Acquisition Meltdown by an International Chain
The melt down of HD Supply in Canada has resulted in the closure of Litemor an electrical distributor that HD Supply purchased in 2005. Back in 2005, Litemor had 13 branches, over 250 employees and was rumored to have sales well over $100 million. The promises made at the time of the acquisition were: better jobs, stable future for employees, better growth opportunities and yes, business as usual. This is the standard response taught in “Acquisitions 101” MBA programs. Litemor was a strong, profitable, well run competitor to many of our Affiliates.
Eight short years later and we wonder how a large international conglomerate can make such a mess of a previously well-run independent distributor, not to mention the disruption to customers and suppliers. We hear the rumours of how a chain negatively impacts their acquired companies, but in this instance the effect cuts deep, as every employee in the former organization is impacted in one way or another. In addition, inventories are discounted and sold back into the market with total disregard for the Canadian suppliers and distributors. Customers are ignored, contracts are terminated and credit limits are eliminated.
In short, the closure of HD Supply – Litemor in Canada has resulted in a negative impact on their employees, suppliers and customers. HD Supply made their decision based on a total disregard for profitability. Unfortunately, these decisions often result in the stock market rewarding management by increasing the share price without taking into consideration the best action for the company or its loyal partners, customers and employees. It is difficult to understand how executives overpay for a company, run it into the ground, lose money and don’t even try to sell the business in order to recoup some of their investment. How is it possible that a company’s stock price increases when the organisation simply closes and liquidates their investment at a significant cost to shareholders? Amazing.