Lowe’s is beefing up its hub for homebuilders and property managers, spending more than $1.3B to acquire Artisan Design Group from private equity firm The Sterling Group.
Lowe’s announced it will spend more than $1.3B to acquire Artisan Design Group.
Artisan Design Group operates 132 distribution, design and service facilities from its headquarters in Dallas. It also works with more than 3,200 professionals in 18 states to coordinate installation.
The company will be incorporated into Lowe’s Pro offering for home improvement professionals in a new distribution channel.
“With more than 18 million homes needed in the United States by 2033, we expect new home construction will be a major driver of Pro planned spend for the next decade,” Lowe’s Chairman, President and CEO Marvin R. Ellison said in a statement. “The acquisition of ADG allows us to build on our momentum with Pro planned spend and is expected to expand our total addressable market by approximately $50 billion.”
The acquisition could be used as a platform for future bolt-on deals, according to Jefferies analyst Jonathan Matuszewski. He said the purchase is designed to attract more homebuilders and property managers to Lowe’s Pro platform and increase sales penetration, Seeking Alpha reported.
Lowe’s officials said the company will use available funds on hand to finance the purchase of ADG, according to The Wall Street Journal.
The company had been owned by The Sterling Group since 2018, with ADG absorbing 15 founder- or entrepreneur-owned companies through acquisitions during that time.
“Our leading position in flooring, cabinets and countertops, combined with Lowe’s scale and category breadth, will allow us to continue on our growth trajectory while providing an even more differentiated and comprehensive offering to the builders and property managers we serve today,” ADG CEO Steve Margolius said in a statement.
While ADG works with small, medium and large homebuilders, UBS Equity Research Analyst Michael Lasser told Seeking Alpha he believes ADG has room to gain market share and realize cost savings with the move.
“This should range from purchasing, supply chain and operations,” Lasser told Seeking Alpha. “We believe there is a degree of overlap in the supplier base between Lowe’s and ADG.”
Lowe’s acquisition is slated to close in Q2, assuming regulatory approvals are received and customary closing conditions are satisfied.
RBC Capital Markets was ADG’s lead financial adviser, with Goldman Sachs also advising. Latham & Watkins LLP was legal adviser to ADG.
