Why This Matters to Distributors: The deal removes one of the largest publicly traded specialty distributors from the public markets, highlighting continued private equity investment in industrial distribution and positioning the company to continue expanding through acquisitions and organic growth under private ownership.
Distribution Solutions Group Inc. has agreed to be acquired by affiliates of its majority shareholder, LKCM Headwater Investments LLC, in a deal that will take the specialty industrial distributor private.
Under a definitive merger agreement announced July 16, LKCM Headwater will acquire all outstanding shares of Distribution Solutions Group common stock that it does not already own. LKCM Headwater and its affiliates currently own about 79% of the company’s outstanding shares. Following the transaction, Distribution Solutions Group will become a privately held company wholly owned by LKCM Headwater and its affiliates, and its common stock will no longer trade on the Nasdaq Stock Market.
The acquisition price represents an 81% premium over Distribution Solutions Group’s closing share price on March 13, the last trading day before LKCM Headwater publicly disclosed its initial proposal to acquire the remaining shares. The final offer also increased by $5.50 per share from LKCM Headwater’s original nonbinding proposal submitted to the company’s board on March 14.
The transaction follows a four-month review by a special committee of independent directors formed after LKCM Headwater submitted its initial proposal. Because LKCM Headwater already controlled the company and Distribution Solutions Group Chairman and Chief Executive Officer J. Bryan King also serves as managing partner of LKCM Headwater, the board appointed the committee to evaluate and negotiate the transaction. The committee unanimously approved the agreement and recommended it to the full board, which approved the merger after certain directors recused themselves.
The transaction remains subject to customary closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act and approval by a majority of votes cast by shareholders not affiliated with LKCM Headwater. The agreement is not contingent on financing.
Distribution Solutions Group is a specialty distributor serving the maintenance, repair and operations, original equipment manufacturer and industrial technology markets. The company was formed through the combination of Lawson Products, Gexpro Services and TestEquity and serves approximately 220,000 customers through operations in North America, Europe, Asia, South America and the Middle East.
Its operating companies provide inventory management services, supply chain solutions, industrial products and electronic test and measurement equipment to manufacturers and industrial customers. The company has expanded rapidly through acquisitions, assembling a portfolio of businesses that serve a broad range of industrial and manufacturing markets.
William Blair & Co. served as financial adviser to the special committee, while McDermott Will & Schulte served as legal counsel. J.P. Morgan Securities advised LKCM Headwater, with Mayer Brown serving as legal counsel.
This transaction marks one of the year’s largest ownership changes involving a publicly traded industrial distributor and continues the broader trend of private equity firms consolidating specialty distribution businesses with an emphasis on long-term growth and acquisition strategies.
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