product flow, Home Depot can better control margins and pass savings (or stability) to Pros.
Customer lock-in: Contractors who depend on quick turnaround will find fewer reasons to shop elsewhere.
Bigger Picture: Distribution as Strategy
In the past, manufacturers chased vertical integration by acquiring suppliers. Today, retailers like Home Depot are flipping the playbook — moving deeper into distribution to guarantee access. For smaller building supply houses, this deal raises the pressure to specialize, partner, or consider their own consolidation.
And it’s not just retailers making these moves. Private equity firms, flush with dry powder (as we covered in last week’s go-private wave), have been circling building products distributors for years. Home Depot’s latest acquisition looks a lot like the PE roll-up playbook — only executed by a retailer with massive reach.
The lesson here is simple: in volatile markets, ownership of distribution channels isn’t a nice-to-have. It’s a hedge against disruption.
A Cautionary Tale
Vertical integration isn’t always a silver bullet. Red Lobster learned this the hard way. In 2023, the chain’s then-CEO leaned into an “endless shrimp” promotion — a decision influenced by its connection to a shrimp supplier. What seemed like a savvy way to fill seats and move product instead created runaway costs.
The fallout was severe. Losses piled up, the promotion became unsustainable, and when new owners stepped in, they were forced to ax one of the brand’s most beloved offerings just to stabilize the business. The lesson is clear: owning part of your supply chain can give you leverage, but if it drives short-term gimmicks over long-term value, it can just as easily sink the ship.
Takeaway
Owning distribution can be a game-changer — but it cuts both ways. Home Depot’s purchase of GMS shows how vertical integration can strengthen resilience, protect margins, and lock in customer loyalty. On the flip side, Red Lobster’s “endless shrimp” era is a reminder that supply-chain ownership can distort strategy if it encourages decisions that drain value instead of creating it.
For business owners, the principle is clear: controlling your supply chain is powerful, but only when it aligns with long-term growth.
What I Read So You Don’t Have To
Lowe’s Expands Pro Fulfillment Centers — Rival Lowe’s is taking a different tack, focusing on regional logistics hubs instead of acquisitions.
Private Equity Push in Building Materials — Firms like Clayton, Dubilier & Rice have been rolling up distributors, making Home Depot’s move look more like PE playbook than retail expansion.
U.S. Bank Survey on Generational Shifts in Ownership — Over one-third of Gen Z and Millennial small business owners plan to acquire a business from a retiring owner, but many older owners aren’t prepared to exit.
Forbes on Small Business Exit Trends — Four emerging trends are reshaping how owners approach succession in 2025, from delayed retirements to buyer demographics.
Resources
Disclaimer: Some of the links below may be affiliate links*
Sources & Further Reading:
Tools & Platforms You May Find Useful:
Kumo – AI-powered deal sourcing and CRM tailored for M&A professionals
BizBuySell – The largest online marketplace for buying and selling small businesses
Acquire.com – Streamlined platform to buy and sell startups and small businesses
MeetAlfred.com – LinkedIn and multichannel outreach automation
Outscraper – Web scraping tools for local business data, Google Maps, and more
Cloudtalk.io – A robust cloud-based calling platform that goes beyond basic VoIP. With built-in power dialer, optional AI features, and advanced analytics, it helps teams handle more calls, close deals faster, and deliver better customer support. New users receive 50% off to get started.
Postale.io – Affordable custom domain email hosting
eVirtual Assistants - Hire a VA from the Philippines
Hostinger - Affordable, fast, and beginner-friendly web hosting with a built-in AI website builder to launch your site in minutes.
Beehiiv – A newsletter publishing platform built by newsletter creators
Enjoyed This Issue?
If you found these insights valuable, chances are someone in your network will too. Forward this email or share the article with a fellow business owner, strategist, or investor who needs to see what’s coming next.
The view is always better when more people are watching from the tower.