The Rise and Decline of the DIY Boom
The COVID-19 pandemic sparked an unprecedented surge in the DIY home improvement market, fueled by increased time at home, remote work and redirected discretionary spending. U.S. home improvement and repair expenditures surpassed $500 billion in 2022, according to Harvard’s Joint Center for Housing Studies, as homeowners invested in projects ranging from minor repairs to major renovations. However, rising interest rates, cooling home sales and tightening household budgets have slowed DIY momentum, signaling a shift in the industry’s growth dynamics.
Home Depot’s Strategic Pivot: The $18.25 Billion SRS Acquisition
As DIY demand wanes, leading retailers are turning to mergers and acquisitions to drive growth. In 2023, Home Depot acquired SRS Distribution, a major distributor of roofing, landscaping and building materials, for $18.25 billion. Targeting the professional contractor segment, SRS has outperformed expectations, bolstering Home Depot’s revenue and diversifying its reliance on the volatile DIY market. This acquisition strengthens Home Depot’s position in high-frequency, non-discretionary building materials distribution, a sector less sensitive to economic cycles, ensuring a more resilient foundation for long-term growth.
Targeting GMS: Expanding Professional Market Presence
Home Depot’s acquisitive strategy continues with ongoing discussions to acquire GMS, a leading distributor of wallboard, ceilings and interior construction products. This potential deal underscores Home Depot’s focus on deepening its professional market presence and expanding into adjacent product categories. Despite modest stock performance in 2024, with shares up just 0.2%, Home Depot’s leadership is leveraging M&A to capture market share in less cyclical segments, reinforcing its portfolio and competitive positioning in a consolidating industry.
Lowe’s and the Risks of M&A
While Home Depot’s acquisitions have gained traction, the industry’s M&A landscape is fraught with challenges. Lowe’s, Home Depot’s primary competitor, provides a cautionary example. Its failed acquisition of Canadian retailer Rona, divested in 2022 at a $2 billion loss, highlights the risks of cross-border expansions and misjudged synergies. More recently, Lowe’s $1.325 billion acquisition of Artisan Design Group aims to strengthen its design and professional installation services, aligning with the industry’s shift toward professional markets. However, historical data suggests that approximately 70% of M&A deals fail to deliver shareholder value, often due to cultural mismatches, overpayment or unrealistic projections, as seen in cases like Tapestry’s Kate Spade write-downs and Walgreens’ costly Rite Aid acquisition.
Strategic Rationale for Consolidation
The home improvement sector’s shift from DIY to professional markets underscores the strategic imperative for consolidation. As organic growth slows in mature markets, M&A enables retailers to access new customer segments, streamline supply chains and unlock operational efficiencies. Home Depot’s disciplined approach—targeting businesses with strong market positions and clear synergy potential—contrasts with less successful deals in other sectors, positioning it to navigate integration risks and margin pressures effectively.
Outlook for Investors and the Industry
The home improvement sector’s future hinges on retailers’ ability to balance M&A ambition with valuation discipline. As the DIY boom fades, acquisitions such as SRS and potential deals such as GMS offer pathways to sustained growth through professional markets and diversified product offerings. However, success depends on rigorous execution, integration and alignment with market realities. For investors, the ability of retailers to deliver accretive, long-term value through M&A will shape the industry’s next chapter.
About DelMorgan & Co.
DelMorgan & Co. is a leading global investment bank headquartered in Santa Monica, in the greater Los Angeles area of Southern California. With over $300 billion of successful transactions in over 80 countries, DelMorgan‘s Investment Banking professionals have worked on some of the most challenging, most rewarding and highest profile transactions in the U.S. and around the globe.
