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Easy Growth Profitability

Grow baby, grow!

#Industrial Goods #Distribution
ProHub Comment

This case requires candidates to identify growth opportunities within a fragmented industrial distribution industry while balancing growth with EBITDA margin improvement. The exhibits provide clear quantitative guidance showing paper-based products as the most attractive segment due to superior projected growth rates and EBITDA margins compared to declining lumber products.

Estimated Time 15 minutes
Difficulty Easy
Source Duke
50 / 100
Your client is a diversified industrials distributor that focuses on four key product areas: plumbing tools (pipes, installation tools), lumber residential products (siding, framing materials, roofing), cement (raw cement powder, ready-to-use cement, mixing tools, etc.) and paper products (cardboard, writing paper, packaging paper, etc.). The client distributes finished products to a variety of customers, such as property management companies, residential home builders and contractor plumbers. Your client currently faces an issue of bottom-line growth. We have been engaged to study how our client can increase their EBITDA margin over the next 5 years.

Clarifying Information

  1. Client operates only in the USA, does not want to expand internationally
  2. Client has many competitors and operates in a fragmented industry, only owns 10% of market share
  3. Current strategy: acquire smaller, competing distributors that have a good synergistic fit
  4. Does not manufacture but serves as an intermediary, aka a distributor, to distribute products to end-customers
  5. Achieved revenues of $15B and EBITDA margin of 8% in 2020
  6. Target EBITDA margin of 10% on whatever revenue by 2025
  7. Client’s board of directors wants the CEO and her leadership team to focus improving EBITDA – find ways to grow