bgl_industrials_insider_jun_15 (PDF 1689KB)

June 2015
Brown Gibbons Lang
& Company
Industrials / Building Products
Chicago
Spotlight:
Window of Opportunity in Building Products
Page 4
Building products is seeing M&A activity accelerate on the heels of
sustained economic growth, strong consumer sentiment, low interest
rates, and a corresponding rebound in the construction market. The
fragmented window and door industry is among the sectors seeing
a healthy uptick as participants seek consolidation opportunities to
expand manufacturing footprints and capabilities, broaden product
portfolios, and enhance margins.
One Magnificent Mile
980 N. Michigan Avenue
Suite 1880
Chicago, IL 60611
Cleveland
One Cleveland Center
1375 East 9th Street
Suite 2500
Cleveland, OH 44114
bglco.com
Insider
The BGL Industrials Insider is published by Brown Gibbons Lang & Company, a leading independent investment bank
serving middle market companies throughout the U.S. and internationally.
Environmental Services Insider
M&A and Capital Markets Activity
Building Products
• Building Products is seeing healthy deal flow on positive momentum
in the construction market. Marquee deals involving corporate and
private equity acquirers are indicative of an active M&A market and likely
harbingers of continued consolidation.
• Ply Gem Holdings (NYSE:PGEM) acquired Simonton Windows
from Fortune Brands Home & Security (NYSE:FBHS) and PGT
(NasdaqGM:PGTI) acquired CGI Windows and Doors. The acquisition of
Norcraft Companies by Fortune Brands Home & Security (NYSE:FBHS)
and ProBuild Holdings by Builders FirstSource (NasdaqGS:BLDR) are
among other notable corporate transactions.
• Private equity sponsors gained the spotlight with Altus Capital Partners
(GED Integrated Solutions), Nautic Partners (Custom Window Systems),
and Audax Group (Chase Doors) among the investors to add platforms
in the windows and doors space. Bellwether transactions include the
proposed merger of Stock Building Supply Holdings (NasdaqGS:STCK)
and Building Materials Holding Corporation, Platinum Equity’s acquisition
of PrimeSource Building Products, and the purchase of Hanson Building
Products by Lone Star Funds.
Broad Market
• 2015 appears off to a strong start for deal making in the middle market.1
M&A volume (based on number of transactions) increased 30 percent
over 1Q14 levels on 23 percent higher value.
• Private equity deal flow is keeping pace with 2014 levels, according to the
PitchBook 2Q15 U.S. Middle Market Report, which reported that
$359.7 billion was invested in 1,791 deals during the first quarter. By
comparison last year, total deal value was up 21 percent over 2013, while
counts were up 24 percent. The middle market accounted for 78 percent
of all private equity buyouts—up from the record high 72 percent logged
in 2014.
• Leverage multiples experienced a modest contraction in 2015 but remain
elevated in the current valuation environment. Reporting on the broader
middle market2, S&P Leveraged Commentary & Data cited a median
EBITDA multiple of 10.24x through the May year-to-date period—up from
9.69x in 2014. Senior debt multiples (senior debt to EBITDA) decreased to
4.86x from 5.13x in 2014.
• S&P LCD reported senior leverage of 4.66x for leveraged buyouts in
the lower middle market. Purchase price multiples for the May year-todate period increased to 8.9x and 8.8x for strategic and financial buyer
transactions, respectively.
1 Middle market defined as enterprise values between $25 million and $500 million.
2 Defined as issuers with EBITDA of $50M or less.
• Supply of capital continues to outstrip loan demand, leaving lenders
dissatisfied with volumes during the quarter. More than 90 percent of
participating lenders in Thomson Reuters LPC’s 2Q15 Middle Market Lender
Outlook survey were unable to meet lending goals in 1Q15, attributing the
shortfall to aggressive structures and tight pricing.
Public Equity Markets
• The public equity markets remain volatile amid uncertainty in the global
economy and energy market. BGL Building Products composite indices
outperformed the broader market year-to-date: Residential-Focused
(10.9 percent), Commercial-Focused (9.3 percent), Distributors
(7.5 percent), Aggregates and Cement (12.7 percent), and Home Builders
(7.6 percent). Broader market indices rallied last week on indications of the
Fed slowing rate hikes, with returns on the S&P 500 and DJIA regaining to
2.5 percent and 1.0 percent, respectively.
*As of June 19, 2015.
Operating Highlights
• Total housing starts rose to an annualized level of 1.0 million units in 2014
and are forecasted to surpass 1.1 million units in 2015. Nonresidential
construction is expected to see continued growth from strong commercial,
industrial, and institutional demand.
• May’s positive PMI reading marked the 29th consecutive month of
expansion for the U.S. manufacturing sector. The overall economy grew for
the 72nd consecutive month.
• Macro indicators of economic growth, declining unemployment, and
low gasoline prices are expected to buoy consumer confidence and fuel
construction spending, positives for the building products market.
For more information on how
BGL’s Global Industrials Practice can assist
your company, please contact:
Andrew K. Petryk
Kevin H. Sargent
Managing Director & Principal
Head: Industrials
Director & Principal
216.920.6639
216.920.6613
apetryk@bglco.com
ksargent@bglco.com
Delivering Results to the Global Middle Market
Industrials Insider
Spotlight
Window of Opportunity
in Building Products
Building products M&A is accelerating on the heels of sustained economic growth and a rebound in the construction
market. The fragmented window and door industry is among the sectors seeing a healthy uptick as participants seek
consolidation opportunities to expand manufacturing footprints and capabilities, broaden product portfolios, and
enhance margins.
The residential window and door industry is sized at
approximately $19.4 billion annually. New construction and
replacement and remodeling (R&R) expenditures drive
growth.
Window Market
New residential construction, comprising single family, multifamily, and manufactured housing, accounts for 47 percent
of the window market. Window demand rebounded sharply
in 2012 from a 2009 low. Annual shipments grew by 6 million
units between 2011 and 2013, representing a compound
annual growth rate of 23 percent. Demand is forecasted to
grow at a CAGR of approximately 18.4 percent (in units)
between 2014 and 2016. Vinyl is projected to make up an
estimated 61 percent of all window shipments in 2016.
The replacement and remodeling (R&R) market represents
53 percent of overall demand for windows. R&R market
demand showed signs of stabilization in 2013 following
negative growth during the downturn. Demand is forecasted
Residential Window Market
The competitive landscape is comprised of local/regional
players and national manufacturers who typically focus on
branded products.
to grow 5.2 percent annually (in units) between 2014 and
2016. Vinyl market share is projected to account for 74
percent of all window shipments in 2016.
Door Market
The replacement market accounts for the largest volume
of residential door shipments with a 48 percent share,
followed by new construction (31 percent) and remodeling
(21 percent). Residential door shipments grew a modest
5.4 percent between 2011 and 2013, or 900,000 units, to
9 million units. Demand is projected to grow at a CAGR of
approximately 8.3 percent (in units) between 2014 and 2016.
Steel is projected to make up an estimated 46 percent of all
door shipments in 2016. Fiberglass continues to gain share,
increasing from 28 percent to 38 percent between 2008 and
2013, driven by product improvements, builder preference,
and greater acceptance of the material across a wide range
of applications.
New construction accounts for 71 percent of the
nonresidential market for doors, followed by remodeling
(19 percent) and replacement (10 percent). Nonresidential
door shipments grew by 8 percent between 2011 and 2013,
or 300,000 units, to 2.1 million units. Demand is forecasted
to grow 16.1 percent annually (in units) between 2014 and
2016. Aluminum market share is projected to account for 52
percent of all door shipments in 2016.
Anderson
Pella
Other
19%
24%
Energy Efficient Windows and Fenestration Systems
Ply Gem (w/Simon
Jeld-Wen (excl. doPrograms
such as ENERGY STAR are encouraging residential
energy efficiency, with growing consumer awareness
Marvin
of the benefits of high-performance windows spurring
Atrium
Associated Matermanufacturers to expand their product lines.
2%
15%
2%
4%
Milgard (MAS)
4%
4%
MI Windows & DoEnergy
8%
4%
with
7%
Source: Equity Research.
7%
efficient windows are the predominant window being
installed today, with ENERGY STAR comprising close to 90
Champion Window
percent of the replacement market and 59 percent of the
Other
market overall. More stringent energy performance criteria
for windows will take effect in January 2016, pursuant to the
ENERGY STAR Version 6.0 Residential Windows, Doors, and
Skylights Specification released by the U.S. EPA.
PGT
4
Industrials Insider
Spotlight
Window of Opportunity
in Building Products
Window Shipments for New Construction
2016 Projected Market Share
35
30
Units (in millions)
25
Aluminum, 17%
17.9
20
13.2
15.8
15
10
3.3
5
5.1
0
2007
10.6
8.6
4.4
7.2
Wood,
Fiberglass,
Other, 22%
12.7
9.7
2008
6.7
6.3
6.6
1.9
3.1
1.7
3.5
1.8
3.3
2009
2010
2011
Wood, Fiberglass, Other
2.5
3.1
3.5
4.0
4.6
5.5
6.4
2012
2013
2014P
2015P
2016P
Aluminum
Vinyl, 61%
5.0
4.4
3.6
Vinyl
Window Shipments for Remodeling/Replacement
2016 Projected Market Share
40
35
Aluminum, 2%
Units (in millions)
30
25
22.5
20.1
20
19.1
21.1
15
10
1.9
5
9.9
1.2
9.0
19.1
18.9
19.6
20.4
21.4
22.5
1.0
1.0
0.7
0.7
0.7
0.6
0.6
0.6
7.3
7.5
6.3
5.9
6.1
6.3
6.8
7.1
2009
2010
2011
2012
2013
2014
2015P
2016P
Wood,
Fiberglass,
Other, 24%
Vinyl, 75%
0
2007
2008
Wood, Fiberglass, Other
Aluminum
Vinyl
Residential Door Shipments
2016 Projected Market Share
14
12
Units (in millions)
10
7.9
5.1
8
6
4.5
4.8
2.9
3.1
4.2
4.3
3.4
2.9
3.0
3.0
3.4
3.8
4.3
4.7
1.4
1.2
1.1
1.0
0.9
1.1
1.2
1.3
1.4
1.5
2007
2008
2009
2010
2011
2012
2013
2014P
2015P
2016P
0
Wood
Fiber Glass
Steel, 46%
Fiber Glass,
41%
4.4
4
2
5.3
4.7
6.3
Wood, 13%
Steel
Nonresidential Door Shipments
2016 Projected Market Share
3.5
Wood, 6%
Other, 3%
3.0
Units (in millions)
2.5
2.0
1.2
0.8
1.1
0.8
0.7
1.5
1.0
1.3
1.3
0.8
0.9
0.9
0.9
0.9
1.0
Steel, 39%
1.6
0.9
1
1.2
0.2
0.1
0.2
0.1
0.2
0.1
0.1
0.1
0.2
0.1
0.1
0.1
0.2
0.1
0.2
0.1
0.2
0.1
0.2
0.1
2007
2008
2009
2010
2011
2012
2013
2014P
2015P
2016P
Aluminum
Steel
Other
Source: Ducker Worldwide.
5
0.7
1.1
0.5
0.0
0.8
Wood
Aluminum, 52%
Industrials Insider
Spotlight
Window of Opportunity
in Building Products
M&A Market Active
SELECTED RECENT TRANSACTION ACTIVITY IN BUILDING PRODUCTS
TARGET
Improving market fundamentals point to continued
strength in the building products sector, with growing
investor appetite that is broad-based, spanning both
residential and commercial construction end markets.
ACQUIRER
JUNE 2015
JUNE 2015
MAY 2015
The M&A market for building products saw the beginnings
of a rebound in 2012, with the pace of investment activity
accelerating as the economy strengthened. Investors
shifted from a value-oriented approach to acquisitions early
in the recovery to the full valuations observed in the market
today as companies returned to a path of profitability and
growth.
MAY 2015
APRIL 2015
APRIL 2015
APRIL 2015
APRIL 2015
Marquee deals announced in 2015 evidence healthy
interest from both corporate and private equity buyers. A
continued strong capital markets environment and a sense
of urgency for private equity funds to deploy capital should
propel deal flow in the coming months.
Cement Assets of
MARCH 2015
MARCH 2015
JANUARY 2015
SEPTEMBER 2014
SEPTEMBER 2014
Historical Building Products M&A Activity
45
39
35
30
25
31
29
25
20
15
30
25
23 23 23
22
20
17
22 23
16
10
11
32
30
28
28
28 28
28
24
23
21
20
17
16
26
19
16
11
5
0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Number of Transacons
40
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: S&P Capital IQ.
6
Industrials Insider
Spotlight
Window of Opportunity
in Building Products
The fragmented window and door industry is seeing a healthy uptick in M&A activity as participants seek consolidation
opportunities to expand manufacturing footprints and capabilities, broaden product portfolios, and enhance margins.
Several acquisitions have been announced during the last 12 months, including Ply Gem Holdings’ (NYSE:PGEM) acquisition
of Simonton Windows from Fortune Brands Home & Security (NYSE:FBHS) and the purchase of CGI Windows and Doors
by PGT (NasdaqGM:PGTI).
September 2014
Enterprise Value: $130 million
Enterprise Value/Revenue: .43x
Enterprise Value/EBITDA: ~10.0x
“Simonton’s strength in the replace and remodel
segment of the market combined with Ply Gem’s
strength in new construction are a natural combination.
Together the companies can now offer a more
comprehensive product portfolio, benefit from an
expanded distribution network, and have a more
efficient national manufacturing platform.”
Chris Klein
CEO, Fortune Brands Home & Security
September 2014
Enterprise Value: $111 million
Enterprise Value/Revenue: 2.5x
Enterprise Value/EBITDA: ~8x-10x
Based in Columbus, Ohio, Simonton
produces ENERGY STAR-qualified
vinyl replacement and new
construction windows and doors,
including a line of impact resistant
products, at manufacturing facilities
in West Virginia, Illinois, and
California. Prior to the acquisition,
Ply Gem’s sales were comprised
of 80 percent new construction
and 20 percent remodeling. With
the addition of Simonton, Ply Gem
establishes a stronger position in
the repair & remodeling market,
with the sales mix divided between
remodeling (52 percent of sales)
and new construction (48 percent),
according to Plastics News.
“The addition of Simonton
Windows is in full alignment with
our strategic growth plan and
will better balance the mix of
end markets that we serve while
strengthening our core capabilities
and contributing significantly to
revenues in the future,” said
CGI is a regional manufacturer of
impact-resistant aluminum- and
vinyl-framed windows and doors
primarily serving the Florida
residential market. Products are
sold under the Estate, Sentinel, and
Targa brands. The deal marks the
largest acquisition in PGT’s 35-year
history.
With the acquisition, PGT enhances
its market position by gaining a
major competitor, diversifies and
broadens its product portfolio
with the addition of impactresistant doors, and expands
its manufacturing footprint and
capabilities. PGT’s larger scale
will enable the company to more
effectively compete against
national suppliers of storm
SOURCE: S&P Capital IQ, PitchBook, Equity Research, Company Filings, and public data.
7
Ply Gem CEO Gary Robinette in a
company statement.
The transaction follows the
2013 acquisitions of Canadian
manufacturers Mitten and
Gienow Windows and Doors.
Mitten produces vinyl siding
and accessories. Gienow
manufactures windows and doors
for the residential and commercial
construction markets in Canada
and the eastern United States.
“With [the Gienow] acquisition we
took the No. 2 and No. 3 window
and door manufacturers in western
Canada and combined them to
make a clear No. 1 and the No.
2 player in all of Canada,” said
Ply Gem CFO Shawn Poe, in an
interview with Plastics News.
Gienow was a former portfolio
company of VKR Holding, which
it acquired in 2009. Mitten was
acquired by Graham Partners in
2011.
protection systems, said PGT
President Jeff Jackson.
The acquisition underscores a
bullish outlook on a sustained
recovery of the Florida housing
market. “The acquisition of CGI
Windows & Doors is consistent with
our stated growth plan to acquire
revenue generating products that
leverage our core capabilities,” said
PGT CEO Rod Hershberger. “This is
an ideal acquisition for PGT, and it
will provide important synergies
while enhancing our leadership
position within the industry.”
CGI was a portfolio company of
Cortec Group, which it acquired in
2007.
Industrials Insider
Spotlight
Window of Opportunity
in Building Products
SELECTED M&A ACTIVITY IN WINDOWS AND DOORS
PRIVATE EQUITY INVESTMENT IN THE INDUSTRY
MAY 2015
2015 INVESTMENT
MAY 2015
2014 INVESTMENT
APRIL 2015
2014 INVESTMENT
SEPTEMBER 2014
2014 INVESTMENT
SEPTEMBER 2014
2013 INVESTMENT
AUGUST 2014
2012 INVESTMENT
AUGUST 2014
AUGUST 2014
2012 INVESTMENT
JULY 2014
2010 INVESTMENT
2010 INVESTMENT
JULY 2014
KENNER AND COMPANY
IWM ACQUISITION
JULY 2014
2010 INVESTMENT
2009 INVESTMENT
JUNE 2014
MARCH 2014
2008 INVESTMENT
SEPTEMBER 2013
2007 INVESTMENT
FEBRUARY 2013
NEW NORTH TRIM
JANUARY 2013
SOURCE: S&P Capital IQ, PitchBook, Equity Research, Company Filings, and public data.
8
Industrials Insider
Spotlight
Window of Opportunity
in Building Products
Castle Harlan
Partners IV L.P.
(CHPIV)
acquired
obtained
acquired by
Restructuring
Advisory
a subsidiary of
obtained exit financing
$37,000,000
Replacement
DIP Credit Facility
$30,000,000
Senior Secured
Credit Facility
provided by
provided by
Reorganized and Recapitalized
by an investment of
$30,000,000
Lumber & Building Supplies, Inc.
acquired by
provided by
an affiliate of
Cerberus Partners
/DIDUJH(UH÷OLdLPHQWR$ù
acquired by
acquired by
BGL Knows Windows Inside and Out
acquired
a portfolio company of
acquired by
GED Integrated Solutions is
a leading manufacturer of
fully integrated insulating
glass (IG) and window and
door production systems in
North America.
Edgetech’s patented
warm-edge insulating
glass spacer systems are
recognized as best-in class
for energy efficiency and
durability.
The company is the
innovation and market
share leader with the
largest installed base of IG
fabrication equipment in
the United States, holding
an estimated 49 percent
market share.
The company markets its
products to window and
door manufacturers
serving both the new
construction and
replacement markets
in North America and
internationally.
merged with
divested
acquired
to
acquired by
acquired
Astro Shapes is a leading
U.S. manufacturer of
extruded aluminum
products for use in the
residential and commercial
building and construction,
transportation, machinery
and equipment, consumer
durables, and industrial
markets. The company
also provides unmatched
finishing capabilities
through its electrostatic
painting line and
leading thermal barrier
technologies, including its
polyamide strip system, the
first of its kind in the United
States.
a portfolio company of
Empire Pacific Windows
manufactures vinyl
windows and patio doors
for the residential and
commercial construction
markets throughout Oregon,
Washington, California, and
Nevada.
acquired by
Financial
Restructuring
acquired
Admission to AIM
£135 million market capitalization
£94 million raise
acquired by
acquired by
a portfolio company of
acquired
a subsidiary of
acquired by
Kawada Industries USA
acquired by
acquired by
Pyramid LLC
9
Inpal
acquired by
Minority
Shareholders
Industrials Insider
Spotlight
Window of Opportunity
in Building Products
Barometer
800
600
Fannie Mae
400
Freddie Mac
200
0
2007
2008
2009
2010
2011
2012
2013
2014 2015P 2016P
Source: U.S. Census Bureau.
Total Home Sales
5.8
5.5
5.4
2013
2014
5.8
5.6
5.0
2007
4.6
4.7
2008
2009
4.5
4.6
2010
2011
2012
2015P
2016P
Source: Freddie Mac.
Interest Rates, Annual Averages
30-year Fixed
6.3%
6.0%
5.0%
4.9%
4.7%
4.5%
4.2%
4.0%
4.0%
3.8%
2016P
2015P
May-15
2014
2013
2012
2011
3.7%
2010
Dodge Data & Analytics, in its 2015 Construction Outlook,
forecasts 11 percent unit growth in single family housing and
15 percent dollar growth in 2015. Multifamily is forecasted
to grow 7 percent and 9 percent in units and dollars.
1,000
2009
The residential construction market gained ground in 2015
with total housing starts rising 20.2 percent to a SAAR of
1.135 million units in April—the highest level of production
since 2007—according to the NAHB. In May, total housing
starts increased 5.1 percent over 2014 levels to a SAAR of
1.036 million units.
1,200
2008
• Mortgage rates are at historical lows. Easing credit
conditions have driven mortgage rates down roughly
80 basis points from early 2014. Gradual rate increases
are anticipated in mid-2015 as the Fed increases its
target rate by ~50 basis points, according to economist
estimates.
1,400
2007
• Consumer optimism is high. The University of Michigan
Consumer Sentiment index averaged 94.6 during the
first six months of 2015—the highest level since 2004,
according to the Survey of Consumers.
1,600
Millions of units
• Unemployment is at the lowest level since May 2008.
The unemployment rate fell to 5.5 percent in May,
down from 6.3 percent the year prior.
Housing Starts
Total Housing Starts (in thousands)
Growth catalysts of improving employment and consumer
confidence and low interest rates are providing lift to the
housing market. Real estate development is returning to
historical levels.
Source: Freddie Mac.
10
Industrials Insider
Spotlight
Window of Opportunity
in Building Products
Repair and remodeling spending is expected to grow in the
coming years with increased demand for energy-efficient and
sustainable building products and materials and accessibility
improvements for seniors.
Positive trends in the Architectural Billings Index (ABI)
and improvements in public spending support continued
momentum in the commercial construction market.
Nonresidential construction is expected to see continued
growth from strong commercial, industrial, and institutional
demand. The American Institute of Architects (AIA) reports the
highest growth in institutional activity, evidenced in March by
ten consecutive months of positive ABI readings in the sector.
The March commercial ABI reading reflected the highest uptick
in billings of the last 18 months. Despite a dip in April, “The
fundamentals in the design and construction industry remain
very healthy,” indicated AIA Chief Economist Kermit Baker,
pointing to positive trends in new project inquiries and new
design contracts, reflective of strong underlying demand for
design activity.
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
Total Construcon
Residenal
Apr-2015
Jul-2014
Oct-2013
Jan-2013
Apr-2012
Jul-2011
Oct-2010
Jan-2010
Apr-2009
Oct-2007
Jul-2008
$0
Jan-2007
The remodeling market is rebounding. Rising consumer
confidence, appreciation in home values, and aging housing
stock are expected to fuel demand in the remodeling market,
which has outpaced the broader housing recovery according
to the Joint Center for Housing Studies at Harvard University
(JCHS). Spending levels rebounded to $300 billion in 2013,
with discretionary spending on large-ticket remodeling projects
seeing the first increase since 2005. JHCS predicts the industry
could see record-level spending in 2015.
Construction Spending
Nonresidenal
Source: U.S. Census Bureau.
Repair & Remodeling Spending
$350
U.S. Home Improvement & Repair Spending ($ in billions)
Barometer (continued)
$324
$300
$200
$298
$291
$280
$250
$281
$228
$214
$150
$100
$50
$0
2001
2003
2005
2007
2009
2011
2013
Source: Joint Center for Housing Studies of Harvard University.
Age of Owner-Occupied Housing Stock
The median age of a U.S. home was 35 years in 2011.
Dodge Data & Analytics, in its 2015 Construction Outlook,
forecasts 15 percent and 9 percent increases in commercial
and institutional building, respectively, in 2015. Robert Murray,
Chief Economist for Dodge Data & Analytics, commented,
“The construction expansion should become more broadbased in 2015, with support coming from more sectors than
was often the case in recent years.” He continued, “The
economic environment going forward carries several positives
that will help to further lift total construction starts. Financing
for construction projects is becoming more available,....
interest rates for the near term should stay low, and market
fundamentals (occupancies and rents) for commercial building
and multifamily housing continue to strengthen.”
11
85%
Older than 10 years
81%
81%
71%
Older than 20 years
67%
58%
41%
Older than 40 years
35%
27%
Housing stock in the U.S. is aging, with the share of owner-occupied
housing structures more than 40 years old ballooning to 41 percent in
2011 - up from only 27 percent in 1991.
Source: National Association of Home Builders.
2011
2001
1991
Industrials Insider
Spotlight
Window of Opportunity
in Building Products
Opportunity
Millennials vital to the building
products industry
Energy Efficient Windows and
Fenestration Systems
The nation is undergoing a seismic demographic shift
as Millennials overtake Boomers as the largest living
generation, according to the Pew Research Center (PRC).
Citing statistics from U.S. Census Bureau forecasts, PRC
reported that Millennials (ages 18 to 34) are projected to
number 75.3 million in 2015, surpassing the projected 74.9
million Boomers (ages 51 to 69). By 2025, the Millennial
generation is expected to be almost 7 percent larger than
the baby boomer generation at comparable ages. Wielding
massive purchasing power, Millennials are expected to
eclipse Baby Boomers in spending power by 2018 ($3.39
trillion) according to Wakefield Research.
Programs such as ENERGY STAR and Leadership in Energy
and Environmental Design (LEED) are encouraging energy
efficiency in homes. More stringent state building energy
codes have contributed to the rise of residential energy
efficiency, according to the U.S. Department of Energy,
which cited that more new homes are being constructed
to meet the targets of energy efficiency programs. Nearly
50 percent of all home buyers cite energy efficiency as
a primary consideration in home purchasing decisions,
reports the National Association of Realtors.
Realtor.com, in its 2015 Housing Forecast, predicts that
Millennials will account for 65 percent of first-time home
buyer sales in 2015, as a growing economy increases
employment opportunities and low interest rates entice
new buyers to the market. Millennials are expected to drive
two-thirds of household formations over the next five years.
Sustainability and healthy living
poised for growth
Sustainable home improvements will be one of the fastest
growing market segments, according to the Joint Center
for Housing Studies at Harvard University. Demand for
products that promote energy efficiency and healthy living,
particularly those addressing indoor air quality, water
conservation, or products made from rapidly renewable or
recycled materials, will continue to grow.
Motivated by tax incentives for energy efficiency, more
consumers are investing in high-performance windows to
realize energy savings and lower utility bills, with growing
acceptance spurring manufacturers to expand their
product lines.
Energy efficient windows are the predominant window
being installed today. ENERGY STAR market share was
at 59 percent nationally in 2008, according to the U.S.
Department of Energy ENERGY STAR Program Windows,
Doors, and Skylights Draft Criteria and Analysis, and close
to 90 percent in the replacement market.
Effective January 1, 2016, more stringent energy
performance criteria for windows will take effect, pursuant
to the ENERGY STAR Version 6.0 Residential Windows,
Doors, and Skylights Specification released by the U.S. EPA.
Participants in a March survey conducted by the American
Institute of Architects expect interest in sustainable
design to grow in the coming years, identifying energy
efficiency (85 percent of respondents), healthy buildings
(60 percent), water efficiency (60 percent), and renewable
energy (44 percent) among the top three priorities of
clients in five to ten years.
12
Industrials Insider
Spotlight
Window of Opportunity
in Building Products
Relative Valuation Trends
Residential-Focused Building Products Manufacturers
Commercial-Focused Building Products Manufacturers
16.0x
1.6x
16.0x
14.0x
1.4x
14.0x
12.0x
1.2x
12.0x
10.0x
1.0x
10.0x
8.0x
0.8x
8.0x
6.0x
0.6x
6.0x
4.0x
0.4x
4.0x
2.0x
0.2x
2.0x
0.0x
0.0x
0.0x
1.8x
1.6x
1.4x
1.2x
1.0x
0.8x
0.6x
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
EBITDA
7.4x
8.4x
7.2x
6.7x
6.2x
6.8x
7.6x
6.6x
5.7x
7.7x 10.0x 11.5x 9.4x
8.8x
8.4x 10.9x 11.2x 10.2x 9.1x
7.9x
9.2x 12.1x 10.2x 12.5x 13.8x 14.0x 12.2x 12.2x 11.3x 11.5x 10.5x 11.1x 12.7x
Revenue
1.0x
1.1x
0.9x
0.8x
0.7x
0.8x
0.8x
0.6x
0.5x
0.7x
0.9x
0.9x
0.9x
1.1x
0.9x
0.9x
1.0x
0.9x
1.1x
1.0x
0.8x
1.1x
1.2x
1.3x
1.4x
1.4x
1.4x
1.4x
1.4x
1.4x
1.4x
1.3x
1.5x
Building Products Distributors
0.4x
0.2x
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
EBITDA
9.1x
9.7x
8.6x
7.9x
7.3x
7.1x
6.5x
6.2x
5.7x
6.4x
8.9x
8.1x
9.5x
9.6x
9.4x 11.0x 11.3x 11.0x 8.9x 10.5x 11.1x 11.4x 10.8x 11.3x 12.4x 13.0x 15.1x 13.6x 14.4x 13.6x 12.3x 13.2x 15.0x
Revenue
1.2x
1.3x
1.2x
1.0x
0.9x
0.7x
0.7x
0.5x
0.5x
0.6x
0.9x
0.8x
1.0x
1.0x
0.9x
1.2x
1.0x
1.1x
0.9x
0.9x
1.1x
1.0x
1.1x
1.1x
1.3x
1.3x
1.3x
1.4x
1.4x
1.4x
1.3x
1.5x
0.0x
1.6x
Lumber and Wood Manufacturers
16.0x
14.0x
1.0x
18.0x
2.0x
0.9x
16.0x
1.8x
0.8x
1.6x
14.0x
12.0x
0.7x
1.4x
12.0x
10.0x
0.6x
1.2x
10.0x
8.0x
0.5x
1.0x
8.0x
0.4x
6.0x
0.8x
6.0x
0.3x
0.6x
4.0x
0.2x
2.0x
0.0x
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
4.0x
0.1x
2.0x
0.0x
0.0x
0.4x
0.2x
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
EBITDA
7.9x 10.3x 8.0x
7.4x
8.5x
7.6x
7.0x
6.3x
6.9x
6.8x
7.7x
7.7x 11.0x 9.7x
8.7x 10.4x 9.9x 11.1x 8.6x
9.1x 10.2x 10.3x 11.1x 11.0x 12.6x 13.3x 13.7x 13.8x 12.9x 13.3x 11.8x 13.0x 13.2x
EBITDA
6.6x
7.2x
6.1x
5.8x
7.7x
8.4x 10.4x 10.4x 12.4x 11.8x 10.6x 8.3x
4.3x 12.9x 8.8x 10.2x 10.0x 10.0x 11.8x 12.6x 13.4x 15.4x 14.2x 14.2x 13.4x 9.1x
8.2x
8.9x
8.8x 10.1x 11.3x 11.8x 11.3x
Revenue
0.5x
0.5x
0.5x
0.4x
0.5x
0.4x
0.4x
0.4x
0.5x
0.5x
0.5x
0.6x
Revenue
0.7x
0.8x
0.7x
0.7x
0.7x
0.7x
1.2x
1.3x
1.3x
1.3x
0.5x
0.4x
0.7x
0.6x
0.6x
0.6x
0.6x
0.5x
0.7x
0.7x
0.8x
0.8x
0.9x
0.9x
0.9x
0.8x
0.9x
0.8x
0.7x
0.7x
0.8x
0.8x
0.6x
0.5x
0.6x
1.0x
1.0x
1.1x
1.0x
1.1x
1.1x
1.0x
0.8x
0.9x
1.0x
1.1x
1.2x
1.6x
1.8x
1.3x
1.2x
1.2x
1.3x
0.0x
1.4x
Homebuilders
Aggregates and Cement Producers
2.5x
14.0x
30.0x
2.0x
1.8x
12.0x
25.0x
1.6x
2.0x
10.0x
1.4x
20.0x
1.2x
1.5x
8.0x
1.0x
15.0x
6.0x
0.8x
1.0x
10.0x
0.6x
4.0x
0.5x
0.4x
5.0x
2.0x
0.2x
0.0x
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
EBITDA
8.3x
8.5x
7.5x
6.8x
7.4x
7.7x
7.5x
6.2x
6.8x
7.5x
8.5x
9.2x
9.5x
9.2x
9.9x 11.0x 10.6x 9.6x
7.5x
8.0x
9.9x
9.7x 10.1x 10.6x 10.6x 10.3x 11.6x 12.0x 12.6x 11.9x 11.3x 11.3x 12.0x
Revenue
2.0x
2.0x
1.8x
1.9x
1.9x
1.9x
1.7x
1.4x
1.4x
1.7x
1.9x
1.9x
1.9x
1.9x
1.8x
1.4x
1.5x
1.7x
1.6x
1.8x
1.7x
1.7x
1.7x
1.7x
1.8x
1.7x
1.8x
BGL Building Products and Construction Materials indices defined on Pages 14 and 15.
SOURCE: S&P Capital IQ.
13
1.9x
2.0x
2.0x
1.9x
1.9x
2.0x
0.0x
0.0x
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
EBITDA
6.4x
8.5x 11.5x 9.5x 11.3x 13.3x 24.1x 11.3x 14.2x 15.2x 13.4x 13.6x 13.4x 11.5x 14.4x 11.6x 20.4x 14.8x 13.8x 14.2x 13.7x 16.1x 15.2x 17.2x 17.5x 20.0x 17.3x 16.4x 13.4x 13.9x 13.9x 15.3x 14.5x
Revenue
0.7x
0.7x
0.6x
0.6x
0.7x
0.6x
0.7x
0.6x
0.7x
0.8x
1.0x
1.1x
1.3x
1.0x
1.0x
1.1x
1.2x
1.3x
1.2x
1.3x
1.5x
1.7x
1.8x
1.7x
1.8x
1.6x
1.5x
1.5x
1.4x
1.4x
1.3x
1.4x
1.4x
0.0x
Industrials Insider
Spotlight
Window of Opportunity
in Building Products
Relative Valuation Trends
($ in millions, except per share data)
Company Name
Country
RESIDENTIAL-FOCUSED BUILDING PRODUCTS MANUFACTURERS
American Woodmark Corp.
United States
Armstrong World Industries, Inc.
United States
Gibraltar Industries, Inc.
United States
Griffon Corporation
United States
Headwaters Incorporated
United States
James Hardie Industries plc
Ireland
Masco Corporation
United States
Owens Corning
United States
PGT, Inc.
United States
Ply Gem Holdings, Inc
United States
Quanex Building Products Corporation
United States
Compagnie de Saint-Gobain S.A.
France
The Sherwin-Williams Company
United States
Simpson Manufacturing Co., Inc.
United States
Trex Co. Inc.
United States
Median
Mean
COMMERCIAL-FOCUSED BUILDING PRODUCTS MANUFACTURERS
AAON Inc.
United States
Kingspan Group plc
Ireland
Lennox International, Inc.
United States
NCI Building Systems Inc.
United States
USG Corporation
United States
Valmont Industries, Inc.
United States
Median
Mean
BUILDING PRODUCTS DISTRIBUTORS
Beacon Roofing Supply, Inc.
United States
Bluelinx Holdings Inc.
United States
Builders FirstSource, Inc.
United States
CanWel Building Materials Group Ltd.
Canada
Huttig Building Products Inc.
United States
Lowe's Companies Inc.
United States
Lumber Liquidators Holdings, Inc.
United States
The Home Depot, Inc.
United States
Watsco Inc.
United States
Wolseley plc
Switzerland
Median
Mean
Ticker
Current
% of
Stock Price (1) 52W High
Market
Capitalization (2)
Enterprise TTM Enterprise Value / Total Debt/
Value (3) Revenue
EBITDA
EBITDA
TTM
Revenue
TTM Margins
Gross EBITDA
NasdaqGS:AMWD
NYSE:AWI
NasdaqGS:ROCK
NYSE:GFF
NYSE:HW
ASX:JHX
NYSE:MAS
NYSE:OC
NasdaqGM:PGTI
NYSE:PGEM
NYSE:NX
ENXTPA:SGO
NYSE:SHW
NYSE:SSD
NYSE:TREX
56.69
54.75
20.90
16.03
19.48
17.95
27.71
40.08
15.15
12.26
20.12
40.63
281.99
33.93
51.97
$27.71
$47.31
97.6%
91.4%
97.8%
89.7%
95.9%
99.4%
97.6%
87.7%
98.7%
82.7%
92.3%
92.3%
95.8%
88.8%
90.0%
92.3%
93.2%
$902
3,026
647
767
1,437
8,003
9,632
4,729
723
833
681
22,965
26,278
1,675
1,667
$1,667
$5,598
$740
3,943
742
1,590
1,932
8,454
11,971
6,982
868
1,865
622
30,591
28,745
1,441
1,749
$1,865
$6,816
0.9x
1.6x
0.9x
0.8x
2.3x
3.9x
1.4x
1.3x
2.6x
1.1x
1.0x
0.7x
2.6x
1.9x
4.2x
1.4x
1.8x
10.7x
10.9x
11.6x
9.8x
13.8x
17.1x
11.8x
9.9x
16.8x
15.3x
12.9x
7.7x
19.1x
11.4x
19.2x
11.8x
13.2x
0.3x
3.5x
3.3x
5.4x
4.0x
1.1x
3.9x
3.3x
3.8x
8.6x
0.0x
2.7x
1.7x
0.0x
0.9x
3.3x
2.8x
$825 18.5%
8.4%
2,477 24.1% 12.1%
872 16.2%
7.3%
2,033 23.4%
8.0%
849 29.4% 16.6%
1,657 34.9% 22.7%
8,574 28.4% 11.8%
5,205 18.4% 13.5%
339 30.7% 15.2%
1,673 19.6%
7.3%
604 21.1%
8.0%
41,054 24.3%
9.6%
11,213 46.5% 13.4%
760 45.4% 16.6%
412 36.5% 22.1%
$1,657 24.3% 12.1%
$5,236 27.8% 12.8%
NasdaqGS:AAON
ISE:KRX
NYSE:LII
NYSE:NCS
NYSE:USG
NYSE:VMI
$23.35
20.94
110.35
15.72
27.20
122.36
$25.28
$53.32
92.8%
99.0%
93.2%
72.5%
86.7%
75.0%
89.7%
86.5%
$1,264
3,692
4,965
1,160
3,954
2,882
$3,287
$2,986
$1,221
3,852
6,015
1,601
5,947
3,391
$3,622
$3,671
3.4x
2.0x
1.8x
1.1x
1.6x
1.1x
1.7x
1.8x
14.8x
20.4x
15.1x
20.4x
11.8x
8.3x
13.3x
12.5x
0.0x
1.8x
2.8x
5.9x
4.8x
1.9x
1.9x
2.3x
$357 30.3% 23.2%
1,891 27.3% 10.0%
3,358 26.7% 11.4%
1,437 22.3%
5.5%
3,783 17.6% 12.2%
3,042 25.2% 13.5%
$2,467 26.0% 11.8%
$2,311 24.9% 12.6%
NasdaqGS:BECN
NYSE:BXC
NasdaqGS:BLDR
TSX:CWX
NasdaqCM:HBP
NYSE:LOW
NYSE:LL
NYSE: HD
NYSE:WSO
LSE:WOS
31.65
0.98
13.69
5.90
3.10
69.99
20.71
112.43
123.92
41.52
$26.18
$42.39
92.2%
66.7%
97.4%
90.1%
56.9%
91.8%
26.8%
95.3%
94.5%
97.9%
92.0%
81.0%
$1,571
88
1,359
170
77
65,279
561
146,044
4,035
10,808
$1,465
$22,999
$1,774
551
1,731
369
154
75,110
537
160,089
4,605
12,067
$1,752
$25,699
0.7x
0.3x
1.1x
0.5x
0.2x
1.3x
0.5x
1.9x
1.2x
0.9x
0.8x
0.9x
13.6x
24.5x
30.3x
12.8x
12.8x
11.4x
5.5x
12.8x
13.7x
13.5x
12.8x
12.0x
1.7x
20.9x
7.2x
6.9x
6.4x
1.7x
0.2x
1.3x
1.0x
1.8x
1.5x
1.3x
$2,399 22.9%
1,990 11.4%
1,629 22.5%
769 11.8%
636 19.6%
56,949 34.8%
1,061 38.5%
84,380 34.8%
3,991 24.4%
13,505 28.0%
$2,195 23.6%
$16,731 24.9%
5.4%
1.1%
3.5%
3.8%
1.9%
11.5%
9.2%
14.9%
8.4%
6.6%
6.0%
6.6%
NOTE: Figures in bold and italic type were excluded from median and mean calculation.
(1) As of 6/19/2015.
(2) Market Capitalization is the aggregate value of a firm's outstanding common stock.
(3) Enterprise Value is the total value of a firm (including all debt and equity).
SOURCE: S&P Capital IQ.
14
Industrials Insider
Spotlight
Window of Opportunity
in Building Products
Relative Valuation Trends
($ in millions, except per share data)
Company Name
LUMBER AND WOOD MANUFACTURERS
Canfor Corp.
Deltic Timber Corporation
Louisiana-Pacific Corp.
Norbord, Inc.
Universal Forest Products Inc.
West Fraser Timber Co. Ltd.
Weyerhaeuser Co.
Median
Mean
AGGREGATES AND CEMENT PRODUCERS
Boral Limited
CEMEX, S.A.B. de C.V.
CRH plc
Eagle Materials Inc.
Grupo Cementos de Chihuahua SAB de CV
HeidelbergCement AG
Holcim Ltd.
Lafarge S.A.
Martin Marietta Materials Inc.
Titan Cement Company S.A.
Vulcan Materials Company
Wienerberger AG
Median
Mean
HOME BUILDERS
Beazer Homes USA Inc.
Cavco Industries, Inc.
DR Horton Inc.
Hovnanian Enterprises Inc.
KB Home
Lennar Corp.
M/I Homes, Inc.
MDC Holdings Inc.
Meritage Homes Corporation
NVR, Inc.
PulteGroup, Inc.
Ryland Group Inc.
Standard Pacific Corp.
Toll Brothers Inc.
William Lyon Homes
Median
Mean
Market
Capitalization (2)
Enterprise TTM Enterprise Value /
Value (3) Revenue
EBITDA
Total Debt/
EBITDA
TTM
Revenue
TTM Margins
Gross EBITDA
Ticker
Canada
United States
United States
Canada
United States
Canada
United States
TSX:CFP
NYSE:DEL
NYSE:LPX
TSX:NBD
NasdaqGS:UFPI
TSX:WFT
NYSE:WY
26.19
67.91
17.42
28.14
53.54
67.71
32.57
$32.57
$41.93
82.0%
97.3%
93.5%
96.3%
92.2%
86.2%
87.9%
92.2%
90.8%
$3,514
857
2,481
2,402
1,070
5,656
16,863
$2,481
$4,692
$4,023
1,055
2,773
3,004
1,270
6,186
21,121
$3,004
$5,633
1.1x
4.8x
1.4x
2.1x
0.5x
1.5x
2.9x
1.5x
2.0x
7.8x
22.3x
266.7x
33.2x
9.2x
10.3x
12.5x
9.8x
10.0x
0.8x
4.3x
128.8x
6.7x
1.5x
0.9x
3.2x
2.4x
2.9x
$3,536
220
1,962
1,154
2,739
4,061
7,388
$2,739
$3,009
33.6%
29.7%
8.4%
7.3%
12.4%
34.0%
21.7%
21.7%
21.0%
14.7%
21.4%
0.3%
6.2%
5.0%
14.8%
22.8%
14.7%
12.2%
Australia
Mexico
Ireland
United States
Mexico
Germany
Switzerland
France
United States
Greece
United States
Austria
ASX: BLD
BMV:CEMEX CPO
ISE:CRG
NYSE:EXP
bmv:gcc *
DB:HEI
SWX:HOLN
ENXTPA:LG
NYSE:MLM
ATSE:TITK
NYSE:VMC
WBAG:WIE
$6.02
$14.75
$26.20
$78.65
$45.49
$71.27
$69.20
$59.13
$148.25
$19.55
$89.29
$14.17
$52.31
$53.50
90.4%
86.4%
97.7%
74.4%
99.4%
92.4%
84.8%
88.0%
95.0%
77.2%
95.9%
92.8%
91.4%
89.6%
$4,612
188,156
21,494
3,951
15,127
13,392
22,550
17,021
10,004
1,525
11,845
1,657
$12,619
$25,945
$5,499
439,340
24,141
4,456
20,871
20,794
34,875
28,835
11,530
2,311
13,730
2,514
$17,262
$50,741
1.2x
2.1x
1.3x
4.2x
2.0x
1.6x
1.8x
2.2x
3.9x
1.9x
4.5x
0.9x
2.0x
2.3x
11.5x
11.3x
14.3x
12.8x
10.0x
8.9x
9.1x
10.6x
17.8x
13.8x
22.1x
8.6x
11.3x
11.7x
3.0x
6.4x
3.6x
1.7x
3.3x
3.6x
3.1x
4.5x
2.4x
4.9x
3.7x
3.6x
3.6x
3.7x
$4,452
213,791
18,912
1,066
10,358
12,938
18,994
12,989
2,931
1,190
3,051
2,862
$7,405
$25,295
27.8%
32.7%
29.3%
23.8%
22.8%
58.3%
44.8%
23.6%
19.9%
24.9%
20.7%
30.1%
26.4%
29.9%
9.2%
18.2%
8.6%
28.4%
20.1%
16.4%
19.5%
20.3%
22.1%
13.8%
20.4%
10.3%
18.9%
17.3%
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
NYSE:BZH
NasdaqGS:CVCO
NYSE:DHI
NYSE:HOV
NYSE:KBH
NYSE:LEN
NYSE:MHO
NYSE:MDC
NYSE:MTH
NYSE:NVR
NYSE:PHM
NYSE:RYL
NYSE:SPF
NYSE:TOL
NYSE:WLH
$19.25
$74.17
$27.29
$2.71
$16.37
$48.64
$24.45
$30.08
$45.39
$1,366.71
$19.99
$46.03
$8.88
$37.71
$24.96
$25.87
$30.37
90.2%
84.4%
93.2%
51.0%
86.2%
90.6%
96.7%
97.5%
91.0%
98.5%
85.6%
92.7%
96.6%
93.5%
79.5%
90.4%
86.2%
$528
658
10,005
397
1,505
9,708
600
1,469
1,798
5,556
7,288
2,156
2,445
6,641
785
$1,064
$3,109
$1,917
621
13,288
2,441
3,885
15,742
1,160
2,126
2,675
5,634
8,177
3,190
4,608
9,507
1,774
$2,283
$5,147
1.3x
1.1x
1.4x
1.1x
1.5x
2.0x
0.9x
1.2x
1.2x
1.2x
1.4x
1.2x
1.9x
2.3x
1.9x
1.3x
1.3x
34.0x
14.7x
13.3x
22.4x
24.1x
14.7x
12.1x
20.8x
13.0x
11.1x
11.3x
10.4x
13.4x
17.9x
22.5x
14.0x
15.8x
30.8x
1.6x
3.9x
21.3x
18.9x
6.6x
5.7x
8.8x
4.7x
1.2x
2.7x
4.5x
6.5x
6.6x
12.6x
4.7x
4.8x
$1,466
567
9,320
2,164
2,588
8,061
1,243
1,755
2,291
4,598
5,837
2,643
2,445
4,114
944
$1,960
$3,396
16.9%
22.3%
20.3%
17.1%
17.4%
23.1%
21.0%
17.3%
20.7%
18.6%
23.4%
21.7%
25.5%
22.7%
19.9%
18.9%
19.4%
3.4%
7.5%
10.7%
4.7%
5.8%
12.1%
7.6%
5.8%
9.0%
11.0%
12.3%
11.6%
14.1%
12.5%
8.4%
6.6%
7.2%
NOTE: Figures in bold and italic type were excluded from median and mean calculation.
(1) As of 6/19/2015.
(2) Market Capitalization is the aggregate value of a firm's outstanding common stock.
(3) Enterprise Value is the total value of a firm (including all debt and equity).
SOURCE: S&P Capital IQ.
15
Current
% of
Stock Price (1) 52W High
Country
Industrials Insider
Spotlight
Window of Opportunity
in Building Products
Sector Performance
By Sector
270%
228%
220%
170%
127%
Returns
123%
87%
80%
66%
70%
126%
114%
120%
69%
63%
68%
39%
20%
11%
9%
5%
7%
3%
-8%
Commercial-Focused Building
Products
Building Products Distributors Lumber and Wood Manufacturers
YTD
1 Year
3 Year
8%
10%
-10%
-30%
Residential-Focused Building
Products
21%
13%
7%
Aggregates and Cement
Producers
Home Builders
5Y
Overall Market
100%
90%
80%
73%
Returns
60%
55%
40%
40%
20%
8%
6%
3%
1%
0%
-20%
S&P 500
DJIA
YTD
1 Year
3 Year
5Y
Source: S&P Capital IQ.
As of 6/19/2015.
16
Industrials Insider
Overall M&A Activity
Mergers & Acquisitions Activity
Private Equity Transaction Activity*
Middle Market M&A Activity
$70
73
60
328
355
283
$40
$30
233
255
49
60
46
227
248
286
231
250
232
217
161
192
199
208
147
$50
$20
161
50
307
39
188
164
235
214
53
176
42
211
54
154
163
137
160
63
68
226
61
55
230
204
168
134
120
166
161 42
234
145
122
141
111 35
197
131
96
100
32
40
43
58
207
233
148
132
145
107
$60
$10
2,500
2,000
1,500
1,000
500
$0
0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
0
114
113 19
58 91 19
97
120 26
191
36
268
222
211
58
63
63
67
63
62
240
66
59
219
214
207
141
156
100
119
200
207
300
148
125
151
106
400
65
500
82
79
69
600
3,000
Number of Transactions
$80
700
70
800
Transaction Value ($ in billions)
Number of Transactions
Transaction Count by Deal Size
2006
2007
2008
2009
$25M-$50M
2010
2011
$50M-$250M
2012
2013
$250M-$500M
Based on announced deals, where the primary location of the target is in the United States.
Middle market enterprise values between $25 million and $500 million.
2014
2006
‘15
2007
Under $25M
2008
2009
$25M-$100M
2010
2011
$100M-$500M
2012
2013
$500M-$1B
2014
2015*
$1B-$2.5B
$2.5B+
Transaction Value
*Buyout activity only
2015 data of 3/31/2015.
SOURCE: S&P Capital IQ.
SOURCE: PitchBook.
Trends in Valuation
Transactions with Financial Buyers
<$250 million
$250-$499 million
2013
2014
2006
2015
2007
7.7x
7.7x
7.4x
$250-$499 million
2012
2013
2014
2015
$500 million+
*NA: Data not reported due to limited number of observations for period.
SOURCE: Standard & Poors LCD.
8.7x
8.7x
9.1x
8.0x
2011
9.5x
9.8x
9.9x
2010
6.3x
8.0x
8.5x
6.6x
2009
<$250 million
$500 million+
*NA: Data not reported due to limited number of observations for period.
2008
NA*
2012
NA*
2011
7.5x
8.2x
NA*
NA*
6.5x
5.0x
2010
NA*
2009
9.4x
9.9x
8.3x
8.5x
8.1x
8.5x
EBITDA Multiple
9.6x
8.8x
8.4x
7.7x
9.2x
9.7x
9.5x
7.6x
8.2x
8.0x
7.6x
10.2x
2008
NA*
2007
8.0x
6.0x
5.0x
2006
9.0x
7.0x
NA*
6.0x
10.0x
7.2x
6.8x
7.0x
8.4x
8.0x
7.1x
9.0x
9.4x
9.1x
10.0x
10.0x
8.7x
8.7x
9.1x
11.0x
8.6x
8.9x
8.5x
11.0x
9.5x
9.7x
12.0x
9.8x
12.0x
8.2x
8.7x
EBITDA Multiple
Transactions with Strategic Buyers
SOURCE: Standard & Poors LCD.
Acquisition Financing Trends
Total Leverage
Equity Contribution
6.0x
55%
5.4x
4.8x
4.0x
4.1x
4.1x
4.3x
4.5x
4.7x
4.7x
4.8x
3.6x
3.0x
2.0x
1.0x
50%
Equity Contribution (%)
Total Debt to EBITDA
5.0x
51%
45%
47%
46%
43%
40%
35%
41%
41%
40%
38%
37%
35%
30%
0.0x
25%
2006
2007
2008
2009
2010
2011
Middle market enterprise values between $25 million and $500 million.
17
2012
2013
2014
LTM
2015
SOURCE: Standard & Poors LCD.
2006
2007
2008
2009
2010
2011
Middle market enterprise values between $25 million and $500 million.
2012
2013
2014
LTM
2015
SOURCE: Standard & Poors LCD.
Global Industrials Practice
Precision Manufacturing
Materials & Inputs
• Aerospace and Defense Products • Motors, Drives, and Gears
• Automation and Controls
• Automotive and Heavy
Truck Products
• Building Products
• Contract Manufacturing
• Plastic Injection, Blow, and
Compression Molding
• Rubber Compounding and
Molding
• Testing, Measuring, and
Sensing Equipment
• Aggregates, Minerals,
and Sands
• Ceramics
• Coatings and Lubricants
• Construction Materials
• Engineered Plastics
and Rubber
• Specialty Chemicals
• Specialty Metals
Capital Goods
Industrial Services
•
•
•
•
•
• Design and Engineering
Food Processing Machinery
Machine Tools
Material Handling Equipment
Packaging Machinery
Power Generation and
Management Equipment
• Equipment Rental
• Infrastructure
Installation, Repair, and
Preventive & Predictive
Maintenance
• Rebuild and
Remanufacturing
• Sanitation and Hygiene
• Test and Measurement
• Transportation, Logistics,
and Distribution
Who We Are
Leading Independent Firm
• Independent investment banking
advisory firm focused on the middle
market
• Senior bankers with significant
experience and tenure; partners
average over 20 years of experience
Comprehensive Capabilities
M&A ADVISORY
PRIVATE PLACEMENTS
Sell-Side Advisory
All Tranches of
Acquisitions & Divestitures
Debt & Equity Capital for:
Public & Private Mergers
Growth
Special Committee Advice
Acquisitions
Strategic Partnerships & Joint Ventures
Recapitalizations
Fairness Opinions & Fair Value Opinions
Dividends
FINANCIAL ADVISORY
RESEARCH
• Offices in Chicago and Cleveland
• Founding member and exclusive U.S.
partner of Global M&A Partners, Ltd.,
the world’s leading partnership of
investment banking firms focusing on
middle market transactions
General Financial & Strategic Advice
Primary Research
Balance Sheet
Industry Benchmarking
Restructurings
Operating Advisor Network
Sales of Non-Core Assets or Businesses
White Papers
§363 Auctions
Industry Surveys
• Deep industry experience across
core sectors of focus, including:
Consumer Products & Retail Services,
Environmental & Energy Services,
Healthcare & Life Sciences, Human
Capital Management Outsourcing,
Industrials, Metals & Metals Processing,
Plastics & Packaging, and Real Estate
For questions
about content
and circulation,
please contact
editor, Rebecca
Dickenscheidt, at
rdickenscheidt@
bglco.com
or 312-513-7476.
The information contained in this publication was derived from proprietary research conducted by a division or owned or affiliated entity of Brown Gibbons Lang
& Company LLC. Any projections, estimates or other forward-looking statements contained in this publication involve numerous and significant subjective assumptions
and are subject to risks, contingencies, and uncertainties that are outside of our control, which could and likely will cause actual results to differ materially. We do not
expect to, and assume no obligation to update or otherwise revise this publication or any information contained herein. Neither Brown Gibbons Lang & Company
LLC, nor any of its officers, directors, employees, affiliates, agents or representatives makes any representation or warranty, expressed or implied, as to the accuracy,
completeness or fitness of any information contained in this publication, and no legal liability is assumed or is to be implied against any of the aforementioned with
respect thereto. This publication does not constitute the giving of investment advice, nor a part of any advice on investment decisions and nothing in this publication is intended to be a recommendation of a specific security or company, nor is any of the information contained herein intended to constitute an analysis of any
company or security reasonably sufficient to form the basis for any investment decision. Brown Gibbons Lang & Company LLC, its affiliates and their officers, directors, employees or affiliates, or members of their families, may have a beneficial interest in the securities of a specific company mentioned in this publication and may
purchase or sell such securities in the open market or otherwise. Nothing contained in this publication constitutes an offer to buy or sell or the solicitation of an offer
to buy or sell any security.