For distributors, acquisitions can serve any number of purposes as they seek to grow their businesses.
They can increase scale in a still-fragmented market. They can bolster overall revenue numbers, especially in times of broader sluggishness. And they can add complementary product categories or new geographic territories to existing operations.
Applied Industrial Technologies has seen each of those results from its recent M&A efforts, which have been among the most ambitious in the industry. But its latest bolt-on deal, company officials said, offers an additional perk, as well: exposure to a maintenance, repair and operations sector that appears poised for a big year.
Thompson Industrial Supply, a Southern California distributor of bearings, hydraulics, automation and an array of other products, was established in 1969 and grew to two locations in suburban Los Angeles with a range of service and fabrication capabilities. The company made headlines in the distribution sector early last year when Motion announced an agreement to acquire it, but that deal ultimately fell through — clearing the way for Applied to buy the business late in the year for an undisclosed sum. The company integrated Thompson into its service center network as of mid-January, which included relocating the newly acquired company’s two area branches: Thompson’s El Monte operations will move to a facility in Commerce, while the Rancho Cucamonga location will be shifted to one in Fontana.
Applied, which announced the deal as part of its latest quarterly financial results in late January, said the move would enhance the Ohio-based company’s footprint in Southern California, and lauded Thomspon’s technical expertise and ties to suppliers in addition to its belting and fabrication capabilities and value-added services.
In the company’s subsequent earnings call, however, Applied President and CEO Neil Schrimsher told analysts that the Thompson purchase exemplified its efforts to be “opportunistic” with M&A in order to add to its existing service center operations — a reflection of an increasingly optimistic view of the MRO market.
“Our service center segment is well-positioned to support our customers’ heightened technical MRO needs as they catch up on required maintenance across an aged installed equipment base,” Schrimsher said on the call. “We believe there’s a clear underlying trend developing around this theme.”
Applied noted in its latest results that of its 2.2% increase in organic sales in the quarter, the service center division was up 2.9% compared to an increase of 0.5% in its engineered solutions segment. Schrimsher added on the call that in the U.S., service center sales were up 4% year-over-year despite the typical seasonal weaknesses in the final month of the year.
Although organic sales were up in Applied’s latest reporting period, the bulk of its overall 8.4% increase in quarterly sales stemmed from recent acquisitions — the most notable of which, of course, was its purchase of fellow Big 50 distributor Hydradyne early in 2025.
Schrimsher, on the earnings call, hailed the “great early success” of the first year of the Hydradyne combination and said those operations contributed “over $30 million of EBITDA” in that span.
“We’re connecting Hydradyne with new growth opportunities by cross-selling their value-added fluid power repair solutions across our legacy U.S. southeastern customer base,” Schrimsher said.
Overall, Applied anticipates sales growth of between 5.5% and 7% for its full fiscal year, and Schrimsher said the addition of both Thompson and Illinois company IRIS Factory Automation, along with “modest foreign currency tailwinds,” would contribute “approximately 50 basis points of year-over-year growth in the second half of the year.” Thompson’s operations are expected to generate $20 million in sales in their first year under Applied.
This column originally appeared in the March/April issue of Industrial Distribution magazine. Sign up here to subscribe to ID’s Today in Industrial Distribution daily newsletter.
