It was announced on January 11, 2023, that Central National Gottesman (CNG) would acquire S.P. Richards (SPR). Since SPR’s split from Genuine Parts Company in 2020 they’ve faced their fair share of challenges, like shifts in demand within the office dealer channel, managing an evolving assortment to meet their customers’ needs during the pandemic, widespread inflation impacting product costs, and increases in transportation and labor costs – large line items on the P&L for wholesalers. With all those challenges SPR has found a new home where there’s a bet the two companies can help one another. Highlands hold a favorable view of the acquisition for the reasons outlined below:
CNG is a strategic buyer
Strategic acquisitions are typically viewed favorably since they have an indefinite time horizon, the acquirer has a broader thesis on how the acquisition will benefit their business and customers, and there is an emphasis on investment rather than solely on cost cutting.
SPR will likely operate as its own division
There is no obvious home within CNG’s existing corporate structure, which leads us to believe SPR will join CNG as its own business unit. This means it will continue to operate as the company you know today, but it will have more capacity for investment in building capabilities, inventory positions, and developing their network.
CNG is a private company
CNG doesn’t have to answer to Wall Street’s timeline on when the owners need to produce returns on the acquisition. This allows CNG to be thoughtful about the SPR integration and make the investments required to position the company for long-term success.
This thoughtfulness will decrease the probability of any significant customer or supplier disruptions as CNG executes on their strategy.
CNG has significant acquisition experience
The acquirer is no stranger to acquiring complementary businesses. Their expertise in M&A bodes well for a successful integration into CNG’s broader corporate umbrella and distribution network. Moreover, if SPR operates as a standalone business unit, it opens up the possibility for CNG to bolt-on additional businesses to SPR.
The real question is what should suppliers expect? The short answer is business as usual.
The press release from CNG focused on SPR’s national distribution network, and it highlighted the company’s desire for SPR to continue operating as a traditional wholesaler. Our perspective is the acquisition was driven by the value of SPR’s national warehousing network, the synergies that CNG brings with their logistics capabilities, and their shared focus on similar customers. This leads us to believe there will be minimal near-term disruptions on the customer and supplier front for SPR. Most of the initial priorities will be centered around optimizing the two companies’ warehouse and distribution networks. CNG may drive sourcing initiatives for relevant paper categories where they have significant domain expertise. Furthermore, due to CNG’s knowledge of the paper and packaging space they may push SPR to diversify their product offering and customer base into new verticals.
All in all, this acquisition will bolster S.P. Richards’s ability to compete, which makes it increasingly important to support the company as they evolve.
Seth Raley Partner + President of Highlands