The Distribution Blog

Larry Stoddard has led through almost every type of distributor ownership structure.

He's been Chairman of family-owned businesses like Crescent Electric Supply, led private equity-backed roll-ups at RelaDyne, and served as President of the Standard Products Division at publicly traded Mueller Industries. Not to mention, he helped build Ferguson from $140 million to $8 billion in revenue over 28 years, eventually becoming COO of its $34 billion parent company Wolseley. 

We sat down with him on a recent episode of “In the Mind of a Distributor” to pick his brain on private equity partnerships. Here's what he had to say.

The biggest myth distributors believe about private equity

"They don't come in and wipe all the people out," Stoddard shared in his recent interview with Proton’s CEO, Benj Cohen. "All the movies show they come in and wipe out the whole town. They don't do that."

Here's why: unlike manufacturing, where assets are equipment, distributor’s most crucial assets are people. "Our assets have feet and they can walk out the door anytime."

Stoddard emphasized that smart PE firms understand that relationships and institutional knowledge walk out the door with departing employees.

This is why, he shared, the best private equity partners invest heavily in training and development: to create growth opportunities that family businesses often can't afford.

"If we don't present teams with an atmosphere of opportunity for growth, personally, professionally and financially, then we're failing our job as leaders."

What the five-year timeline really means

PE firms typically target three-to-five-year exits. For distributors used to thinking in decades, this creates fundamental tension. Stoddard covered this dynamic in the episode, sharing: "We're trying to build a hundred-year company in five-year increments."

He explained that the pressure cuts both ways. You'll make decisions you might avoid with a 20-year horizon, and that urgency is what drives behavior that creates results.

With everyone's inccentives pointing the same direction, this condensed timeline creates more alignment between ownership and management.

The operational discipline you're not prepared for

Another dynamic that Stoddard touched on during his interview is that PE-backed businesses operate more like public companies than family businesses. As a result, the operational rigor and discipline requirements are "significantly higher than those of privately held businesses."

This can create challenges when integrating multiple company cultures, but Stoddard had clear advice for listeners: don’t worry about getting it perfect on the first try.

"You don't have to do it the best way. You just have to do it the same way."

He shared that once you have every team on similar workflows, then you can refine them. If you keep waiting until you’ve found the perfect solution to roll it out across teams, you’re holding up progress. 

According to Larry, this starts with getting every team aligned operationally. In other words, every location needs identical processes for receiving products, entering orders, and other basic operations.

Think of Walmart: a cashier can transfer from a store location in Florida to Georgia and be productive on day one because their systems will be the same in both locations. The same should be true for distributors. 

This gets especially challenging for relationship-driven sales teams where each rep has a different approach. Because of that, Larry called out that it’s important to move away from pure gut decisions toward data-informed choices.

You're not eliminating the  “Wild West” cowboy culture entirely, just giving your reps better information to make decisions.

Technology decisions that make or break deals

Next in the interview, Benj and Larry discussed the tech side of consolidating distributors. Larry shared that PE firms approach large technology changes very cautiously because, for example,  ERP overhauls are "a longer term play and a very distracting activity."

Unless your current system is completely inadequate, he said to expect to keep your existing technology initially. Evidently, PE's focus is usually on operational discipline within current systems, not a complete technology replacement.

What to expect from the partnership

Next in the discussion, Larry shared 3 critical advantages that family businesses often lack, that PE can help with:

Capital for acquisitions at pace. Sure, you can generate acquisition funding from business earnings, but it limits how fast you can consolidate markets. PE provides the cash to accelerate these deals. 

Operational expertise. The best PE partners have seen and completed successful consolidations before. They know which operational disciplines create scalable advantages, to keep you focused on what matters most. 

Complete alignment. Unlike family businesses where ownership and management might have different priorities, PE partnerships align everyone around the same exit timeline and value creation goals.

The tradeoff is compressed decision-making timelines and pressure to show results within the five-year window.

Questions that distributors should ask PE firms

If you're thinking of working with a PE firm, here is a list of questions you can ask to get a sense of their partnership style and experience:

• How many distribution roll-ups have you completed successfully?
• What's your approach to retaining key employees during integration?
• How do you handle technology integrations across acquired companies?
• What operational disciplines do you require, and what flexibility exists for local market differences?
• How do you measure success beyond financial returns?

The bottom line for distributors

The right private equity partnerships can create great growth opportunities and operational advantages that some family-pwned distributors may struggle to achieve alone.

The key is finding PE partners who treat people as the valuable assets they are, not costs to be eliminated.

As Stoddard puts it: "There is a silver bullet, and that is having high quality, intelligent people who care." The right PE partnership amplifies that advantage. The wrong one destroys it.