But just as in printing and banking, there will always be room in the metals distribution business for the small, niche supplier that provides a unique specialty or serves a regional market, he adds. The supply chain driver McCague agrees with Levinson Steel's spokesman that supply chain demands are driving the consolidation wave. Buyers are looking to deal with a smaller network of steel suppliers because this is such a large industry and so fragmented. They want a short list. And it isn't hard to see why a smaller company would find consolidation an attractive opportunity.
Companies often sell out because there's no succession plan in place.
A larger organization can provide capital. The buyer stands to make money by picking up additional revenues and market share and by consolidating costs. In addition, the buyer has more access to the financial markets at reduced rates, so he's not paying as much for borrowing and can consolidate purchasing. The consolidation trend has little downside, McCague contends. That doesn't mean no pitfalls exist.