Recently, we learned that Home Depot $HD ( ▼ 1.01% ) is acquiring GMS Inc. $GMS ( ▲ 0.27% ) , a building products distributor, for about $4.3 billion.

This deal echoes its acquisition of HD Supply Holdings back in 2020. While HD Supply is one of the largest distributors of appliances, plumbing, and electrical equipment, GMS is one of the largest distributors of wallboard, ceilings, steel framing, and complementary construction products.

Interestingly, last year, Home Depot acquired a subsidiary of GMS called SRS for $18.25 billion. That acquisition remains Home Depot’s largest acquisition to date. With that acquisition, Home Depot can now sell supplies to professionals in the landscaping, pool, and roofing businesses.

Both of these acquisitions are part of Home Depot’s push to be a supplier to professionals in various blue-collar industries. Selling supplies to blue-collar professionals is steadier and more lucrative than selling products directly to consumers. Unlike consumers, these professionals tend to tackle larger projects and thus need a lot more supplies than what your average Home Depot location has in stock.

Let’s take a look at the ROI analysis that I’ve made of this acquisition.

ROI Analysis

Deal Structure & Baseline Financials

Acquisition Details

• Purchase Price: $110 per share ($4.3B equity value)

• Total Enterprise Value: $5.5B (including ~$1.2B net debt)

• Expected Close: Early 2026

• Integration Timeline: 24-36 months for full synergy realization

GMS Historical Performance (Fiscal 2025 Baseline)

Based on recently reported results:

Key Context: GMS experienced headwinds in FY 2025 with organic sales declining 8.3% due to construction market softness, though they maintained strong cash generation.

Detailed Financial Forecast Model

Core Assumptions

Market & Industry Assumptions

• Construction Market Recovery: Gradual improvement starting 2026

• Interest Rate Environment: Rates plateau then decline modestly 2026-2027

• R&R vs New Construction: R&R remains more resilient (60% of revenue)

• Professional Market Growth: 3-5% CAGR vs 1-2% DIY market

Integration & Synergy Timeline

• Year 1 (2026): Integration costs, minimal synergies

• Year 2 (2027): Early synergy realization (25% of target)

• Year 3 (2028): Meaningful synergy capture (60% of target)

• Year 4+ (2029+): Full synergy realization

Revenue Forecast & Synergy Analysis

Standalone GMS Projections (Pre-Synergies)

Assumptions:

• 2026: Continued market headwinds, modest recovery

• 2027-2028: Construction market normalization

• 2029+: Steady-state growth aligned with the construction market

Cost Synergies & Margin Analysis

There are various ways that this acquisition can bring cost synergies:

• Enhanced supplier negotiations

• Operational efficiencies

• SG&A Optimization

I can put up numbers on what I think are the cost savings from all three factors, but these numbers will only be a guess. On top of that, the return on investment calculation will be a guess too, since the estimated returns will come from various factors.

Investment Conclusion

Overall, this acquisition will provide modest growth for Home Depot $HD ( ▼ 1.01% ) . The business is growing at a moderate pace and operates in a stable segment of the home improvement industry.

Management is using this acquisition to build a dominant professional distribution platform. Since GMS is a cash cow business, Home Depot will be better able to use the cash flow from GMS to pay down any acquisition debts.

The financial returns on this deal won’t look attractive like the returns Big Tech is looking to get from overpaying for startups. But, the returns will be meaningful for growing Home Depot’s business for many years to come. In the future, many will look back on the GMS acquisition, along with the acquisition of HD Supply and SRS, and credit those deals for why Home Depot has been able to capitalize massively on the rebound in the construction industry.

Disclosure

About Me

I am an independent personal finance writer and blogger. I do not have any formal training or certifications in finance, but I have a deep passion for the subject and have been researching and writing about personal finance topics for several years.

Disclaimer

The information provided in my articles is for educational and informational purposes only. It is not intended to be a substitute for professional financial, investment, or tax advice.

I encourage you to do your own research, consult with a licensed financial advisor, and make decisions that are best suited to your individual financial situation and goals. I cannot guarantee any specific outcomes or results from following the advice in my articles.

Please remember that investing involves risk, and you should only invest what you can afford to lose. Past performance is not a guarantee of future results.

If you have any questions or concerns, please don't hesitate to reach out to me. I'm here to help!

I/We own HD