Home Depot’s largest acquisition ever is an $18.25 billion bet on the housing market’s severe shortage of new homes

Home Depot will buy SRS Distribution, a materials provider for professionals, in a deal valued at approximately $18.25 billion.

It is Home Depot’s largest acquisition in its history and with it, it steps more aggressively into the fast growing professional builder and contactor business.

SRS provides materials for professionals like roofers, landscapers and pool contractors.

Home Depot is making a big bet on a housing market that is suffering a severe lack of new homes, which has driven prices sky high. The median sales price for new homes in the U.S. has climbed 29.4% over the past five years. In the fourth quarter, the median sales prices totaled $417,700, according to data from the Federal Reserve Bank of St. Louis.

The U.S. housing market is coming off a deep, two-year sales slump triggered by one-two punch of so few homes and sharp rise in mortgage rates. The overall decline in rates since their peak last fall has opened a tiny window for some, though a home remains out of reach for millions of Americans.

Sales of previously occupied U.S. homes rose in February from the previous month to the strongest pace in a year with homebuyers encouraged by that modest pullback in mortgage rates.

With mortgage rates still high, millions of people are spending money on upkeep for the homes that they own, another financial driver for the Home Depot, SRS deal.

Home Depot said that when taking the deal into account, it now believes its total addressable market is approximately $1 trillion, an increase of approximately $50 billion.

“SRS has built a robust and successful platform that will accelerate our growth with the residential professional customer while presenting future opportunities with the specialty trade pro,” Home Depot CEO Ted Decker said in a statement.

SRS’s has a sales team of more than 2,500 and more than 760 branches across 47 states. It also has 4,000-plus truck fleet and jobsite delivery capabilities.

“We are looking forward to combining our differentiated assets and capabilities, including our extensive branch network, experienced sales team, robust trade credit offering, and order management system, geared at serving the complex project purchase occasion, with The Home Depot’s competitive advantages,” SRS CEO Dan Tinker said. “We believe this will enable us to better serve pros and continue growing in our large and highly fragmented market.”

Tinker and his senior management team will continue to lead SRS, which is based in McKinney, Texas.

The deal is expected to close by the end of fiscal 2024.

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