Home Depot Acquires GMS for $4.3 Billion to Expand Drywall Offerings

Home Depot has announced a significant acquisition, purchasing building materials distributor GMS for $4.3 billion. This strategic move is aimed at bolstering its professional contractor business and expanding its offerings into drywall, ceilings, and steel framing. The acquisition is expected to enhance Home Depot's position as a leading building products distributor, following its 2024 acquisition of specialty trade distributor SRS, which strengthened its presence in roofing, landscaping, and pool supply retailing.

Analysts generally support the strategic value of the acquisition, noting that it adds scale, category breadth, and delivery capabilities to Home Depot's portfolio. However, there are concerns about the purchase price, which is 11 times GMS' EBITDA. This high valuation could raise investor concerns, as some analysts believe Home Depot may have overpaid for the acquisition. The transaction involves Home Depot's SRS subsidiary purchasing all outstanding shares of GMS common stock for $110 per share, with the deal expected to close by the end of the fiscal year.

Despite the potential for debate among investors, the acquisition is seen as positioning Home Depot as the leading drywall distributor, ahead of private equity-owned competitors. This move is also expected to increase pressure on other home improvement companies. Following the acquisition, Home Depot will significantly expand its fulfillment and service options, creating a network of over 1,200 locations and a fleet of more than 8,000 trucks. This infrastructure will enable tens of thousands of jobsite deliveries per day, enhancing the company's service capabilities.

Home Depot's chair, president, and CEO, Ted Decker, expressed confidence in the acquisition, stating that the success of SRS as a growth platform gives them assurance that adding GMS will create even greater value for customers. Analysts suggest that if Home Depot can deliver higher than expected earnings-per-share (EPS) and earnings before interest and taxes (EBIT) growth, investors may overlook the higher premium paid and view the acquisition favorably.