TM Capital Building Products Report Industry Spotlight

Transcription

TM Capital Building Products Report
Building Momentum in 2015 and Beyond
Industry Spotlight
w w w. t m c a p ital.c o m
Case Study: Financial Sponsor Investment
The Jordan Company Acquires DiversiTech Corporation
has been acquired by
The undersigned served as financial advisor
to DiversiTech Corporation in connection
with this transaction.
$ Q 0 $ , Q W H U Q D W L R Q D O , Q F ) L U P
In May 2015, The Jordan Company (“Jordan”) acquired
DiversiTech Corporation (“DiversiTech”). Based in
Duluth, GA, DiversiTech is North America’s leading
manufacturer and distributor of HVACR equipment
pads and offers an extensive, proprietary portfolio
of condensate management equipment, HVACR
maintenance chemicals and electrical accessories.
DiversiTech leverages its breadth of offerings,
extraordinary product innovation capabilities and
market leadership to position itself as a “one-stopsource” for HVACR distributors nationwide.
DiversiTech’s attractive and highly defensible profile
coupled “As
with
tailwinds
garnered
thefavorable
U.S. housing industry
market continues
its recovery,
we believe now is
the
ideal
time
to
position
Builders
FirstSource
for
its
next phase of
significant interest from a large pool of leading middle
growth and value creation. Together we will establish a broader, more
market private
equity of
firms.
TM Capital
served
as
efficient platform
manufacturing
and distribution
capabilities,
supported
by
high-quality
service
from
the
best
talent
in
the industry.”
exclusive financial advisor to DiversiTech.
– Floyd Sherman, Chief Executive Officer of Builders FirstSource
Moving forward, Jordan plans to aggressively grow DiversiTech via acquisitions and organic
investments. This is yet another example of financial sponsors actively pursuing opportunities
in the building products sector to take advantage of what is expected to be an extended period
of favorable industry trends.
“We will continue to invest in the Company and aggressively execute
on a highly targeted acquisition and organic growth strategy. This is a
great business with a wealth of opportunities ahead.”
– David Butler, Senior Partner of The Jordan Company
www.tmcapital.com
Sanabe Team Joins TM Capital to Expand Industrial Practice
TM Capital is pleased to announce the expansion of our Industrial practice with the addition of Sanabe &
Associates, LLC, a boutique investment bank focused on the Building Products, Paper and Packaging and
Renewable Energy industries. Together, TM Capital and Sanabe have completed over 125 mergers, acquisitions
and financings in the Industrial space with a total value in excess of $12 billion. Sanabe founder Jonathan
Mishkin and his team have earned a distinguished reputation for industry expertise, transactional acumen
and client service, having represented such notable companies as Ainsworth Lumber Co. Ltd., Catalyst Paper
Corporation, EACOM Timber Corporation, Finch, Pruyn & Company, Inc., Huttig Building Products Inc., Interfor
Corporation, Kruger Inc., Longview Fibre Company, NewPage Corporation and WestRock Company.
Jonathan Mishkin
Daniel Zwelling
Oxana Kunets
Managing Director
Managing Director
Associate
(212) 809-1413
(617) 259-2205
(212) 809-1431
jmishkin@tmcapital.com
dzwelling@tmcapital.com
okunets@tmcapital.com
“The Sanabe team adds complementary expertise to our Industrial practice, deepening our capabilities in key
sectors which are currently booming in the middle market,” said Jim Grien, President and CEO of TM Capital.
“We are pleased to be joining forces with a team of industry leaders whose business practices mirror our own
and whose marketplace reach will enable us to enhance our services to clients.”
TM Capital’s Industrial Team
W. Gregory Robertson
Paul R. Smolevitz
Michael S. Goldman
Managing Director
Managing Director
Managing Director
(212) 809-1410
(212) 809-1416
(212) 809-1419
grobertson@tmcapital.com
psmolevitz@tmcapital.com
mgoldman@tmcapital.com
www.tmcapital.com
Jerome S. Romano
Andy B. Krna
Managing Director
Vice President
(617) 259-2206
(212) 809-1442
jromano@tmcapital.com
akrna@tmcapital.com
Building Products Industry Spotlight
Introduction
Still on the First Floor
The Building Products industry is on a path of
long-term sustainable growth supported by strong
fundamentals across both the residential and
commercial building sectors.
During 2014 and
through the first half of 2015, major indicators such
as construction spending, home building, household
formation and architectural billings have all pointed
towards a sustained, long-term recovery. In spite
of these improving trends, however, the overall
growth has been delayed and slower than previously
discussed in TM Capital’s June 2014 Building
Products Industry Spotlight. This updated Industry
Spotlight provides further analysis and commentary
encompassing these key industry drivers, examines
the current shortfall of housing starts in relation to
household formations, discusses the impact of credit
requirements and interest rates on the industry and
evaluates the implications of these trends on the
overall recovery, growth and investment activity
throughout the sector. As the strong tailwinds in the
residential and non-residential construction markets
continue, both strategic and financial investors remain
highly acquisitive in the Building Products sector.
M&A activity within the United States and Canada
in 2014 increased by 19.5% compared to 2013,
with over 130 closed transactions. We anticipate
that deal activity will remain strong throughout 2015
(albeit below 2014 levels) and into the coming years.
recovery, albeit at a more moderate 1.0% growth rate
over 2013. Although private residential construction
spending has continued to improve in 2014, it still
remains below the 2008 level of $350 billion, see
Figure 1. Within the overall spending figures, multifamily spending increased 32.7% over 2013 which
is reflective of changing demographic patterns that
favor urban cores. Single-family investment continued
to moderately increase by 13.4%.
We expect
improvement spending to accelerate as wage growth
improves and access to home equity credit lines
expands within the broader economic recovery.
Despite more moderate spending growth in 2014, the
upward trend in construction spending since 2010
remains robust with a 6.6% compound annual growth
rate (“CAGR”) over that period. Additionally, the outlook
for 2015 continues to show improvement. Compared
to the slow spending that the U.S. experienced at the
beginning of 2014, mainly the result of prolonged poor
weather across the country, the first half of 2015 inspires
confidence. In June 2015, the National Association
of Home Builders (“NAHB”) / Wells Fargo Housing
Strong Macroeconomic Indicators
Residential Construction Spending Back to
2008 Levels with Further Headroom – In 2014,
U.S. residential construction spending continued its
Figure 1: U.S. Private Residential Construction Spending
in billions)
($ in($billions)
$400
$350.3
$300
$245.9
$238.8
$244.1
2009
2010
2011
$280.6
$335.4
$338.7
2013
2014
$200
$100
—
2008
Source: U.S. Census Bureau
www.tmcapital.com
-1-
2012
Market Index, an index measuring builder confidence
in the market for newly built, single-family homes,
rose to a yearly high, representing a bullish outlook
for the single-family housing construction market.
“Builders are reporting more serious and committed
buyers at their job sites and this is reflected in recent
government data showing that new-home sales and
single-family construction are gaining momentum,”
said NAHB Chairman Tom Woods.
adjusted annual rate of 1.275 million, the highest
level since 2007. This uptick demonstrates continued
builder confidence in the market and an optimism
that consumers are returning to the housing market.
Although the magical one million mark has finally been
achieved, the market remains well below the long
term average of 1.4 million starts. Following the Great
Recession, household formation dropped sharply and
has generally remained below its historical average.
The low rate of household formation among American
millennials has been a key driver. Reflecting the
burden of higher student loans and stagnant wages,
many American millennials have preferred to live
at their parents’ homes. Late 2014 brought some
evidence of gathering strength in the level of household
formation. The rate of housing starts per household
formed also remained below its average for most of
the post-recession period, although it has recently
returned to its normal level, see Figure 3. From 1981
to 2007, there were approximately 1.17 housing starts
per new household formed, but this metric fell to
0.90 for the 2008-2014 period. We see the housing
market poised for growth from a sustained recovery
in household formation and pent up demand created
by the low level of starts/formation in recent years.
Figure 2: U.S. Housing Starts
Housing Starts
(Thousands)
2,500
2,000
1,500
1,000
500
—
1980
1985
1990
Overall
1995
2000
2005
2010
2015
Single-family
Housing Starts & Household Formation Are
Accelerating But Still Have a Very Long Runway –
Housing starts are a direct driver of demand for Building
Products within the residential construction sector. In
2014, overall annual housing starts surpassed the one
million mark for the first time since 2007, see Figure 2.
Despite this short-term growth, there remains significant
headway for continued growth, with housing starts still
well below the 35-year historical average of 1.4 million
per year. The NAHB predicts that U.S. housing starts
will continue to recover, reaching approximately 1.3
million in 2016. The first half of 2015 has also shown an
uptick in permit issuance, rising 11.8% to a seasonally
In spite of the overall growth of housing starts, singlefamily construction has been slower to rebound. Singlefamily housing starts, despite showing signs of life in
July 2015 by growing 14.2% above the prior month to
a seasonally adjusted annual rate of 782,000, remain
54.4% below the 2005 peak. Strengthening homebuilder
confidence and the growing number of first-time
homebuyers entering the market are positive trends
that should support continued single-family growth.
Household Formations
(Thousands)
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
—
1981
1984
1987
1990
Household Formations
1993
1996
2002
Average Starts per Formation
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1999
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2005
2008
2011
2014
Overall Starts per Formation
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
—
Starts Per
Household Formation
Figure 3: U.S. Household Formations and Housing Starts per Household Formation
Figure 4: U.S. Homeownership Rate (Quarterly, Seasonally Adjusted)
70.0%
69.0%
68.0%
67.0%
66.0%
65.0%
64.0%
63.0%
62.0%
61.0%
60.0%
Source: Federal Reserve Bank of St. Louis
Homeownership Levels Still Awaiting Rebound –
One fundamental indicator for the Building Products
industry has yet to show recovery.
The U.S.
Homeownership rate was at 63.8% as of January
2015, lower than any period since October 1988,
see Figure 4. U.S. homeownership has been in a
decline since reaching a peak of 69.4% in April 2004.
Although the improving overall economy should bolster
homeownership rates, rising home prices, a continued
challenging mortgage environment, a limited supply of
lower-end properties and a recent explosion in student
loans have made affordability difficult for new, entrylevel home buyers. Should the homeownership rate
begin to improve to historical norms over the coming
quarters and years, TM Capital would expect to see
accelerating growth in the Building Products industry
resulting from both new construction and remodeling
of existing homes.
Figure 5. Additionally, amongst 25- to 34-year-old
renters with student loans, the average balance of
loans outstanding has increased dramatically, growing
to $30,700 in 2013, an increase of 50% from 2004
levels, due to the ever increasing costs associated
with a college education. Further demonstrating the
constraining nature of these loans is the percentage
of people ages 27 to 30 with home-secured debt, see
Figure 6. Since 2012, a larger percentage of 27- to
30-year-olds that are unburdened by student loans
have purchased a home than those with outstanding
student loans. Historically, this has not been the case,
as those with student loans have typically represented
college educated individuals with higher earning
power and an enhanced ability to take on mortgage
debt. As the volume of student loans outpace growth
in discretionary income, the younger generation of
potential homeowners has become hamstrung by
personal debt levels, discouraging and disqualifying
many from making a big ticket housing purchase.
Student loan debt in particular remains an impediment
to a more comprehensive homeownership recovery.
From 2004 to 2014, the total volume of student loans
outstanding has more than tripled, growing from $346
million to almost $1.2 billion over that period, see
As the Great Recession fades further into the
background, median household income, while having
slowly increased since the trough in 2010, remains
Figure 5: U.S. Student Loans Outstanding
Figure 6: % of 27–30 Year Olds with Home-Secured Debt
($ in thousands)
$1,400
35.0%
$1,200
30.0%
$1,000
25.0%
$800
20.0%
$600
15.0%
$400
10.0%
$200
5.0%
—
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
—
2014
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Have Student Loans
Source: Federal Reserve Bank of New York Consumer Credit Panel / Equifax
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No Student Loans
Source: Federal Reserve Bank of New York Consumer Credit Panel / Equifax
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Figure 7: U.S. Median Household Income
Figure 8: Consumer Confidence Index
($thousands)
in thousands)
($ in
$80.0
125
$75.0
100
$70.0
75
$65.0
50
$60.0
25
$55.0
—
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
$50.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2010
2011
2012
2013
2014
well below historical levels and continues to act as a
headwind for a robust housing recovery, see Figure
7. Following the housing crisis, which saw home
prices decline to unprecedented lows in the modern
era, home prices continue to climb back towards
pre-recession levels, as illustrated by The Schiller
U.S. National Home Price Index (“Schiller Index”).
The Schiller Index tracks the change in value of the
U.S. residential housing market. This appreciation
of home equity and consequent generation of wealth
is restoring consumer confidence, see Figure 8, and
spurring increased levels of discretionary spending,
including on big ticket purchases such as home repairs
and home purchases.
face. Although this remains well below the long-term
average of approximately 40%, it has the potential
to greatly impact the housing and Building Products
markets over the coming years. Following nearly a
decade of stagnant purchasing by young adults and
millennials, many of whom have defaulted to living with
their parents or renting, the strengthening economy
combined with lower unemployment and improved
wages are enabling younger adults to save for down
payments.
Remodeling and Repair Spending Is Necessary
Support to an Aging Housing Stock – The Leading
Indicator of Remodeling Activity (“LIRA”), recorded
by the Joint Center for Housing Studies at Harvard
University (“JCHS”), measured as the annual rateof-change of its components, provides a short-term
outlook of homeowner remodeling activity and is
intended to help identify future turning points in the
business cycle of the home improvement industry,
see Figure 9. The LIRA model utilizes eight different
economic indicators to estimate near-term changes
in the market: (i) remodeling market index-future
expectations, (ii) pending home sales index, (iii) 30year treasury bonds yield, (iv) single-family housing
starts, (v) retail sales at building materials and supplies
In 2015, we have already begun to see more new
homeowners enter the market. According to the
Research Division of the National Association
of Realtors, in May 2015, first-time homebuyers
represented 32% of existing home sales, compared
to 27% in May 2014, matching the highest level
since September 2012. June and July saw first-time
homebuyers decline to 30% and 28%, respectively,
likely due to recent volatility in the stock markets
and the continued challenges of flat wage growth
and rising rents that young, potential homebuyers
Figure 9: Leading Indicator of Remodeling Activity (Year-over-Year Change)
($ in billions)
$160.0
$140.0
$120.0
$100.0
$80.0
$60.0
$40.0
$20.0
-
20.0%
15.0%
10.0%
5.0%
—
(5.0%)
(10.0%)
(15.0%)
(20.0%)
LTM Home Improvement Activity
Source: Joint Center for Housing Studies at Harvard University
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Y-O-Y Change
Figure 10: U.S. Private Residential Fixed Investment as a % of GDP
8.0%
Average: 4.7%
6.0%
4.0%
2.0%
65-year low: 2.2%
—
1948
1954
1960
1966
1972
1978
1984
1990
1996
2002
2008
2014
Source: Federal Reserve Economic Data
dealers, (vi) manufacturers’ shipments of construction
materials, wood products and household appliances,
(vii) number of employees of residential remodelers
and (viii) purchasing managers’ index.
Home sales have a significant correlation with
remodeling spending. An existing homeowner is most
likely to make improvements to a home prior to placing
the home on the market in an attempt to drive interest
Figure 11: U.S. Owner-occupied Housing Stock Age
1- 5 Years
1.8%
6 - 10
Years
5.9%
11 - 15 Years
6.9%
16 - 20 Years
6.8%
21 - 25 Years
5.4%
31 Years or Older
66.6%
26 - 30 Years
6.7%
Source: U.S. Census Bureau – American Housing Survey 2013
Figure 12: U.S. Private Non-Residential Construction Spending
($ in billions)
Private Residential Fixed Investment Appears to
be in a Sustained Recovery – Private residential
fixed investment (“fixed investment”) includes amounts
spent on the construction of new single-family and
multi-family homes, manufactured housing (or mobile
homes) and home improvements. This metric is a key
macro indicator for gauging the health of the housing
market, with higher figures signaling a more robust
environment. Fixed investment was 3.2% of GDP
$500
$400
$409.4
$344.1
$300
$263.3
$257.8
2010
2011
$301.4
$312.3
2012
2013
$347.7
$200
$100
—
2008
2009
2014
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and maximize value. New homeowners are most
likely to make substantial changes immediately after
purchase as they personalize their homes to best meet
their needs. According to the National Association
of Realtors, existing home sales are expected to
increase by 7.4% in 2015. These increased home
sales, combined with rising home equity and favorable
interest rates, will likely spur remodeling activity and
drive retail sales of Building Products. Bob Hull, CFO
of Lowe’s Companies, Inc., echoed this sentiment
in his message during Lowe’s Analyst & Investor
Conference, “Rising home values and lower debt
levels are expected to continue to contribute to overall
household wealth and should fuel home improvement
spending as customers will be more willing and able
to take on discretionary projects. All that said, there’s
been positive momentum in housing turnover lately.
Existing home sales in single-family starts will begin
to expand at a more sustainable pace driving home
improvement demand.”
Further, as the housing
stock in the U.S. continues to age (as of 2013, twothirds of the housing stock was over 31 years old,
with a median age of U.S. owner-occupied housing
stock of 40 years old), homes will require additional
upkeep and maintenance, presenting a tremendous
opportunity for remodeling and replacement activity in
the years ahead – a significant growth opportunity for
the Building Products industry, see Figure 11.
-5-
in 2014, up from a 65-year low of 2.2% in 2011, see
Figure 10. However, fixed investment remains well
below the historical average of 4.7% of GDP, another
indication that the housing market is still in the early
stages of a full recovery.
Non-Residential Construction Continues Upward
March to Pre-Recession Levels – Throughout
2014 and thus far in 2015, private non-residential
(commercial, industrial, manufacturing, warehouse,
hotels, offices, retail) construction spending has
continued to show signs of recovery, but still
remains well below historical peaks, see Figure
12. After a slow start in 2014, primarily the result
of weather-related delays, the second half of 2014
improved dramatically to end the year at greater than
forecasted spending levels. In 2014, total U.S. private
commercial construction spending reached $60.8
billion, up from $50.9 billion in 2013, representing
19.3% growth. Growth in 2014 was led by multi-retail
(department stores, shopping malls and town centers)
and warehouse (commercial, storage and distribution
warehouses) construction. The American Institute
of Architects (“AIA”), forecasts that non-residential
construction spending will grow 7.7% and 8.2% in
2015 and 2016, respectively. This growth will be
driven by the commercial and industrial construction
sectors, as it was in 2014; however, institutional
(educational, healthcare, public buildings, amusement
& recreational, transportation, religious) activity is
expected to return to positive growth. According to
AIA Chief Economist, Kermit Baker, PhD, Hon., “This
is the first time since the Great Recession that every
major building category is projected to see increases
in spending. But by far, the most significant driver
that will fuel greater expansion in the marketplace is
the revival in the institutional sector, especially with
growing demand for new healthcare and education
facilities, which alone traditionally account for a third
of spending on new building construction.”
The AIA also publishes the Architecture Billing Index
(“ABI”), which serves as a proxy for non-residential
construction activity. The ABI scores are released
every month, and a score above 50 indicates growth,
whereas scores below 50 indicate contraction.
Architectural billings typically lead construction
spending by approximately nine to twelve months.
Since January 2013, there have only been five months
of contraction, versus 24 months of growth, a positive
indicator for the overall trajectory of billings. In May
2015, the ABI returned to positive levels, up to 51.9
compared to 48.8 in April, led by growing demand for
new schools, hospitals, cultural facilities and municipal
buildings, see Figure 13.
Aging Commercial Building Stock Will Need
Sustained
Reinvestment
for
Modernization
– In March 2015, the U.S. Energy Information
Administration released the results from its 2012
Commercial Buildings Energy Consumption Survey
(“CBECS”).
The CBECS classifies commercial
buildings as buildings over 1,000 square feet that
devote more than half of their floor space to activities
that are not residential, manufacturing, industrial or
agricultural. Since 1979, the number of commercial
buildings in the U.S. has increased from 3.8 million
to 5.6 million, with commercial floor space increasing
Figure 13: Architecture Billing Index
60
55
50
45
40
Source: The American Institute of Architects
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Jan-15
Mar-15
Nov-14
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Jan-14
Mar-14
Nov-13
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Mar-13
Nov-12
Jul-12
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Mar-12
Nov-11
Jul-11
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Jan-11
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Nov-08
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30
Mar-08
35
Figure 14: Commercial Buildings by Year Constructed (% of total buildings and % of floor space)
18.0%
16.0%
16.5%
15.3%
14.0%
12.0%
11.5%
11.5% 11.9%
10.8%
10.0%
17.4%
15.2%
15.9%
15.8%
13.0%
12.3% 12.5%
8.5%
8.0%
5.5%
6.0%
6.6%
4.0%
2.0%
—
Before 1946
1946 to 1959
1960 to 1969
1970 to 1979
1980 to 1989
Year Constructed
Percent of Total Buildings
1990 to 1999
2000 to 2007
2008 to 2012
Percent of Total Floorspace
Source: U.S. Energy Information Administration, 2012 Commercial Buildings Energy Consumption Survey
Credit Markets Are Supporting Continued
Growth in Residential and Commercial
Real Estate Investment
from 51 billion square feet to 81 billion square feet. The
U.S. building stock is “middle-aged”, with about half
of all commercial buildings having been built before
1980, see Figure 14. Many of these older buildings
will require renovation and retrofitting to improve
energy efficiency, meet modern compliance codes and
to maintain asset value. Older buildings are not only
less efficient, but they also lack the amenities of more
modern buildings, resulting in lower occupancy and
rental rates. In order to compete with newer assets,
these older buildings must be renovated through
investment that will drive occupancy rates, rental rates
and ultimately return on the investment made.
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Complementing the positive fundamental economic
environment supporting the housing market are
several credit related tailwinds that are further fueling
demand within the industry. After years of onerous
credit requirements resulting in an unprecedented
credit crunch, banks have started to loosen standards,
as evidenced in the Mortgage Credit Availability Index
(“MCAI”). The MCAI, which was benchmarked to 100
in March 2012, was 122.0 as of June 2015.
-7-
Figure 15: Housing Affordability Index
250
200
150
100
50
—
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: National Association of Realtors
This loosening of credit standards coupled with
improving income statistics is leading to a growing
number of consumers who qualify for loans and
mortgages for big ticket purchases, expanding
the overall pool of eligible buyers. The National
Association of Realtors’ Housing Affordability Index
(“HAI”) tracks this by measuring whether or not a
typical family earns enough to qualify for a mortgage
loan on a typical home based on the most recent price
and income data. An index value of 100 denotes that
the median income is exactly sufficient to qualify for a
mortgage on a median-priced home, with higher values
representing superior levels of affordability. The HAI
score for the month of May 2015 was at 159.0, see
Figure 15. Notwithstanding these improvements the
recovery of household formation remains sluggish.
Mortgage rates are a key factor in determining the
affordability of homes, with low rates increasing the
ability of a consumer with a given income to purchase
a higher-priced home. Mortgage rates have hovered
around 50-year lows for the past five years, due in
large part to near-zero interest rates maintained by the
Federal Reserve. However, as the economy shows
signs of continued recovery, the Federal Reserve is
widely expected to raise interest rates in the second
half of 2015. Mortgage rates are expected to follow
suit, with Freddie Mac forecasting 30-Year Fixed
Mortgage Rates to climb as high as 4.9% by 2016,
compared to 4.0% today, see Figure 16. Even a spike
in rates to 4.9% is still 1.6% below the historical, 25year average of 6.5%. Although the near-term spike in
interest rates could lead to a slow-down of mortgage
originations, TM Capital maintains a positive outlook
on the industry, anticipating that strong housing market
fundamentals and real income growth will outweigh
this potential headwind.
Much like the housing market, a recovery in the
mortgage market is far from complete, and even with
loosening credit standards, there remains significant
room for mortgage expansion. The total value of
mortgage loans outstanding, which peaked at $11,287
Figure 16: 30-Year U.S. Fixed Rate Mortgage Average
10.0%
8.0%
6.0%
4.0%
2.0%
—
2000
2001
2002
2003
2004
2005
2006
2007
Source: Mortgage Bankers Association
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-8-
2008
2009
2010
2011
2012
2013
2014
2015
Figure 17: Mortgage Loans Outstanding
($ in billions)
1Q 2008: $11,287
$11,500
1Q 2015: $9,867
$11,000
$10,500
$10,000
$9,500
$9,000
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: Bloomberg
billion in the first quarter of 2008, was $9,867 billion at
the end of the first quarter in 2015, a decline of $1,420
billion during the seven-year period, see Figure 17.
While it may not be realistic to expect the levels seen
during the peak of the housing boom, current numbers
suggest a meaningful opportunity for growth moving
forward, even with the threat of increased mortgage
rates partially curtailing affordability.
balance sheets continues to increase, reaching $1,670
billion in April 2015, and is almost back to 2008 levels,
see Figure 18. During the Federal Reserve’s Open
Market Committee meeting on June 17, it was noted
that financing for commercial real estate remains
broadly available.
M&A Activity
Low interest rates and robust economic conditions
have also benefited commercial lending.
The
improving employment landscape has spurred demand
for office space, and higher consumer spending has
led to a boost in the need for larger warehouses and
industrial buildings. Consequently, the overall volume
of commercial and industrial loans outstanding has
increased to all-time highs. Further, the aggregate
value of commercial real estate loans on banks’
M&A Activity Drives Industry Consolidation – Both
strategic and financial acquirers continue to take
advantage of strong industry tailwinds and favorable
macroeconomic trends. In 2014, the Building Products
industry saw a resurgence of U.S. and Canada based
M&A activity with 135 closed transactions, a 19.5%
increase over 2013, see Figure 19. This remains well
below the peak of 189 transactions in 2006. Despite a
Figure 18: Commercial Real Estate Loans Outstanding
($ in billions)
($ in billions)
$2,000
$1,600
$1,200
$800
$400
—
2004
2005
2006
2007
2008
2009
Source: U.S. Federal Reserve
www.tmcapital.com
-9-
2010
2011
2012
2013
2014
M&A Activity
modest year-over-year decline in closed transactions
through YTD August 2015, as the positive trends in the
residential and non-residential construction markets
continue, we expect to see deal activity within the
Building Products industry continue to accelerate in
the long term.
Consolidation continues within the historically
fragmented Building Products space. Large, mature
strategic companies are seeking to make targeted
acquisitions to fuel growth. These companies remain
focused on acquiring businesses that will either expand
their geographic footprint or enhance their product
offerings and ultimately result in increased sales and
market share. With the availability of credit in the
current market environment, strategic buyers are able
to take advantage of growth via acquisition in a more
cost effective manner than through traditional organic
growth initiatives. An example of this aggressive
consolidation is US LBM Holdings, LLC (“US LBM”),
a company formed in 2009 and backed by BlackEagle
Partners, a middle market private equity firm. US LBM
was formed with the intent of acquiring regional lumber
and building materials distributors. Since 2010, US
LBM has successfully completed over 20 acquisitions
and has become one of the largest building materials
distributors in the U.S., providing lumber, roof and floor
trusses, siding and other building materials to custom
homebuilders and professional remodelers, as well
as multi-family and commercial contractors, across
21 states. It was recently announced that Kelso and
Company recently announced that it had entered into
a definitive agreement to purchase a majority of the
equity interests in US LBM.
Financial sponsors remain on the lookout for
acquisitions of businesses that are supported by
strong macroeconomic tailwinds. Private equity firms
with significant dry powder are aggressively pursuing
platform acquisitions in the Building Products space in
order to establish a presence in the sector upon which
to add tuck-in acquisitions.
Figure 19: U.S. and Canada Based Building Products Transactions by Year
200
189
175
180
157
160
140
120
156
140
111
110
139
137
135
113
103
100
128
92
89
80
60
40
20
—
2000
2001
2002
2003
2004
2005
2006
2007
Source:
Source: Capital
IQ Capital IQ
www.tmcapital.com
- 10 -
2008
2009
2010
2011
2012
2013
2014
M&A Activity
Strategic Consolidation – The following charts show a select group of Building Products consolidators that
have been acquisitive within the sector over the past several years.
Windows, Doors & Cabinetry
Core Brand /
Acquirer
Acquired Brands / Companies (Year Acquired)
Pending
Pending
2014
2014
2015
2015
2015
2014
2015
2014
2012
2013
2013
2013
2010
2014
2013
2012
2012
2012
2011
Windows segment
2014
2013
2013
HVAC & Lighting
Core Brand /
Acquirer
Assets of
Pending
2015
Refrigerant business and
pharma propellants
2015
2014
2013
2013
2012
2013
2014
Pending
www.tmcapital.com
2012
2012
Home & Life Solutions and Global
AC Segment
2014
- 11 -
2011
2011
2011
2011
M&A Activity
Plumbing & Hardware
Core Brand /
Acquirer
Assets of
2013
2012
2015
2012
2010
2015
2015
2014
2014
2014
2013
2014
2013
2012
2012
2013
2011
2010
2010
Surfaces
Core Brand /
Acquirer
2014
2014
2014
2014
Ceramics SRL
Division
Pending
2013
2015
2014
2013
2013
2012
2013
2013
Assets of
2015
www.tmcapital.com
2014
2014
- 12 -
2014
2012
2011
M&A Activity
Distributors
Core Brand /
Acquirer
Windows, doors and
siding segment
2015
2015
2015
2015
2015
2014
2014
Pending
2012
2013
2014
2015
2012
2013
2014
2014
2012
2012
2012
Assets of
2015
2015
2014
Pending
2015
2015
2015
2014
2014
2015
2014
2015
2011
2014
2011
2014
2013
2015
2015
2013
2013
2011
2015
2013
2014
2014
- 13 -
2011
Alley Roofing Lewis Shingle Supply Co.
Co.
2014
2015
2014
2013
2014
2014
2015
2014
2011
2014
2014
2014
2013
2015
2014
2014
www.tmcapital.com
2014
M&A Activity
M&A Activity by Financial Sponsors – Financial sponsors continue to target the Building Products market to
deploy capital in order to take advantage of the industry’s strong growth dynamics. The charts below highlight
investments and exits since January 2014 involving private equity firms and U.S.-based Building Products companies.
($ in millions)
($ in millions)
Date Closed
Date Closed
8/3/2015
8/3/2015
Acquisitions of North American Building Products Companies by Private Equity Firms (2014 - Present)
Target
Target
MGM Industries, Inc.
MGM Industries, Inc.
Acquiror
Acquiror
Custom Window Systems, Inc.
Custom Window Systems, Inc.
(Nautic Partners, LLC)
(Nautic Partners, LLC)
Target Description
Target Description
Manufacturer of custom PVC vinyl window and door products for
Manufacturer of custom PVC vinyl window and door products for
homeowners, builders and remodelers
homeowners, builders and remodelers
7/31/2015
7/31/2015
ProBuild Holdings, Inc.
ProBuild Holdings, Inc.
(Devonshire Investors)
(Devonshire Investors)
Manufacturer and distributor of lumber and building materials to
Manufacturer and distributor of lumber and building materials to
professional builders, contractors and project-oriented consumers
professional builders, contractors and project-oriented consumers
7/14/2015
7/14/2015
Better Life Technology, LLC
Better Life Technology, LLC
Builders FirstSource, Inc.
Builders FirstSource, Inc.
(JLL Partners, Inc. and Warburg
(JLL Partners, Inc. and Warburg
Pincus LLC)
Pincus LLC)
Century Park Capital Partners
Century Park Capital Partners
7/10/2015
7/10/2015
Cali Bamboo
Cali Bamboo
High Road Capital Partners
High Road Capital Partners
Manufacturer of bamboo based, green building products including
Manufacturer of bamboo based, green building products including
bamboo fencing, flooring, decking, paneling and other accessories
bamboo fencing, flooring, decking, paneling and other accessories
Artissimo Designs Inc.
Artissimo Designs Inc.
(Huron Capital Partners)
(Huron Capital Partners)
Excelsior Capital Partners
Excelsior Capital Partners
Designer, manufacturer and marketer of wall décor based on
Designer, manufacturer and marketer of wall décor based on
purchased or licensed imagery
purchased or licensed imagery
6/30/2015
6/30/2015
Advanced Flooring & Design
Interior Specialists
(Littlejohn & Company)
6/29/2015
6/29/2015
Northwest Carpets
Northwest Carpets
Lexmark Carpet Mills
Lexmark Carpet Mills
(H.I.G. Capital, LLC)
Manufacturer of a range of products for floors and interiors including
ceramic tiles, natural stone, hardwood, carpet, window coverings and
sheet vinyl products
Manufacturer of solution-dyed, broadloom carpet focused exclusively
Manufacturer of solution-dyed, broadloom carpet focused exclusively
on the hospitality market
on the hospitality market
6/19/2015
6/19/2015
American Securities
American Securities
Manufacturer and distributor of industrial adhesives and sealants,
commercial roofing adhesives and mirror mastics
6/9/2015
6/9/2015
Royal Adhesives and Sealants
(Arsenal Capital Partners, PNC
Erieview Capital)
Erieview Capital)
Carolina Drawers
Carolina Drawers
Olon Industries
Olon Industries
(Huron Capital)
(Huron Capital)
Manufacturer of solid wood and ply wood drawer box products
6/9/2015
6/9/2015
Rock Ridge Stone
Rock Ridge Stone
Salt Creek Capital
Salt Creek Capital
Distributor of natural stone products used in outdoor applications
6/3/2015
6/3/2015
Insulation Fabricators, Inc.
Distribution International (Advent)
Fabricates and distributes thermal and acoustical insulation products
for industrial and commercial markets
6/3/2015
6/3/2015
A.H. Harris & Sons
A.H. Harris & Sons
Frontenac Company
Frontenac Company
Distributor of construction supplies to the heavy & highway,
commercial, industrial and residential markets
5/31/2015
5/31/2015
Valterra Products
Valterra Products
Brookside Equity Partners, Scott
Capital Partners
Capital Partners
5/29/2015
5/29/2015
Vestal Manufacturing Enterprises
(MVC Capital)
(MVC Capital)
Spell Capital Partners
Manufactures and distributes recreational vehicle plumbing
equipment and supplies including valves for sanitation, plumbing and
winterizing
winterizing
Manufacturer of metal building products including building materials,
fireplace accessories, iron castings and cast iron dampers
5/27/2015
5/27/2015
Advanced Building Products, Inc.
Advanced Building Products, Inc.
SRS Distribution
SRS Distribution
(Berkshire Partners)
(Berkshire Partners)
Manufacturer and installer of aluminum replacement and storm
Manufacturer and installer of aluminum replacement and storm
windows
windows
5/19/2015
5/19/2015
DiversiTech Corporation
The Jordan Company
The Jordan Company
5/13/2015
5/13/2015
Termo-Cell Industries
US GreenFiber
US GreenFiber
(Tenex Capital Management)
Manufactures and distributes an extensive proprietary portfolio of
condensate management equipment, HVACR maintenance chemical
and electrical accessories
Manufactures thermal and acoustical cellulose insulation, specialty
fibers and hydroseeding mulches
5/11/2015
5/11/2015
PrimeSource Building Products
Platinum Equity
Platinum Equity
Distributor of fasteners and other building materials including nails,
screws and compressors
4/17/2015
4/17/2015
Direct Cabinet Sales
Distributor and designer of kitchen cabinetry and related products
4/17/2015
4/17/2015
Rosen Materials
Rosen Materials
US LBM Holdings (Building
Industry Partners, BlackEagle
Partners)
Partners)
Partners)
Partners)
7/6/2015
7/6/2015
www.tmcapital.com
- 14 -
Manufacturer of rollout vinyl flooring
Manufacturer of rollout vinyl flooring
Distributor of residential and commercial building products including
kitchen and bath cabinetry, countertops, stucco, roofing and
insulation
insulation
($ in millions)
Date Closed
Closed
Date
4/16/2015
6/30/2015
M&A Activity
Target
Target
New Energy Bedrooms
Acquiror
Acquiror
Hillsdale Furniture
Interior
Specialists
(Brookside Equity Partners)
Webster Capital, Morgan Stanley
American
AlternativeSecurities
Investment Partners
4/8/2015
6/9/2015
Rio Brands (Guardian Capital
Royal
Adhesives and Sealants
Partners)
Erieview Capital)
Kitchen Kaboodle
Carolina Drawers
Lynx Equity
Olon Industries
(Huron Capital)
Provider of kitchen appliances and accessories and home products
4/2/2015
6/9/2015
Metalcrafts
Rock Ridge Stone
Tecta America
Salt
CreekCapital
Capital
(Oaktree
Management)
Manufacturer of roofing and sheet metal products
4/1/2015
6/3/2015
Design Specialties
Blackthorne Partners, Individual
Distribution
International (Advent)
Investor
Manufacturer of glass fireplace doors
4/1/2015
6/3/2015
RDL Supply
A.H. Harris & Sons
The Cook & Boardman Group
Frontenac
(RidgemontCompany
Equity Partners)
Distributor of commercial doors, door frames, door hardware and
Distributor
of construction supplies to the heavy & highway,
related
accessories
3/25/2015
5/31/2015
J&B Materials
Valterra Products
3/23/2015
5/29/2015
Merchants Metals
(MVC Capital)
Gypsum Management and
Brookside
Equity Partners, Scott
Supply
Capital
Partners
(AEA Investors)
Supplier and distributor of building materials including drywall, metal
Manufactures
recreational
vehicle plumbing
studs,
plaster, and
pooldistributes
and general
building materials
winterizing
Manufacturer and distributor of ornamental steel and aluminum fence
systems
3/20/2015
5/19/2015
Petry Roofing Supply
SRS Distribution
The
JordanPartners)
Company
(Berkshire
3/19/2015
5/13/2015
Great Western Building Materials
Foundation Building Materials (CI
US
GreenFiber
Capital
Partners)
3/19/2015
5/11/2015
ProWall Building Products
Platinum
Equity
Capital Partners)
Distributor of residential and commercial roofing products servicing
Manufactures
distributes
the
Greater St.and
Louis
market an extensive proprietary portfolio of
Distributor of building products and related equipment including
Manufactures
thermal
and acoustical
specialty
gypsum
wallboards,
acoustical
ceilingcellulose
products,insulation,
metal framing
fibers andand
hydroseeding
mulches
products
plaster products
3/17/2015
4/17/2015
Pronamic Industries
Distributor and manufacturer of fiberglass materials used in the air
Distributor
and
designer
of kitchen cabinetry and related products
filtration
and
related
industries
3/13/2015
4/17/2015
Hanson Building Products,
Rosen
BuildingMaterials
Products business in
North America and U.K.
Lampert Yards
New Energy Bedrooms
Flanders
US
LBMEquity)
Holdings (Building
(Insight
Partners)
Lone Star Funds
Partners)
Hillsdale
Furniture BlackEagle
Industry Partners,
(Brookside
Partners) Equity Partners)
4/10/2015
6/19/2015
3/2/2015
4/16/2015
2/27/2015
4/10/2015
Phillips Tile
Rio
Brands
(Guardian Greyrock
Capital
(Goense
& Company,
Partners)
Capital Group)
Atlas Holdings
Target
Target Description
Description
Manufacturer and importer of bedroom furniture
Supplier of outdoor furniture and sportsman accessories
Manufacturer of one-coat stucco, surface coatings and expanded
Distributor of(EPS)
fasteners
and other building materials including nails,
polystyrene
products
Manufacturer of a diversified range of concrete and clay building
products
insulation
Supplier of lumber and building materials to homeowners,
Manufacturerbuilders
and importer
of bedroombuilders
furniture
professional
and commercial
Residential Design Services (DBI
Webster
Capital, Morgan
Stanley
Capital, Huntington
Capital,
Trive
Alternative
Investment Partners
Capital)
Provider of floor and wall tiles, natural stone and synthetic counter
Supplier
of outdoorhome
furniture
and sportsman accessories
tops
for residential
builders
Desjardins Capital régional et
Lynx
Equity(Fondaction)
coopératif
Manufacturer of doors and windows in Canada
Harrison Gypsum, LLC
Tecta
(H.I.G.America
Capital, LLC)
(Oaktree Capital Management)
Miner and processer of limestone for industry and agricultural sectors
2/25/2015
4/2/2015
ATIS Group
Kitchen
Kaboodle
(Cornerstone
Capital Partners,
Cyprium Partners)
J.A. Jack & Sons, Inc.
Metalcrafts
2/18/2015
4/1/2015
Kitchen Creations
Design Specialties
Lynx Equity
Investor
Manufacturer and custom designer of kitchen and bath cabinetry
IPS Corporation (Calera Capital)
RDL Supply
Nautic Partners
(Ridgemont Equity Partners)
Manufacturer of adhesives, solvent cements, plumbing specialty
Distributor
of commercial
doors,and
door
frames, door hardware and
items
and various
components
supplies
related accessories
2/9/2015
3/25/2015
Carroll Chair
J&B Materials
Manufacturer of tables and chairs
studs, plaster, pool and general building materials
1/26/2015
Glassworks
(Bounds Equity Partners)
Mity Enterprises
Gypsum
and
(ProspectManagement
Capital)
Supply
(AEA Investors)
Binswanger Glass (Grey
Mountain Partners, Guff &
Company)
Morrison Supply
(Advent International)
2/26/2015
4/8/2015
2/9/2015
4/1/2015
1/2/2015
Kiva Kitchen & Bath
(Rock Hill Capital)
www.tmcapital.com
- 15 -
Provider of glass fabrication, installation of shower doors, mirrors,
table glass, windows and patio door services
Provides plumbing fixtures, hardware, appliances, cabinetry, and
counter tops for bathrooms and kitchen
($ in millions)
Date Closed
Closed
Date
12/31/2014
6/30/2015
12/29/2014
6/19/2015
M&A Activity
Target
Target
Meyer Decorative Surfaces
12/19/2014
6/9/2015
AGC Flat Glass North America,
Royal
Inc. Adhesives and Sealants
Erieview Capital)
Virginia Tile Company
Carolina Drawers
12/15/2014
6/9/2015
Lumber Specialties
Rock Ridge Stone
12/15/2014
6/3/2015
12/12/2014
6/3/2015
Acquiror
Acquiror
Rugby Architectural Building
Interior
Specialists
Products
(Littlejohn
& Company)
(Leading Ridge
Capital Partners)
Trulite Glass & Aluminum
American
Solutions Securities
(Sun Capital Partners)
Harren Equity Partners
Olon Industries
(Huron Capital)
Target
Target Description
Description
Regional distributor of kitchen and bath laminates
Manufacturer of glass and glass-related products in North America
Manufacturer
andresidential,
distributorinterior,
of industrial
adhesivesapplications
and sealants,
for
architectural,
and industrial
Distributor of ceramic tile, marble and granite for commercial and
Manufacturer
of solid wood and ply wood drawer box products
residential
applications
Manufacturer and distributor of structural building components
Distributortrusses
of natural
products used in outdoor applications
including
andstone
wall panels
Distribution International
Insulation
Fabricators, Inc.
(Audax Group)
Salt
Creek
Capital BlackEagle
Industry
Partners,
Partners)
Advent International
A-Plus Building Supply
A.H. Harris & Sons
SRS Distribution
Frontenac
(Berkshire Company
Partners)
Distributor of roofing and related exterior building products servicing
Distributor
construction
to the
heavy & highway,
the
Central of
and
Southeast supplies
Connecticut
region
12/8/2014
5/31/2015
American Masons' & Building
Valterra
Supply Products
12/5/2014
5/29/2015
Honsador Lumber
Vestal
Manufacturing
Enterprises
(Cyprium
Investment Partners)
(MVC Capital)
Brookside
Equity Partners,
Scott
Industry Partners,
BlackEagle
Capital
Partners
Partners)
Provider of steel framing, insulation, acoustical, block, brick and
Manufactures
and distributes
recreational
vehicle
masonry
supplies,
as well as drywall
products
andplumbing
accessories for
equipment and
including
valves for sanitation, plumbing and
commercial
andsupplies
residential
applications
winterizing
Manufacturer and distributor of building products, roof trusses and
Manufacturer
of services
metal building products including building materials,
wood
treatment
12/2/2014
5/19/2015
Acmeda
RollEase
The
Jordan Company
(ShoreView
Industries, Nova
Capital Management)
US
GreenFiber
Industry
Partners, BlackEagle
(Tenex
Capital Management)
Partners)
Developer and manufacturer of hardware systems for the windowManufactures
and distributes an extensive proprietary portfolio of
furnishing
market
Distributor of building materials including drywall, metal framing,
Manufactures
thermal
and acoustical
cellulose
insulation,
specialty
acoustical
ceiling,
insulation,
lumber, trim
and fastener
products
Art For Everyday, Inc.
Platinum
Equity Ltd.)
(Argosy Partners
Designer and manufacturer of a range of architectural wood products
Top Knobs USA (Harbour Group)
Partners)
Trulite Glass & Aluminum
US
LBM Holdings (Building
Solutions
Industry
Partners,
BlackEagle
(Sun Capital
Partners)
Partners)
One Rock Capital, Yukon
Hillsdale
Partners Furniture
Provider of decorative hardware products including cabinet hardware,
Distributorpulls,
and designer
of kitchen switch
cabinetry
and house
relatednumbers,
products
appliance
bath accessories,
plates,
doorbells and doorknockers
Fabricator of glass for safety and decorative applications
insulation
Designer and manufacturer of air conditioning, heating, ventilating
Manufacturer
and importer of bedroom furniture
and
related appliances
Webster
Capital, Morgan
Stanley
Industry Partners,
BlackEagle
Alternative
Partners) Investment Partners
Provider of wood building products to builders, remodelers and
homeowners
Carlson Systems Holdings (Tenex
Lynx
Equity
Capital
Management)
Distributer of tools and fasteners for wood construction projects and
Provider of kitchen
appliances and accessories and home products
manufacturing
operations
Gerflor
Tecta
America Conseil,
(Euromezzanine
(Oaktree
Capital
Management)
Intermediate
Capital
Group)
Manufacturer of hard maple sports flooring systems for basketball,
Manufacturer
of roofing
and sheet
volleyball,
racquetball
aerobics
andmetal
otherproducts
sports
Friedman Fleischer & Lowe
Investor
Manufacturer of spray polyurethane foam insulation products
11/19/2014
5/11/2015
Wallboard Supply
Termo-Cell
Industries
(Agincourt Capital
Partners,
Gemini Investors)
Acanthus Industries, Inc.
11/19/2014
4/17/2015
Atlas Homewares
11/19/2014
4/17/2015
Texas Tempered Glass, Inc.
Rosen Materials
11/18/2014
4/16/2015
Airxcel
New
Energy Bedrooms
(Bruckmann,
Rosser, Sherrill &
Co.)
K-I Lumber & Building Materials
Partners)
11/25/2014
5/13/2015
11/14/2014
4/10/2015
11/11/2014
4/8/2015
Southern Fastening Systems
Kitchen Kaboodle
Grey Mountain Partners
Value added distributor of thermal and acoustical insulation and
Fabricates
and distributes
thermalrepair,
and acoustical
insulation products
related
supplies
for maintenance,
and operations
11/5/2014
4/2/2015
Connor Sports Flooring
Metalcrafts
(The Riverside Company)
11/5/2014
4/1/2015
Icynene
Design
Specialties
(Element
Partners)
11/4/2014
4/1/2015
SteelStar
RDL Supply
Kodiak Building Partners
Fabricator specializing in design-build, architecturally exposed
Distributorsteel
of commercial
doors,miscellaneious
door frames, door
hardware
structural
and large scale
metal
projects and
related accessories
10/31/2014
3/25/2015
Damron Sand & Gravel, Inc.
J&B Materials
Manufacturer and supplier of sand and gravel in Lubbock, Texas
10/31/2014
Northwest Fastener Sales
PB Materials Holdings, Inc.
Gypsum
(WL RossManagement
& Co. LLC) and
Supply
(AEA Investors)
Monroe Engineering Products
(Svoboda Capital Partners)
10/23/2014
Peterson Industries
www.tmcapital.com
Aldora Glass Holdings
(Superior Capital Partners)
- 16 -
Value-added supplier of niche industrial hardware products including
hinges, pull handles, knobs, hand wheels, clamps, plungers and
related assemblies
Manufacturer and distributer of tub enclosures, shower enclosures
and doors, mirror closet doors and sliding glass patio doors
($ in millions)
Date Closed
Closed
Date
10/15/2014
6/30/2015
M&A Activity
Target
Target
The Gravel Company
Acquiror
Acquiror
Harrison Gypsum, LLC
Interior
Specialists
Tenex Capital Management
American Securities
10/10/2014
6/9/2015
Carlson Systems Holdings, Inc.
Erieview Capital)
Empire Plumbing Supply, Inc.
Carolina Drawers
Morrison Supply Company, LLC
Olon
Industries
(Advent
International)
(Huron Capital)
Wholesale distributor servicing plumbing, mechanical and industrial
Manufacturer
solid wood
markets
in theofUnited
Statesand ply wood drawer box products
10/9/2014
6/9/2015
Colorado County Sand & Gravel
Rock
Ridge Stone
And Concrete
Supply of Topeka
Manufacturer of sand and gravel aggregates in west Houston region
10/8/2014
6/3/2015
Mechanical Insulation Supply
Summit Materials, LLC
Salt
Creek Capital
(Silverhawk
Capital Partners,
LLC)
Distribution
(Audax Group)
10/4/2014
6/3/2015
DJ Roofing Supply
A.H. Harris & Sons
SRS Distribution
Frontenac
(Berkshire Company
Partners)
Distributor of residential and commercial roofing systems and related
accessories
10/1/2014
5/31/2015
Valterra Products
Littlejohn & Company
Capital Partners
9/30/2014
5/29/2015
Standard Companies
(MVC Capital)
9/29/2014
5/19/2015
Barnsco, Inc.
Spell
Capital
Partners
Industry
Partners,
BlackEagle
Partners)
The Jordan Company
Provider of flooring, countertops, window coverings and cabinets
winterizing
Supplier of cabinetry, windows, doors, trusses, components, roofing,
Manufacturer
of metal
building products including building materials,
siding
and framing
materials
9/17/2014
5/13/2015
Chase Doors
Termo-Cell
Industries
(Sentinel Capital
Partners)
Audax Group
US GreenFiber
9/16/2014
5/11/2015
Hokanson Carpets
Scott Group Custom Carpet
Platinum
(KeystoneEquity
Capital)
Designer and manufacturer of rugs and carpets
9/16/2014
4/17/2015
Direct
Cabinet
Sales
(Blue Point
Capital
Partners)
9/12/2014
4/17/2015
Residential Design Services
Rosen Materials
9/9/2014
4/16/2015
Pacific Insulation Company
New Energy Bedrooms
Ridgemont Equity Partners,
US
LBM Capital
Holdings
(Building
Triangle
Corporation
Partners)
Trive Capital
Partners)
Hillsdale
Furniture
(Audax Group)
Distributor of commercial doors, door frames, architectural hardware
Distributor
designer to
of real
kitchen
cabinetry
and related
products
and
relatedand
accessories
estate
construction
contractors
and
building owners
Provider of interior design centers and installation services for home
Distributor
residential
and commercial building products including
builders
in of
Southern
California
insulation
Distributor and fabricator of commercial and industrial insulation
Manufacturer and importer of bedroom furniture
products
9/2/2014
4/10/2015
Aquatic US Holdings
Partners)
The Sterling Group
Alternative Investment Partners
Manufacturer and marketer of bathtubs and showers for residential
buildings
Versatex Building Products
Kitchen Kaboodle
Highlander Partners
Lynx Equity
8/15/2014
4/2/2015
ANR Door Systems
Metalcrafts
Total Fleet Solutions
Tecta
America
(CI Capital
Partners)
Manufacturer of trim boards, sheets, corner boards, beadboards,
Provider of kitchen
and accessories
andmolding
home products
skirtboards,
wraps, appliances
beaded profiles,
soffit systems,
profiles
and finishing products
Manufacturer of residential and commercial doors made of steel or
Manufacturer
of roofing
and
sheet metal products
fire
and weather
resistant
material
8/15/2014
4/1/2015
The Home Decor Companies
Design
Specialties
(Linsalata
Capital Partners)
Nielsen Bainbridge
Blackthorne
Partners, Individual
(Kohlberg & Company)
Investor
Manufacturer of wall and lighting home decor products
8/15/2014
4/1/2015
Tropitone Furniture Company
RDL
Supply
(Pfingsten
Partners)
Brown Jordan
The
Cook Capital)
& Boardman Group
(Crescent
Designer and manufacturer of casual indoor and outdoor patio
Distributorpool
of commercial
doors, door
frames, door
hardware and
furniture,
furniture, contract
and hospitality
furnishings
related accessories
8/12/2014
3/25/2015
Fairway Building Products
J&B Materials
Argosy Private Equity, Graycliff
Gypsum
Partners Management and
Supply
(AEA Investors)
Manufacturer of vinyl, composite and aluminum porch, decks and
Supplier railing
and distributor
balcony
systems of building materials including drywall, metal
Partners)
Provider of lumber and drywall products, board products, building
supplies and specialty products
10/14/2014
6/19/2015
9/2/2014
4/8/2015
8/8/2014
AO
8/8/2014
Feldman Lumber Co.
www.tmcapital.com
- 17 -
Target
Target Description
Description
Supplier of decorative landscaping gravel, construction gravel,
Manufacturer
of
a
range
of
products
for floors
and interiors including
topsoil, sand, compost, and landscaping
stones
Distributor of product assembly systems serving the fastening and
Manufacturer
andof
distributor
of industrial
adhesives
sealants,
packaging
needs
construction,
industrial
and OEMand
customers
Distributor and manufacturer of insulation mechanical pipe insulation,
Fabricates
and distributes
and acoustical insulation products
HVAC,
refractory
products thermal
and accessories
Fabricator and distributor of rebar and concrete accessories
Designer and manufacturer of specialty doors and door systems for
Manufactures
thermal
andapplications
acoustical cellulose insulation, specialty
commercial
and
industrial
Distributor of doors, frames and hardware to commercial contractors
for the office build-out market
($ in millions)
Date Closed
Closed
Date
8/1/2014
6/30/2015
M&A Activity
Target
Target
Hollow Metal Xpress
Acquiror
Acquiror
Mesker Door
Interior
Specialists
(Inverness Graham Investments)
Stone Panels
Royal
Adhesives
and Sealants
(Metapoint
Partners)
Erieview Capital)
Wine Valley Siding Supply
Carolina Drawers
Brookside Mezzanine Partners,
American
ThompsonSecurities
Street Capital
Partners
Lynx Equity, Succession Capital
Olon Industries
(Huron Capital)
7/31/2014
6/9/2015
Custom Window Systems
Rock
Ridge Stone
(Highlander
Partners)
Nautic Partners, Triangle Capital
Salt
Creek Capital
Corporation
Designer and manufacturer of impact resistant and non-impact
Distributordoors
of natural
stone enclosures
products used in outdoor applications
windows,
and porch
7/18/2014
6/3/2015
Northwest Hardwoods, Inc.
Insulation
Inc.
(AmericanFabricators,
Industrial Partners)
Littlejohn & Company
Manufacturer and distributor of hardwood lumber
7/1/2014
6/3/2015
DelGrosso Floor Covering
A.H. Harris & Sons
Frontenac
Company
(KRG Capital
Partners)
Provider of custom home interior products and services
7/1/2014
5/31/2015
ZyTech Building Systems
Valterra Products
TriWest Capital Partners
Capital Partners
6/30/2014
5/29/2015
Carter-Waters, LLC
Vestal
Manufacturing
(Pritzker
Group PrivateEnterprises
Capital)
(MVC Capital)
Aiglon Capital Management, Merit
Spell
Capital
Partners
Capital
Partners
Manufacturer and distributer of roof trusses, floor systems, wall
Manufactures
and lumber
distributes
recreational vehicle plumbing
panels,
stairs and
packages
winterizing
Distributor of construction materials and equipment to commercial,
Manufacturer
metal building
products including building materials,
residential
andofhighway
contractors
6/30/2014
5/19/2015
Paramount Windows
Cascade Windows
The
JordanCapital
Company
(Altamont
Partners)
6/27/2014
5/13/2015
Factory Builder Stores
US GreenFiber
6/17/2014
5/11/2015
RCR International
PrimeSource
Building Products
(Southfield Capital)
Peak Rock Capital
Platinum Equity
Manufacturer and distributor of home improvement products,
Distributorinsulation
of fasteners
building materials including nails,
including
andand
floorother
coverings
6/17/2014
4/17/2015
The RiteScreen Company
Manufacturer of screens for the window and patio door industry
5/31/2014
4/17/2015
Wholesale Builders Supply
Rosen Materials
5/30/2014
4/16/2015
Wagner Interior Supply
New Energy Bedrooms
Seven Point Equity Partners
Partners)
US
LBMPartners)
Holdings (Building
Capital
Partners)
Hillsdale
Furniture
Capital Partners)
5/13/2014
4/10/2015
Indiana Limestone Company
Partners)
Wynnchurch Capital
Manufacturer of finished dimensional cut stone and standard building
products
5/2/2014
4/8/2015
Desert Lumber
Kitchen Kaboodle
Manufacturer and supplier of floor and roof trusses to construction
industry
5/1/2014
4/2/2015
Foster Manufacturing Company /
Metalcrafts
Zsi Inc.
Lynx
Equity
Industry
Partners)
Pfingsten Partners
Tecta America
8/1/2014
6/19/2015
8/1/2014
6/9/2015
Target
Target Description
Description
Manufacturer of metal and stainless steel doors, frames and louvers
Manufacturer of natural stone composite panels
Provider of siding, trims and accessories
Manufacturer and installer of wooden windows
Distributor of appliances and cabinets
Provider of commercial construction products, including metal
Distributor
residential
and commercial building products including
framing
andofsiding
products
insulation
Distributor of interior construction products including ceiling, wall and
Manufacturer
floor
products and importer of bedroom furniture
Designer and manufacturer of detachable couplers, blow guns, hose
Manufacturer
of roofing and
sheet metal
products
fittings
and accessories
for various
industrial
applications
4/30/2014
4/1/2015
Roberts & Dybdahl
Design Specialties
Cedar Creek Wholesale Lumber
Blackthorne
Individual
(CharlesbankPartners,
Capital Partners)
Investor
Wholesale distributor of lumber products, building materials,
Manufacturer
of glass
fireplace
engineered
wood
products
and doors
roof and floor truss systems
4/25/2014
4/1/2015
Larson Distributing Co.
RDL Supply
4/24/2014
3/25/2015
Coastal Roofing Supply
J&B Materials
Rugby Architectural Building
The
Cook(Leading
& Boardman
Products
RidgeGroup
Capital
(Ridgemont
Partners) Equity Partners)
Distributor of decorative surfacing and cabinet hardware including
Distributor
of commercial
doors,
doorcommercial
frames, door
hardware
wood
flooring,
rubber flooring
base,
tiles,
sound and
related accessories
insulation
and adhesive products
Provider of a multitude of roofing products
4/1/2014
3/31/2014
Supply
Jones Lumber Company
www.tmcapital.com
Gypsum
Management
and
Industry Partners,
BlackEagle
Supply
Partners)
(AEA Investors)
AEA Investors
Partners)
- 18 -
Distributor of drywall, acoustical and other specialty building materials
Supplier of lumber and a variety of hardware items
($ in millions)
Date Closed
3/25/2014
6/30/2015
3/23/2014
6/19/2015
M&A Activity
Target
Midwest
Plastics
Products
Advanced
Flooring
& Design
Acquiror
Spell
Capital
Partners
Interior
Specialists
AWP
RoyalWindows
Adhesivesand
andDoors
Sealants
(Sun
Capital
Partners)
(Arsenal
Capital
Partners, PNC
Deerpath
American Holdings
Securities
Target Description
Manufacturer
tile, fittings
and pipe
Manufacturer of
of plastic
a rangedrain
of products
for floors
andaccessories
interiors including
Distributor
of aluminum
and vinyl
windowsadhesives
and doorsand sealants,
Manufacturer
and distributor
of industrial
3/21/2014
6/9/2015
Erieview Capital)
Vornado
Air, LLC
Carolina Drawers
(McCarthy Capital)
Waitt
Company
Olon Industries
(Huron Capital)
Designer
and manufacturer
of airply
comfort
Manufacturer
of solid wood and
wood products
drawer box products
3/19/2014
6/9/2015
ProFusion
Rock RidgeIndustries
Stone
Peak
Rock Capital
Capital
Salt Creek
Manufacturer
of industrial
transit matting,
Distributor of natural
stoneproducts
productsincluding
used in outdoor
applications
protective linings and custom specialty film products
3/17/2014
6/3/2015
Koroseal
Products
InsulationInterior
Fabricators,
Inc.
Peak
Rock Capital
Distribution
2/14/2014
6/3/2015
Novik
A.H. Harris & Sons
Clearview
Frontenac Capital
Company
Manufacturer
and
distributor
of custom
interior products
including
Fabricates and
distributes
thermal
and acoustical
insulation
products
commercial
wall
protection systems and dry-erasable
for industrialwall
andcoverings,
commercial
markets
wall coverings
Manufacturer
provider supplies
of polymer
and &
roofing
materials
Distributor of and
construction
to siding
the heavy
highway,
2/5/2014
5/31/2015
E.B.
Bradley
Company (Industrial
Valterra
Products
Opportunity Partners,
Stonehenge Partners)
General
Tools and Instruments
Vestal Manufacturing
Enterprises
Company
(MVC Capital)
PSP
Capital
Partners
Brookside
Equity
Partners, Scott
Capital Partners
Distributor
of specialty
hardware,
surfacingvehicle
products,
flooring and
Manufactures
and distributes
recreational
plumbing
woodworking
supplies
and
manufacturer
equipment and
supplies
including
valves of
forlaminated
sanitation,panels
plumbing and
High
Capital
Partners
Spell Road
Capital
Partners
winterizing
Developer
of specialty
tools
and electronic
instruments
Manufacturer
of metal hand
building
products
includingtest
building
materials,
1/31/2014
5/19/2015
Gypsum
Supply
DiversiTech
Corporation
Foundation
Materials (CI
The Jordan Building
Company
Capital Partners)
Supplier
of drywall,
metal studs,
tile, proprietary
insulation and
related
Manufactures
and distributes
an ceiling
extensive
portfolio
of
building
materials
and toolsequipment, HVACR maintenance chemical
condensate
management
1/23/2014
5/13/2015
Alleyton
Resource
Termo-Cell
Industries
Summit
Materials
US GreenFiber
(Silverhawk
Capital
Partners)
(Tenex Capital
Management)
Manufacturer
wholesaler
of concrete
and building
products
Manufacturesand
thermal
and acoustical
cellulose
insulation,
specialty
1/23/2014
5/11/2015
Howard
PlatinumBerger
EquityCompany
Provider
of of
home
hardware
products
Distributor
fasteners
and other
building materials including nails,
1/21/2014
4/17/2015
The
Faucet Queens
PrimeSource
Building Products
(Citizens Capital, Incline Equity
Partners)
Alliance
Steel Sales
Direct Cabinet
Associated
Steel Group,
Promus
US LBM Holdings
(Building
Equity
Partners
Industry
Manufacturer
metal and
frame
Distributor andofdesigner
of related
kitchen components
cabinetry andincluding
related products
structures, panel structures and other items used in construction
1/1/2014
4/17/2015
Polycor
Rosen Materials
1/1/2014
4/16/2015
Rockland
Industrial
Products
New Energy
Bedrooms
(Babson Capital Management)
Partners)
PNC
Mezzanine
US LBM
HoldingsCapital
(Building
Partners)
Lubar
& Co
Hillsdale
Furniture
4/10/2015
Partners)
4/8/2015
Kitchen Kaboodle
Lynx Equity
4/2/2015
Metalcrafts
Tecta America
4/1/2015
Design Specialties
Investor
4/1/2015
RDL Supply
Distributor of commercial doors, door frames, door hardware and
related accessories
J&B Materials
Supply
(AEA Investors)
2/4/2014
5/29/2015
3/25/2015
www.tmcapital.com
- 19 -
Producer
range of stone
products, including
slabs,including
curbs,
Distributorofofaresidential
and commercial
buildingtiles,
products
pavers
stone
kitchen and
and architectural
bath cabinetry,
countertops, stucco, roofing and
insulation
Manufacturer
laminated
flooringfurniture
Manufacturer of
and
importer wood
of bedroom
($
($ in
in millions)
millions)
M&A Activity
Exits
Exits of
of U.S.
U.S. Based
Based Building
Building Products
Products Companies
Companies by
by Private
Private Equity
Equity Firms
Firms (2014
(2014 -- Present)
Present)
Date
Company
Date
Company Name
Name
Closed
(Exiting
Closed
(Exiting P.E.
P.E. Sponsor)
Sponsor)
8/24/2015
8/24/2015 Quest
Quest Construction
Construction
Products
Products (Audax
(Audax Group;
Group;
Moelis
Moelis Capital
Capital Partners)
Partners)
Enterprise
Enterprise
Exit
Exit Type
Type
Acquiror
Acquiror
Company
Company Description
Description
Value
Value
Merger
Merger //
Acquisition
Acquisition
Building
Building Materials
Materials
Corporation
Corporation of
of
America,
America, Inc.
Inc.
Manufacturer
Manufacturer of
of protective
protective systems
systems and
and coatings
coatings for
for the
the
construction
construction industry
industry
4/1/2015
4/1/2015 Ainsworth
Ainsworth Engineered
Engineered
(Brookfield
(Brookfield Capital
Capital
Partners)
Partners)
Merger
Merger //
Acquisition
Acquisition
Norbord
Norbord
Manufacturer
Manufacturer and
and supplier
supplier of
of oriented
oriented strand
strand board
board
including
including flooring
flooring products,
products, stair
stair tread
tread panels,
panels, stringers
stringers and
and
risers
risers for
for stairs
stairs
3/9/2015
3/9/2015 AF
AF Lighting
Lighting
(Consortium
(Consortium of
of PE
PE firms)
firms)
Merger
Merger //
Acquisition
Acquisition
Almo
Almo
Manufacturer
Manufacturer and
and distributor
distributor of
of specialty
specialty lighting
lighting and
and
electrical
electrical products
products through
through catalogs,
catalogs, online
online portals
portals and
and retail
retail
outlets
outlets
2/24/2015
2/24/2015 M&M
M&M Manufacturing
Manufacturing
(TGF
(TGF Management)
Management)
Merger
Merger //
Acquisition
Acquisition
MiTek
MiTek Industries
Industries
Fabricator
Fabricator of
of custom
custom sheet
sheet metal
metal products
products for
for residential
residential
and
and commercial
commercial applications
applications
1/29/2015
1/29/2015 Monarch
Monarch
(Taylor
(Taylor Morrison
Morrison Home)
Home)
Merger
Merger //
Acquisition
Acquisition
Mattamy
Mattamy Homes
Homes
Provider
Provider of
of construction
construction services
services including
including the
the development
development
and
and construction
construction of
of single-family
single-family homes
homes and
and condominiums
condominiums
$278.3
$278.3
1/16/2015
1/16/2015 CENTRIA
CENTRIA Incorporated
Incorporated
(Riverfront
(Riverfront Capital
Capital Fund;
Fund;
SMST
SMST Management)
Management)
Merger
Merger //
Acquisition
Acquisition
NCI
NCI Group,
Group, Inc.;
Inc.;
Steelbuilding.com
Steelbuilding.com
Designer,
Designer, developer,
developer, and
and manufacturer
manufacturer of
of engineered
engineered wall,
wall,
roof,
roof, and
and floor
floor systems,
systems, as
as well
well as
as provides
provides coil
coil coating
coating
services
services
$245.0
$245.0
1/14/2015
1/14/2015 Climatec
Climatec Building
Building
Technologies
Technologies Group
Group
(Pegasus
(Pegasus Capital
Capital Advisors)
Advisors)
Merger
Merger //
Acquisition
Acquisition
Robert
Robert Bosch
Bosch
Provider
Provider of
of energy
energy efficiency,
efficiency, building
building automation,
automation, security
security
and
and life-safety
life-safety services
services
$226.0
$226.0
12/2/2014
12/2/2014 AERCO
AERCO International
International
(The
(The Riverside
Riverside Company)
Company)
Merger
Merger //
Acquisition
Acquisition
Watts
Watts Water
Water
Technologies
Technologies
Provider
Provider and
and manufacturer
manufacturer of
of boilers,
boilers, venting
venting systems,
systems, air
air
filtration
filtration system,
system, hydraulic
hydraulic separator,
separator, pump
pump products,
products, valves
valves
and
and related
related products
products
$264.5
$264.5
11/5/2014
11/5/2014 National
National Diversified
Diversified Sales
Sales
(Graham
(Graham Partners)
Partners)
Merger
Merger //
Acquisition
Acquisition
Norma
Norma Group
Group
Provider
Provider of
of water
water management
management services
services for
for residential
residential and
and
commercial
commercial markets
markets in
in North
North America
America and
and Europe
Europe
$285.0
$285.0
10/31/2014
10/31/2014 Trussbilt
Trussbilt
(Sentinel
(Sentinel Capital
Capital Partners)
Partners)
Merger
Merger //
Acquisition
Acquisition
American
American Steel
Steel
Products
Products
Designer
Designer and
and manufacturer
manufacturer of
of security
security products
products including
including
doors,
doors, wall
wall panels,
panels, frames,
frames, security
security ceilings
ceilings and
and floors
floors
10/31/2014
10/31/2014 Rostra
Rostra Tool
Tool
(Buckingham
(Buckingham Capital
Capital
Partners,
Partners, Ironwood
Ironwood Capital)
Capital)
Merger
Merger //
Acquisition
Acquisition
Oetiker
Oetiker Group
Group
Designer
Designer and
and producer
producer of
of hand
hand tools
tools in
in the
the United
United States
States
10/3/2014
10/3/2014 Fairmount
Fairmount Santrol
Santrol
(American
(American Securities,
Securities, PNC
PNC
Erieview
Erieview Capital)
Capital)
IPO
IPO
9/22/2014
9/22/2014 CGI
CGI Windows
Windows and
and Doors
Doors
(Cortec
(Cortec Group)
Group)
Merger
Merger //
Acquisition
Acquisition
9/18/2014
9/18/2014 Industrial
Industrial Distribution
Distribution Group
Group
(Luther
(Luther King
King Capital
Capital
Date
Company Name
Management)
Management)
Closed
(Exiting P.E. Sponsor)
8/20/2014 Borga
(Hancock Park Associates,
Pegasus Capital)
Merger
Merger //
Acquisition
Acquisition
Exit Type
Producer
Producer of
of industrial
industrial and
and commercial
commercial foundry
foundry resin-coated
resin-coated
sand
sand in
in the
the United
United States
States
$400.0
$400.0
PGT
PGT Industries
Industries
Manufacturer
Manufacturer of
of aluminum
aluminum and
and vinyl
vinyl impact-resistant
impact-resistant
windows
windows and
and doors
doors
$111.0
$111.0
Sonepar
Sonepar Iberica
Iberica
Provider
Provider of
of maintenance,
maintenance, repair,
repair, operating
operating and
and production
production
products
products and
and services
services in
in the
the United
United States
States and
and China
China
Company Description
Acquiror
Merger /
Acquisition
Manufacturer of pre-engineered metal buildings and
components for agricultural, industrial, commercial and
residential building markets
8/20/2014 Peerless Industrial Group
(WestView Capital
Partners)
Merger /
Acquisition
KITO Americas
Manufacturer and distributor of chains, wire forms, traction
products, wire ropes, cordage and associated accessories
7/31/2014 Hurd Windows & Doors
(Longroad Asset
Management)
Merger /
Acquisition
Sierra Pacific
Industries
Manufacturer of wood, aluminum and vinyl windows and
doors
Merger /
Acquisition
-20 -Manufacturer and distributor of fasteners including adjuster
Fontana Gruppo
gears, blind fastening systems, installation tools, stem
fasteners and lock bolts
www.tmcapital.com
6/19/2014 Acument Global
Technologies
(Platinum Equity)
$616.2
$616.2
Enterprise
Value
$0.4
$120.0
Enterprise
Date
Company Name
Exit Type
Acquiror
Company Description
Value
Closed
Building
Products
Industry
Spotlight
M&A
Activity
8/20/2014 Borga
Merger /
Manufacturer of pre-engineered metal buildings and
$0.4
(Hancock Park Associates, Acquisition
components for agricultural, industrial, commercial and
Pegasus Capital)
residential building markets
Exits of U.S. Based Building Products Companies by Private Equity Firms (2014 - Present)
($8/20/2014
in millions) Peerless Industrial Group
Merger /
KITO Americas
Manufacturer and distributor of chains, wire forms, traction
$120.0
(WestView Capital
Acquisition
products, wire ropes, cordage and associated accessories
Enterprise
Date
Company Name
Partners)
Exit Type
Acquiror
Company Description
Value
Closed
7/31/2014
Hurd
Windows
&
Doors
Merger
/
Sierra
Pacific
Manufacturer
of
wood,
aluminum
and
vinyl
windows
and
8/24/2015 Quest Construction
Merger /
Building Materials Manufacturer of protective systems and coatings for the
(Longroad
Asset Group;
Acquisition
Industries
doors
Products (Audax
Acquisition
Corporation of
construction industry
Management)
Moelis Capital Partners)
America, Inc.
6/19/2014
4/1/2015 Acument
AinsworthGlobal
Engineered
Technologies
(Brookfield Capital
(Platinum
Partners) Equity)
Merger
Merger //
Acquisition
Acquisition
Fontana
Norbord Gruppo
Manufacturer
fasteners
including
Manufacturer and
and distributor
supplier ofof
oriented
strand
boardadjuster
gears,
blind
fastening
systems,
tools,
stem and
including
flooring
products,
stairinstallation
tread panels,
stringers
fasteners
and lock bolts
risers for stairs
5/31/2014
Furniture
3/9/2015 Whalen
AF Lighting
Manufacturing
(Consortium of PE firms)
(HCI Equity Partners)
Merger
Merger //
Acquisition
Acquisition
Li
& Fung
Almo
Manufacturer
ofspecialty
furniture lighting
including
home
Manufacturer and
and wholesaler
distributor of
and
furniture,
storage
and
entertainment
storageand retail
electrical garage
products
through
catalogs,
online portals
systems
outlets
5/14/2014
Pools
2/24/2015 Paddock
M&M Manufacturing
(Lincolnshire
Management)
(TGF Management)
Merger
Merger //
Acquisition
Acquisition
Paddock
Pools
MiTek Industries
Management
Provider
ofof
pool
construction
services
and related
backyard
Fabricator
custom
sheet metal
products
for residential
accessories
in the
Arizona and Nevada markets of the
and commercial
applications
United States
4/16/2014
1/29/2015 Carpets
MonarchN More
(Levine
Leichtman
Capital
(Taylor Morrison
Home)
Partners)
Merger
Merger //
Acquisition
Acquisition
Youthstream
Mattamy Homes
Media Networks
Provider
products
and flooring
Provider of
of flooring
construction
services
includinginstallation
the development
services
to the home
builder and homes
consumer
in
and construction
of single-family
andmarkets
condominiums
Southern Nevada.
$5.5
$278.3
4/9/2014 Taylor
Lumber
1/16/2015
CENTRIA
Incorporated
(Resilience
Capital Fund;
(Riverfront Capital
Partners)
SMST Management)
Merger
Merger //
Acquisition
Acquisition
Ohio
Valley Inc.;
NCI Group,
Veneer
Steelbuilding.com
Producer
hardwoods,
and flooring
products for
the
Designer,of
developer,
andlumber
manufacturer
of engineered
wall,
construction
industry
roof, and floor
systems, as well as provides coil coating
$245.0
3/26/2014
Hardwood
1/14/2015 American
Climatec Building
Industries
Technologies Group
(H.I.G.
Capital)
(Pegasus
Capital Advisors)
Merger
Merger //
Acquisition
Acquisition
Baillie
RobertLumber
Bosch
Manufacturer
of lumber
products
usingautomation,
a variety of security
Provider of energy
efficiency,
building
hardwoods,
including
white oak, cherry, hard maple, red oak
and life-safety
services
and other species
$226.0
2/13/2014
Building Products
12/2/2014 Installed
AERCO International
(Littlejohn
& Co,Company)
Primus
(The Riverside
Capital)
IPO
Merger /
Acquisition
Watts Water
Technologies
Manufacturer,
distributor and
of installation
of air
Provider and manufacturer
of provider
boilers, venting
systems,
building
including separator,
insulations,pump
shower
doors, valves
filtration products
system, hydraulic
products,
mirrors,
garage
doors and fireplaces
and related
products
$94.2
$264.5
2/4/2014 Continental
Building Sales
11/5/2014
National Diversified
Products
(Graham Partners)
(Lone Star Funds)
IPO
Merger /
Acquisition
Norma Group
Manufacturer
of plasterboard
and
other gypsum
based and
Provider of water
management
services
for residential
products
commercial markets in North America and Europe
$164.7
$285.0
10/31/2014 Trussbilt
(Sentinel Capital Partners)
Merger /
Acquisition
American Steel
Products
Designer and manufacturer of security products including
doors, wall panels, frames, security ceilings and floors
10/31/2014 Rostra Tool
(Buckingham Capital
Partners, Ironwood Capital)
Merger /
Acquisition
Oetiker Group
Designer and producer of hand tools in the United States
10/3/2014 Fairmount Santrol
(American Securities, PNC
Erieview Capital)
IPO
9/22/2014 CGI Windows and Doors
(Cortec Group)
Merger /
Acquisition
9/18/2014 Industrial Distribution Group Merger /
(Luther King Capital
Acquisition
Management)
www.tmcapital.com
$616.2
services
Producer of industrial and commercial foundry resin-coated
sand in the United States
$400.0
PGT Industries
Manufacturer of aluminum and vinyl impact-resistant
windows and doors
$111.0
Sonepar Iberica
Provider of maintenance, repair, operating and production
products and services in the United States and China
- 21 -
Case Study
Case Study: Financial Sponsor Exit
Builders FirstSource Announces Acquisition of ProBuild Holdings
In April 2015, Builders FirstSource, a leading supplier and
manufacturer of building products, announced its pending
merger with ProBuild Holdings (“ProBuild”) from Devonshire
Investors in an all-cash transaction worth $1.63 billion. The
deal values ProBuild at approximately 9.6x 2014 adjusted
EBITDA and is expected to close later in the second half of
2015.
ProBuild was founded in 2006 by Devonshire Investors, the
private equity arm of Fidelity Investments. With approximately $4.5B of revenue in 2014,
the company is one of the largest manufacturers and distributors of building materials
to professional builders, contractors and project-oriented consumers across 40 states.
Builders FirstSource has been tremendously acquisitive and has completed six acquisitions
since 2011.
The combined entity is set to create a diversified national building products distributor
with approximately $6 billion in annual sales. This will make them the largest supplier
of Building Products to professional homebuilders in the United States. As a result of
this transaction, Builders FirstSource anticipates realizing significant cost savings, product
portfolio diversification, an expanded geographic footprint and margin expansion.
The execution of such a transaction demonstrates the company’s confidence in the
favorable timing and growth potential of its industry. Driven by strong financial performance
and sector tailwinds, there has been a meaningful uptick in strategic M&A activity, with no
signs of slowdown. Some other significant strategic transactions that have recently been
announced or closed include: BMC’s announced acquisition of STOCK Building Supply,
US LBM’s acquisition of Lampert Yards in May 2015 and Fortune Brands’ acquisition of
Norcraft Companies in March 2015.
“As the U.S. housing market continues its recovery, we believe now is
the ideal time to position Builders FirstSource for its next phase of
growth and value creation. Together we will establish a broader, more
efficient platform of manufacturing and distribution capabilities,
supported by high-quality service from the best talent in the industry.”
– Floyd Sherman, Chief Executive Officer of Builders FirstSource
www.tmcapital.com
- 22 -
Valuation Considerations
Valuation Considerations
The charts below illustrate the valuation metrics and stock performance of the Building Products industry by
major sub-segment. In general, consumer-facing companies with strong brand names trade at a premium to
more commoditized companies that rely heavily on raw material inputs (e.g. roofing, siding and insulation). Since
the last report, the overall industry has seen an expansion in TEV / EBITDA multiples, with companies realizing
significant sales and earnings growth and buyers willing to pay higher premiums to capture industry tailwinds. All
of the sectors across the Building Products category have outperformed the S&P 500 over the past five years, with
the exception of the roofing, siding and insulation category.
Figure 20: Guideline Public Company TEV / EBITDA Multiple
15.0x
13.3x
13.7x
12.6x
10.8x
10.0x
9.3x
10.4x 10.3x
9.5x
9.9x 9.2x
11.2x
10.9x
10.8x 10.7x
9.7x
8.6x
2014E
8.7x
9.9x
12.4x
11.2x 10.9x
10.7x
9.3x
8.0x
5.0x
0.0x
LTM 2015E 2016P
LTM 2015E 2016P
Windows &
Doors and
Cabinetry
Plumbing &
Hardware
LTM 2015E 2016P
HVAC &
Lighting
LTM 2015E2016P
Surfaces
LTM 2015E2016P
LTM 2015E 2016P
Roofing, Siding
& Insulation
Materials
LTM 2015E 2016P
Distributors
Source: Capital IQ
LTM 2015E 2016P
TM Capital
Building
Products Index
Figure 21: Historical TEV / EBITDA Multiple
30.0x
25.0x
Windows & Doors and
Cabinets
Roofing, Siding & Insulation
20.0x
Distributors
Surfaces
15.0x
Plumbing & Hardware
10.0x
Materials
5.0x
HVAC & Lighting
—
Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15
S&P 500
Source: Capital IQ
Figure 22: 5-Year Stock Performance
Surfaces
300.0%
Distributors
Plumbing & Hardware
200.0%
Materials
100.0%
Windows & Doors and
Cabinetry
HVAC & Lighting
0.0%
(100.0%)
Jun-10
S&P 500
Roofing, Siding &
Insulation
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Source: Capital IQ
- 23 -
Dec-13
Jun-14
Dec-14
Jun-15

TM Capital Building Products Report Industry Spotlight

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