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The BGL Building Products Insider is published by Brown Gibbons Lang & Company, a leading independent investment bank
serving middle market companies throughout the U.S. and internationally.
Insider
Building Products
Optimism Fuels M&A Page 4
Investor interest in the Building Products industry is continuing, with
market indicators pointing to strengthening fundamentals against a
backdrop of economic growth, improving employment, and rising
consumer confidence.
Renewed optimism in the economy is fueling appetite, with acquisition
growth a primary strategy in value creation, driving an active M&A
market.
May 2017Brown Gibbons Lang & Company
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Environmental Services Insider
M&A and Capital Markets Activity• Building Products M&A reached a record level in 2016, with activity
signaling broad investor appetite across all industry subsectors. Boral
Limited’s announced acquisition of Headwaters headlined deal activity,
underscoring continuing strong interest from international buyers in U.S.
assets. Melrose Industries (Nortek), dormakaba (Stanley Black & Decker
assets, Mesker Openings), and aluplast (Chelsea Building Products) also
participated in cross-border deals. In Materials, Cemex accelerated its
divestiture activity with Eagle Materials, GCC, and Quikrete picking up
strategic assets. Quikrete also made headlines with Contech Engineered
Solutions, ramping up its position in the infrastructure market.
• Private equity remains active, with sponsors seeking new platforms and
add-ons for existing investments. American Securities (Henry Company),
Blue Wolf Capital Partners (Novo Building Products), Graycliff Partners
(Oberfields), Madison Dearborn Partners (U.S. LUMBER), and Sun Capital
Partners (Arrow Tru-Line) were among the announced platforms. Add-on
activity included buys from Audax Private Equity (Fomo Products) and
Arsenal Capital Partners (Covestro assets), among others, while private
equity-backed distribution platforms of Kelso & Company (U.S. LBM
Holdings) and The Sterling Group (Construction Supply Holdings) were
acquisitive.
• The capital markets environment remains robust evidenced by rising
public equity valuations, plentiful debt and equity capital, and valuation
multiple expansion. M&A activity is expected to increase in 2017
supported by availability of capital, the expectation of growth, lower
taxes, and potential regulatory changes. In 2016, middle market M&A
activity1 was down 9.0 percent year-over-year, with a corresponding
5.1 percent decrease in value. Transaction activity is off to a slower start in
2017 with first quarter deal volume and value down 8.8 percent and
11.1 percent, respectively, from the year-ago period.
• 2016 marked an active year for middle market loan fund raising amid
growing institutional interest in private credit. For borrowers, strong
liquidity should translate into ample leverage and favorable terms for the
foreseeable future. Standard & Poors Leveraged Commentary & Data
(S&P LCD) reported total leverage of 4.7x for the middle market1
(enterprise values of $25 million to $500 million) in March 2017.
• In March 2017, median EBITDA multiples for strategic and financial buyers
were 7.0x and 8.3x, respectively, on transactions valued less than
$250 million, and 9.2x and 7.9x on transactions valued between
$250 and $500 million, according to S&P LCD.
1 Middle market defined as enterprise values between $25 million and $500 million.
2
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your company, please contact:
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Andrew K. Petryk Managing Director & PrincipalHead: [email protected]
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Public Equity Markets• Broader market indices have gained traction in recent weeks on strong
corporate earnings and anticipated tax reform. In early March, the Dow
Jones Industrial Average (DJIA) soared to an all-time high—surpassing
21,000—fueled by expectations of pro-business policy changes that will
boost the economy.
• Building products stocks have rallied on positive secular trends with
composite indices outperforming the broader market. Home Builders and
Distributors are leading with year-to-date returns of 18.2 percent and
16.0 percent, respectively, as compared to a 5.6 percent increase in
the S&P 500 index. Manufacturers are also showing strong gains, with
Residential and Nonresidential Building Products Manufacturers posting
15.7 percent and 9.8 percent returns, respectively.
*As of April 28, 2017.
Operating Highlights• Market indicators point to strengthening industry fundamentals against a
backdrop of improving employment and consumer confidence. Housing
demand is rising, evidenced by positive trends in housing starts and new
and existing home sales, with pent-up demand resulting from household
formations, rising home values, and low existing home inventory among
the catalysts expected to sustain growth. Continued low interest rates
should serve to stimulate demand.
• Continued gains in nonresidential construction spending are anticipated
with increased infrastructure investment prolonging the current growth
cycle.
3
Building Products Insider
Market Update
4
Positive secular trends in the construction and remodeling
markets are driving strong performance in building
products companies. Investor sentiment remains optimistic,
buoyed by expectations of sustained economic growth,
with investment activity continuing at a brisk pace as
acquisitions drive value creation.
Residential Construction
Housing Starts
New housing starts decreased in March 2017 to a SAAR of
1,215,000, down 6.8 percent from February, but finished
9.2 percent higher than the prior-year reading. Single-family
starts decreased 6.2 percent to 821,000. U.S. housing starts
climbed to the highest level in nearly a decade in February.
Despite strong momentum, residential activity remains
significantly below prerecession levels, suggesting room for
continued growth. Housing starts have remained above one
million units since April 2015 (24 consecutive months), which
compares to the last peak when annual starts soared above
two million units, and a historical average of 1.5 million units.
Residential construction spending is currently 74 percent of
prerecession levels.
According to the latest estimates published in February 2017,
the National Association of Home Builders (NAHB) forecasts
new housing starts for 2017 and 2018 of 1,242,000 and
1,332,000, representing 5.6 percent and 7.3 percent increases,
respectively, over a 2016 level of 1,176,000.
Builder Confidence
Home builder confidence remains strong, registering a 68 on
the NAHB/Wells Fargo Housing Market Index (HMI) in April,
which is down modestly from 71 in March. The March reading
marked a 12-year high—the highest level since June 2005—
according to the NAHB.
Repair & Remodeling
Improving home values have spurred an increase in
remodeling expenditures. The Joint Center for Housing
Studies (JCHS) at Harvard University reported four quarters
of consecutive gains in home improvement spending in 2016,
ticking up to 6.8 percent in 4Q16. Repair and remodeling is
projected to grow as homes built in the prior market peak
from 2004 to 2007 come into their first repair and remodeling
cycle. The JCHS is forecasting quarterly growth in the
7.0 percent range in 2017.
Home Values are Rising
Consumer confidence is high, supported by a 5.8 percent rise
over the past 12 months in the Standard & Poor’s CoreLogic
Case–Shiller National Composite Home Price Index. The
February increase marks 13 consecutive months of expansion.
New and Existing Home Sales Remain Strong
New home sales increased to 621,000 units in March 2017—up
5.8 percent from 587,000 in February and 15.6 percent year-
over-year (537,000)—marking the highest volume since 2008.
Existing home sales increased to 5.71 million in March 2017—
up from 5.47 million in February—the fastest pace in a decade
reported the National Association of Realtors (NAR). Existing
home inventory stood at a 3.8-month supply in March,
unchanged from February. Unsold inventory fell to 3.5 months
in January 2017, which was the lowest level since 1999. The
NAR is forecasting 2.0 percent growth in 2017.
Nonresidential Construction
Nonresidential construction spending remained unchanged at
$701.9 billion in February, reported Associated Builders and
Contractors. Spending levels have remained above the
$700 billion threshold for seven consecutive months.
Nonresidential spending of $708.2 billion in December 2016
increased 4.6 percent over the previous year.
In its semiannual Consensus Construction Forecast, the
American Institute of Architects projected a 5.6 percent
increase in the nonresidential sector in 2017 and 4.9 percent
growth in 2018.
Dodge Data & Analytics, in its annual Executive Conference
held last October, delivered a positive outlook for
construction activity, highlighting job growth, low interest
rates, low inflation, and infrastructure funding among the key
drivers for increased spending, reported Construction Dive. In
its 2017 Construction Outlook, Dodge forecasted construction
starts activity to increase to $713 billion in 2017, representing
a 5 percent increase from $676 billion in 2016. The biggest
gains are expected in single-family housing and institutional
buildings.
The U.S. is “entering a more mature phase of expansion,”
Chief Economist Robert Murray told conference attendees,
forecasting moderate growth in construction activity into
Building Products Insider
Market Update
5
0
500
1,000
1,500
2,000
2,500
1959 1966 1973 1980 1987 1994 2001 2008 2015
(in T
hous
ands
)
Market Indicators
New Housing Starts - Single and Multifamily New Housing Starts - Annual Averages
Value of Construction Put in Place 30-Year Mortgage Rate
Recessionary Period
Long-term Average
New Home Sales Existing Home Sales and Months Supply
National S&P CoreLogic / Case-Shiller Index Repair & Remodeling
$252.5$256.6
$260.9$264.4 $267.0
$270.8$274.7
$278.0 $280.0$285.9
$291.9$297.0
$300.4$306.2
$312.3$317.4 $318.6
6.2% 6.1% 6.0% 5.9% 5.7% 5.5% 5.3% 5.1%4.8%
5.6%
6.3%6.8%
7.3% 7.1% 7.0% 6.9%
6.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
$225
$250
$275
$300
$325
$350
$375
$400
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
2014 2015 2016 2017P 2018P
Rate of Change(In B
illio
ns)
Repair & Remodeling Expenditures Four-Quarter Moving Totals Four-Quarter Moving Rate of Change
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
Jun-
05
Jan-
07
Oct
-08
Jun-
10
Feb-
12
Oct
-13
Jun-
15
Feb-
17
(In T
hous
ands
)
Total Construc�on Total Residen�al Total Nonresiden�al
0%
2%
4%
6%
8%
10%
Jan-
05
Jul-0
6
Jan-
08
Jul-0
9
Feb-
11
Aug-
12
Feb-
14
Sep-
15
Mar
-17
0
500
1,000
1,500
2,000
2,500
Jan
-05
Jul-
06
Jan
-08
Au
g-0
9
Feb
-11
Au
g-1
2
Mar
-14
Se
p-1
5
Mar
-17
(In
Th
ou
san
ds)
Total In Structures with 1 Unit In Structures with 5 Units or More
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Jan-
10
Mar
-11
May
-12
Aug
-13
Oct
-14
Dec
-15
Mar
-17
Months of Su
pp
ly (In
Thou
sand
s)
0
200
400
600
800
1,000
1,200
1,400
1,600
Jan-
05
Jul-0
6
Jan-
08
Jul-0
9
Feb-
11
Aug-
12
Feb-
14
Aug-
15
Mar
-17
(In T
hous
ands
)
100
120
140
160
180
200
220
Jan-
07
Jun-
08
Nov
-09
May
-11
Oct
-12
Apr-
14
Sep-
15
Feb-
17
Building Products Insider
Market Update
Infrastructure Funding Gap
Source: 2016 Failure to Act, ASCE.
By 2025, the cumulative infrastructure “funding gap” is projected to swell to more than $2.0 trillion.
$0 $500 $1,000 $1,500 $2,000 $2,500
Schools
Rail
Public Parks & Recreation
Levees
Hazardous & Solid Waste
Dams
Inland Waterways & Marine Ports
Airports
Electricity
Water/Wastewater Infrastructure
Surface Transportation
Schools RailPublic Parks &
RecreationLevees
Hazardous &Solid Waste
DamsInland
Waterways &Marine Ports
Airports ElectricityWater/Waste
waterInfrastructure
SurfaceTransportation
Estimated Funding $490 $125 $12 $10 $4 $6 $22 $115 $757 $45 $941
Funding Gap $380 $29 $102 $70 $3 $39 $15 $42 $177 $105 $1,101
$4,590 $4,590
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$2,526
$2,064
Total Needs
Infrastructure Systems, 2016-2025
Total Needs
Total Needs
$2,042
$150
$934
$157
$114
$154
$870
$37
$45
$80
$7
$ in billions
$ in billions
$4,590
Funding Gap
EstimatedFunding
$ in billions
2018. Murray indicated that the construction market lagged
the recovery in the broader economy—pegging 2012 for the
rebound—suggesting room for continued growth, reported
Construction Dive. “This is a very measured upturn. It’s
not a boom,” Murray said. “Construction spending can be
expected to see moderate gains through 2017 and beyond.”
Dodge is projecting the industry to cycle sometime in 2018
or 2019, emphasizing it will be a more gradual decline. “We
don’t have that boom and bust situation [that was] present
in the past decade. When the slowdown ultimately comes,
it’s not going to be a repeat of what we experienced in
2009,” Murray observed.
Infrastructure Opportunity
Infrastructure investment in the U.S. is not making the
grade, with the nation’s critical infrastructure systems
earning a D+ in the Infrastructure Report Card released
by the American Society of Civil Engineers (ASCE)
this January. The study is performed every four years
and evaluates the condition of national infrastructure
categories to assess needs and investment. The 2017
study identified a material funding gap to remedy needed
improvements, which the ASCE estimated at more than
$2 trillion through 2025, of which surface transportation
accounted for the largest share at more than $1 trillion.
The National Association of Manufacturers, in a report
titled Building to Win, outlined an analysis of funding
requirements to revitalize U.S. infrastructure over the next
10 years, estimating the gap at $1.1 trillion. “Infrastructure
is absolutely critical to the ability of manufacturers to
compete and succeed. From a position of economic
strength, I don’t think we have the option of failing
to address our infrastructure challenges,” remarked
Jay Timmons, CEO of the National Association of
Manufacturers, in a video discussing the Report Card.
The economic impact of continued underinvestment in
infrastructure is staggering, a figure the ASCE estimates
at $3.9 trillion by 2025, putting the U.S. at risk of losing its
global competitiveness. Numerous studies have shown that
U.S. infrastructure spending has lagged other developed
countries. The World Economic Forum, in The Global
Competitiveness Report for 2016-2017, revealed that the
U.S. ranked number 11 among the 138 economies studied
for overall infrastructure quality, behind Hong Kong, Japan,
France, and Germany, among others.
Globally, infrastructure investment has declined as a
share of GDP in 11 of the G20 economies, according to
a 2016 McKinsey study Bridging Global Infrastructure
Gaps, triggered by the recent financial crisis. Among the
countries to dial back infrastructure spending were the
European Union, the United States, Russia, and Mexico.
Between 2016 and 2030, McKinsey estimates $3.8 trillion
per year in infrastructure investment is required globally to
support projected economic growth.
6
Building Products Insider
Market Update
“When it comes to your infrastructure you should be
worried,” said Norma Jean Mattei, 2017 president of ASCE.
“President Trump is onto something as he calls for a new
program of national rebuilding.” The Trump administration
has declared its intentions to prioritize infrastructure
spending, proposing plans for a $1 trillion bill to fortify
the country’s deteriorating
systems over the next
10 years. While industry
is urging swift action to
address current infrastructure
challenges, the reality is that
tax and healthcare reform
may slow progress, with some
industry experts predicting the
implementation of a spending
plan may not materialize
until 2018.
Investors maintain a bullish
outlook, with investment
in infrastructure expected to extend the current growth
cycle. The Trump infrastructure plan is expected to boost
companies servicing related markets, which is directing
M&A and private investment into the sector.
“A decrease in public funding and weakened economic
conditions in many regions are driving tremendous global
demand for private investments in infrastructure,” said Marc
Lipschultz, Global Head of KKR’s Energy & Infrastructure
business. In July 2015, KKR announced the closing
of a second global infrastructure fund, KKR Global
Infrastructure Investors II, raising $3.1 billion. The fund
will target investments in the energy supply chain, water
systems, roads, railways, airports, and communications
networks.
International private
equity funds are
targeting the U.S.
for investment.
In March 2017, 3i
Group announced
the formation of
a North American
infrastructure business
to target investment
opportunities in the
region, stating its
“ambition to build a
significant business in
this market,” said 3i CEO Simon Burrows. 3i is building on
its investment success in the European market.
EQT Partners raised $4.2 billion for its third infrastructure
fund, EQT Infrastructure III, which closed in February
2017. The fund will seek investment opportunities in
the energy, transportation and logistics, environmental,
telecom, and social infrastructure sectors primarily in
North America and Europe.
Infrastructure Investment Gap: The Economic Impact
2016-2025 $1,167 $508 $819 $337 $784 $3,615
2026-2040 $1,981 $3,215 $1,071 $1,073 $2,003 $14,201
$ in billions
SurfaceTransportation
Water/Wastewater
Inland Waterways& Marine
Aggregate Economic Impact of All SectorsAirportsElectricity
Losses to the National Economy Due to Infrastructure Investment Gaps
Gross Domestic Product
Source: 2016 Failure to Act, ASCE.
“Good infrastructure allows us to be more competitive in the world. We know work we’ve done shows that if we don’t have a competitive infrastructure, it will cost this economy $3.9 trillion in our gross domestic product.” Greg DiLoreto Chair of ASCE’s Committee on America’s Infrastructure
7
Building Products Insider
Market Update
Public equities have rallied on news of a proposed
infrastructure revitalization plan. The S&P 1500
Construction & Engineering index outperformed the
broader market, with a one-year return of 16.9 percent,
compared to 14.9 percent for the S&P 500.
Interest Rates
The prolonged low interest rate environment has been
stimulative to the housing market recovery. Industry
participants are closely following the Federal Reserve,
which raised rates 25 basis points in March, marking the
third rate hike since December 2015, and is signaling at
least two more rate hikes in 2017.
Mortgage interest rates have been rising steadily, with
the 30-year fixed rate reaching an average 4.20 percent
in March 2017—which is up from 3.69 percent a year ago.
The NAHB is forecasting fixed mortgage rates to increase
to 4.36 percent and 5.09 percent in 2017 and 2018,
respectively, according to estimates released in February
2017.
While rising interest rates are not expected to have an
immediate impact on the construction industry, rate
increases will create “more of a dampening element by
2018, which will lead to a slowdown in overall economic
activity in 2018 or 2019,” predicts Robert Murray, chief
economist at Dodge Data & Analytics.
Capital Markets
The capital markets environment remains robust evidenced
by rising public equity valuations, plentiful debt and equity
capital, and valuation multiple expansion. Building products
stocks have rallied on strengthening industry fundamentals
with composite indices outperforming the broader market.
The sector has seen a number of IPOs launch, including
JELD-WEN (NYSE:JELD) which raised $575 million through
an IPO in January 2017, pricing 25 million shares at $23
per share—the high end of the offering range. JELD-
WEN has seen its stock price gain 22.0 percent since the
offering. JELD-WEN has been backed by Onex since 2011.
Foundation Building Materials, Forterra, and GMS are
among other IPOs announced over the last 18 months.
The overall tone of the lending markets can be viewed
as cautiously optimistic, with themes of lower taxes, less
regulation, and more infrastructure spending expected to
boost the economy, which is raising confidence. Lender
appetite in the sector remains healthy; however, leverage
levels are discounted to the broader market reflecting
perceived risk for industry cyclicality.
M&A Activity
The pace of M&A activity is accelerating with 2016
transaction volume besting 2015 levels and nearly
matching the 2007 peak. Transaction activity reflects
active participation from strategic and financial buyers and
investor appetite that is broad-based with interest across
all building products subsectors.
In its 4Q16 earnings call, JELD-WEN (NYSE:JELD)
highlighted acquisitions as a key driver of revenue growth,
citing six buys completed in the past 18 months and a
healthy acquisition pipeline, according to SVP of Corporate
Development John Linker, speaking to the company’s
future plans, “We’d like to continue executing on more
of what we’ve been doing, which is filling in gaps in our
product or service offering, with some of these smaller
bolt-on companies that are growing faster than we are in
certain segments or have a specialty offering that we can
fill in and really accelerate our core growth.” JELD-WEN’s
recent acquisitions include Breezway, Trend Windows
and Doors, LaCantina Doors, Karona, Dooria, and Aneeta
Historical Building Products M&A Activity
Source: S&P Capital IQ.
0
50
100
150
200
250
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q2016
1Q2017
Num
ber o
f Tra
nsac
tion
s
8Sources: S&P Capital IQ, PitchBook, Equity Research, Company Filings, public data.
Building Products Insider
Market Update
9
Window Systems. The company remains optimistic about
broader market fundamentals, pointing to improvement in
housing starts in the U.S., and views “the underlying market
in North America to be remaining quite constructive,” said
CEO Mark Beck.
Headwaters (NYSE:HW) has been aggressively growing
its manufacturing footprint in windows, announcing
the acquisitions of Magnolia Window in January 2017
and Krestmark Industries in August 2016. Magnolia’s
Southeastern territory spans seven states, broadening
Headwaters footprint in the region. Vinyl window
manufacturer Krestmark provided an entry to the growing
Texas residential market, commanding $240 million in the
sale at a full 9.2x adjusted EBITDA (1.9x revenue), according
to analyst estimates.
Quikrete is deepening its capabilities in the infrastructure
market, completing the $540 million purchase of Cemex’s
U.S. Reinforced Concrete Pipe Manufacturing business
this January to solidify its leadership position in concrete
drainage products, which followed the $950 million
purchase of Contech Engineered Solutions last November,
a provider of solutions for stormwater management, bridge
structure, and drainage applications.
ABC Supply grew its footprint substantially with the
$670 million purchase of L&W Supply from USG
Corporation (NYSE:USG) last October, identifying the
deal as one of the largest in the company’s history. ABC
added 136 distribution branches and $1.4 billion in revenues,
expanding its footprint to over 700 locations with revenues
of $8 billion.
Recent activity evidences strong interest in U.S. assets
to tap faster growth and anticipated increases in
infrastructure spending.
International building products companies have been active
acquirers. Among the notable recent buys is the pending
acquisition of Headwaters (NYSE:HW) by Australia’s largest
building materials supplier Boral Limited (ASX:BLD), a
move that will more than double its U.S. business, furthering
the company’s stated strategy to increase its building
products exposure while increasing its fly ash business
fivefold, “which will play favorably into the infrastructure
spend underway in the U.S.,” the company said. “While the
acquisition of Headwaters significantly transforms Boral
USA, it is also highly transformative for Boral as a Group,”
commented Boral CEO Mike Kane, underscoring that the
combination solidifies Boral’s positioning as a global player
in the building products and construction materials market.
The transaction is expected to close by mid-2017.
Germany’s aluplast announced in March it acquired Chelsea
Building Products, a transformational buy that will expand
its U.S. presence and provide a foundation for accelerated
growth in North America. “We see Chelsea as a cornerstone
of our global strategy,” said aluplast CEO Dirk Seitz,
commenting on the new partnership. The manufacturer
of vinyl window and patio door lineal systems plans to
leverage Chelsea’s market knowledge and experience “to
build a strong platform for substantial growth in the United
States,” Seitz said.
dormakaba’s (SWX:DOKA) acquisitions of Mesker
Openings in December 2016 and the Mechanical Security
Businesses of Stanley Black & Decker (NYSE:SWK)
this February are viewed by industry analysts as “game
changing” in the access control market, with the moves
positioning dormakaba as a top three player in North
America. These highly synergistic deals garnered premium
valuations, with the Stanley assets fetching 13.8x EBITDA
and a healthy 9.0x after estimated synergies, and 8.9x
EBITDA for Mesker.
The acquisitions follow the merger of DORMA and Kaba
in September 2015 to form a top three player in the global
market for security and access solutions. dormakaba CEO
Riet Cadonau, commented on the acquisitions, saying,
“…the recently completed Mesker acquisition…will expand
our North America offering to cover all essential door
components including manual doors. With…Stanley
Commercial Hardware, we will add substantial scale,
becoming a top-three provider in the attractive North
American market that can offer the full portfolio of door
hardware and access control solutions to our customers.”
Sources: S&P Capital IQ, PitchBook, Equity Research, Company Filings, public data.
Building Products Insider
Market Update
Private Equity
Investor confidence has strengthened on improving secular
trends, with building products companies continuing to
attract private equity interest.
The buyout market is facing dueling forces of growing
capital stores and pent up demand resulting from a
competitive deal market. Private equity capital ballooned
to a record $754 billion in 2016, of which a growing supply
($142 billion) is earmarked for the middle market. Investment
activity will continue to be fueled by a sense of urgency for
funds to deploy capital, with acquisition growth a primary
strategy in value creation.
• Private equity remains heavily invested in the Building
Products sector. The growing inventory of portfolio
companies has steadily risen to top 150 in 2017. Just
under one-third of building products businesses have
been held in portfolios six years or longer. Sponsors are
beginning to monetize aging portfolio investments with
current favorable market conditions likely to drive more
sale activity. Sponsor-to-sponsor trades dominated exits
in 2016, and the trend appears to be continuing into
2017.
• Add-on acquisitions are central to private equity’s
investment thesis, consistently accounting for nearly
two-thirds of all buyout activity with the share growing
in recent years.
• Time to exit reached a high of 7.8 years in 2014,
reflective of the challenging operating environment and
a construction market that has been slower to rebound
in the economic recovery.
A number of new platform investments have been
announced in recent months, indicative of a positive growth
outlook and risk appetite that spans diverse building
products subsectors.
In April 2017, Graycliff Partners expanded its building
products portfolio with the acquisition of Oberfields
Holdings, a regional manufacturer of concrete hardscape
and masonry products serving Ohio and surrounding states.
Graycliff intends to invest in Oberfields’ manufacturing
capabilities to expand its product lines while building out
its geographic footprint. Graycliff’s related holdings include
Stone Source, a distributor of natural stone and other
decorative surface products, and Wood Pro, a manufacturer
of wood flooring products for the residential construction
market, both 2015 investments, and Fairway Building
Products, a manufacturer of vinyl, aluminum, and composite
railing systems, a 2014 investment.
Madison Dearborn Partners (MDP) is partnering with
U.S. LUMBER, a distributor of specialty building products
in the Eastern United States. In March 2017, the sponsor
financed a growth equity investment to fund geographic
and product expansion. U.S. LUMBER currently operates
nine distribution centers in 23 states and generates sales
in excess of $500 million, according to ProSales. “We
look forward to utilizing our expertise in growing and
scaling businesses in order to support the various growth
opportunities before U.S. LUMBER,” said Richard Copans, a
Managing Director at MDP, commenting on the investment.
U.S. LUMBER acquired Boston Cedar in April 2016.
0%
20%
40%
60%
80%
100%
Company Inventory Portfolio Add-on Activity
Private Equity Investing in Building Products
Add-
ons
as P
erce
ntag
e of
Tot
al B
uyou
ts
Source: PitchBook.
*As of March 31, 2017.
Year ofInvestment
2011-2016
2006-2010
2000-2005
71%
21%
8%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Company Inventory 112 116 120 116 118 128 135 143 142 152 155 152
Median Time to Exit 3.26 4.46 2.24 3.06 7.00 6.73 6.04 7.12 7.78 7.22 5.85 5.23
0.0
2.0
4.0
6.0
8.0
10.0
0
30
60
90
120
150
180
Median Tim
e to Exit (in years)
Num
ber o
f Com
pani
es
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Add-Ons 43.7% 46.2% 55.0% 42.3% 65.2% 52.6% 61.0% 56.4% 63.0% 61.3% 58.5% 70.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
10 Sources: S&P Capital IQ, PitchBook, Equity Research, Company Filings, public data.
Building Products Insider
Market Update
11
Industrial Opportunity Partners (IOP) purchased Union
Corrugating in January 2017, a maker of metal roofing
systems and parts for residential, commercial, and agricultural
building applications. The company’s manufacturing footprint
comprises facilities in the Southeast, Mid-Atlantic, and
Midwest regions. IOP’s other building products holdings
include Alexandria Moulding, acquired in 2016, and Coldwater
Veneer, a 2015 investment.
Sun Capital Partners picked up Arrow Tru-Line in January
2017, a manufacturer of garage door hardware and fittings
for residential and commercial markets. The sponsor “sees
considerable potential to grow the business” through
maximizing operational efficiencies, reducing procurement
costs, and expanding market share. Sun Capital Partners owns
Demilec, a player in the North American spray polyurethane
foam insulation market.
Blue Wolf Capital Partners formed Novo Building Products
in December 2016 with the purchase of the North American
Building Products business of Tenon Holdings, a millwork
operation that manufactures stair parts, moldings, doors, and
other building products. The sponsor stated the goal to “make
Novo the industry leading manufacturer and distributor of
millwork and specialty building products in North America,”
said Partner Charlie Miller. Building products distributor
American Builders Supply is a Blue Wolf portfolio company.
In September 2016, American Securities acquired Henry
Company, a North American manufacturer of roofing and
building envelope products for the residential and commercial
building products markets, in a $600 million transaction.
Graham Partners exited its five-year investment in the sale
and is credited with more than doubling Henry’s EBITDA
during its ownership. The sponsor completed a number of
strategic initiatives including new product launches and
strategic acquisitions while expanding the senior management
team.
Platinum Equity acquired Fabcon in September 2016, a
maker of concrete wall panels for nonresidential construction
applications with manufacturing facilities in Kansas,
Minnesota, Ohio, and Pennsylvania. Platinum “will bring its
financial, operational, and M&A resources to bear in support of
the company’s continued growth,” the sponsor said. Platinum
Equity recently closed its fourth fund raising $6.5 billion.
Consumer facing businesses Kith Kitchens and Top Knobs
were targets for new platforms in 2016. Pfingsten Partners
acquired Kith Kitchens in June, a manufacturer of branded
kitchen and bath cabinetry in the Southeastern U.S., a region
that has benefited from a vibrant housing market. Pfingsten
will leverage its previous experience in the cabinet industry as
a former owner of Norcraft Companies. The Jordan Company
acquired Top Knobs in March, a supplier of decorative kitchen
and bath hardware.
Industry fragmentation remains a draw as sponsors pursue
accretive add-ons to execute buy-and-build strategies.
Arsenal Capital Partners is building a leader in the spray
polyurethane foam (SPF) market, announcing in February
2017 it was acquiring the North American SPF business of
Covestro, which manufactures products for insulation and
roofing in residential and commercial applications. Accella
completed add-ons in March 2016, picking up Quadrant
Urethane Technologies, and in September 2015, Burtin
Polymer Laboratories and Coating and Foam Solutions,
further solidifying its presence in the SPF market. Accella
has been backed by Arsenal Capital Partners since 2012.
The company has attracted more than $250 million in
development capital to date, adding Maranon Capital as
a new investor in September 2015, to fund an acquisition
growth strategy.
Audax Group portfolio company, Innovative Chemical
Products (ICP), acquired Fomo Products in April 2016, a
maker of foam sealants and adhesives used in construction
applications—its third add-on for the platform following the
2017 acquisitions of MinusNine Technologies and
Rock-Tred.
Distribution platforms are leveraging acquisitions to build
scale and geographic footprint. US LBM Holdings, backed by
Kelso & Company since 2015, acquired Ridout Companies
in January 2017, its fourth acquisition in the last 12 months.
Ridout extends its footprint in Arkansas with 12 locations. To
date, US LBM has completed 14 acquisitions under Kelso’s
ownership.
Construction Supply Holdings (CSH), a newly-formed
platform of The Sterling Group, added on with Stetson
Building Products this January, expanding its Midwest
footprint with nine branches. CSH was formed through
the acquisitions of Brock White Company and Border
Construction Specialties in November 2016, creating a
platform for national expansion with 39 branches in the
Midwest, Southwest, and western Canada.
Sources: S&P Capital IQ, PitchBook, Equity Research, Company Filings, public data.
Building Products Insider
Market Update
TARGET ACQUIRER DEAL STATS TARGET ACQUIRER DEAL STATS
GRAHAM PARTNERS
Mar-16
Jun-16
Pending
Apr-17
Apr-17
Feb-17
Feb-17
Jan-17
Jan-17
Mar-17
Enterprise Value: $467.5M
Dec-16
Feb-17
Enterprise Value: $240MEV/Revenue: 1.9xEV/EBITDA: 9.2x
Enterprise Value: $950MEV/Revenue: 1.4x
Enterprise Value: $450MEV/Revenue: 2.8x
Enterprise Value: $2.54BEV/Revenue: 2.5xEV/EBITDA: 14.8x
Enterprise Value: $142.5MEV/Revenue: 2.1xEV/EBITDA: 8.9x
Enterprise Value: $725MEV/Revenue: 2.7xEV/EBITDA: 13.9x
Enterprise Value: $670MEV/Revenue: .5xEV/EBITDA: 12.9x
Enterprise Value: $400MEV/Revenue: 5.0xEV/EBITDA: 12.1x
Door and Mechanical Security Division
Select assets in OH
North AmericanSpray Foam
Business
Enterprise Value: $2.73BEV/Revenue: 1.1xEV/EBITDA: 9.9x
Enterprise Value: $306M
Enterprise Value: $540MEV/Revenue: 1.96xEV/EBITDA: 12.3x
Enterprise Value: $600M
Aug-16
Oct-16
Mar-17
Feb-17
Nov-16
Jan-17
Novo Building Products
Select assets in TX and NM
Dec-16
Nov-16
Jan-17
Apr-16
Apr-16
Jan-17
Sep-16
Dec-16
Sep-16
Sep-16May-16
Feb-16
Dec-16
GRAHAM PARTNERS
Concrete PipeManufacturing Business
SELECTED M&A ACTIVITY IN BUILDING PRODUCTS
12
Sources: S&P Capital IQ, PitchBook, Equity Research, Company Filings, public data.
Building Products Insider
11
Overall M&A Activity
Middle Market M&A Activity Private Equity Transaction Activity*
Mergers & Acquisitions Activity
Trends in Valuation
Acquisition Financing Trends
Total Leverage Equity Contribution
SOURCE: Standard & Poors LCD.
*NA: Data not reported due to limited number of observations for period. *NA: Data not reported due to limited number of observations for period.SOURCE: Standard & Poors LCD.
SOURCE: Standard & Poors LCD.
Transactions with Strategic Buyers Transactions with Financial Buyers
Transaction Count by Deal Size
Middle market enterprise values between $25 million and $500 million. Middle market enterprise values between $25 million and $500 million.
EBIT
DA
Mul
tiple
Tota
l Deb
t to
EBIT
DA
EBIT
DA
Mul
tiple
Equi
ty C
ontr
ibut
ion
(%)
Middle Market M&A Activity
SOURCE: PitchBook.SOURCE: S&P Capital IQ.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. *Buyout activity only
7.2x
8.3x
6.5x 6.6x
6.3x
8.2x
8.1x 8.
5x
8.2x
8.0x 8.0x
7.4x 7.
7x
7.7x
9.1x
8.7x
6.4x
8.5x
9.9x
9.4x
7.5x
8.5x
9.1x
8.7x
8.7x
9.9x
10.1
x
9.9x
9.8x
5.0x
6.0x
7.0x
8.0x
9.0x
10.0x
11.0x
12.0x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Mar-17
<$250 million $250-$499 million $500 million+
4.8x
5.4x
4.1x
3.6x
4.1x4.3x
4.5x4.7x 4.7x 4.8x 4.7x 4.7x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Mar-17
38%
35%
46%
51%
47%
43%
41% 40%
37%
44%42%
39%
25%
30%
35%
40%
45%
50%
55%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Mar-17
8.2x
6.8x 7.
1x
9.8x
8.0x
7.6x 7.7x
8.6x 8.7x 9.
2x
7.4x
7.0x
8.7x
9.4x
8.4x
7.6x
9.2x 9.
5x
8.9x
8.7x
10.1
x
11.4
x
9.1x
10.0
x
9.1x
10.2
x
8.2x
9.5x 9.
7x
9.7x
8.5x
9.1x
9.8x 10
.3x
8.3x
5.0x
6.0x
7.0x
8.0x
9.0x
10.0x
11.0x
12.0x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Mar-17
<$250 million $250-$499 million $500 million+
119
148
125
151
106 14
115
614
510
713
214
811
458 97 96 13
110
012
214
113
412
0 166
163
154
137
160
164 23
514
716
119
219
916
1 217
231
250
232
227
240
228
183
199
210
228
176
207 21
921
4 240
207 22
221
1 268
191 20
7 233
113
9112
011
119
714
5 161 23
420
416
823
022
621
417
6 211
188
307
208 22
7 248 28
623
325
5 328 35
528
327
0 305
334
261 27
125
8 310
234
6566
5963
6267 63
6336
5843
1919
26 3540
3242
5861
5563 68
5342
54 5069
3946
6079
4982
7370
60 5377 68
5477 51
6144
$0
$10
$20
$30
$40
$50
$60
$70
$80
0
100
200
300
400
500
600
700
800
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ‘17
Transaction Value ($ in billions)
Num
ber o
f Tra
nsac
tions
$25M-$50M $50M-$250M $250M-$500M Trans Value
NA
*
NA
*
NA
*
NA
*
NA
*
NA
*N
A*
NA
*
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q12016
Q12017
Under $25M $25M-$100M $100M-$500M $500M-$1B $1B-$2.5B $2.5B+
13
Building Products Insider
14
Building Products M&A ActivityMergers & Acquisitions
BUILDING PRODUCTS
In May 2017, Apogee Enterprises, Inc. (NasdaqGS:APOG)
announced it is acquiring EFCO Corporation from Pella
Corporation in a transaction valued at $195 million. The Des
Moines, Iowa-based company manufactures architectural
aluminum window, curtainwall, storefront, and entrance
systems for commercial construction projects. EFCO
operates facilities in Iowa, Missouri, Illinois, and Virginia and
generates annual revenue in excess of $250 million. The
transaction is expected to close in the first half of fiscal
2018.
Apogee CEO Joseph Puishy commented on the acquisition:
“EFCO will accelerate our growth strategies, and expand
our presence in mid-size commercial buildings, broaden our
product offerings, and increase our geographic presence
across the United States.” Puishy highlighted EFCO’s
focus on mid-size and small commercial projects, which he
identified as less cyclical and a target growth sector for the
company. Transaction Multiple: .8x Revenue
In April 2017, Graycliff Partners completed the
recapitalization of Oberfields Holdings, with participation
from management. MB Business Capital provided the
senior credit facility as part of the acquisition. Delaware,
Ohio-based Oberfields manufactures concrete hardscape
and masonry products for the residential and commercial
construction markets. Products include segmental retaining
walls, pavers, architectural block, gray block, precast
products, and hardscape and masonry accessories. The
company holds a leading market position in Ohio and a
growing presence in surrounding states, with a distribution
footprint that includes Ohio, Indiana, Kentucky, Pennsylvania,
and West Virginia.
Commenting on the acquisition, Will Henderson, a Managing
Director at Graycliff Partners, said: “The Oberfields team has
built an impressive business—known for innovative, quality
products, and its commitment to customers. We look forward
to working with Bruce and his team to position the company
for future growth while retaining the reputation of excellent
service built over the past 50+ years.” The Anderson Group
exited its six-year investment in the sale. During its ownership,
Anderson invested in product line and facility expansion,
as well as strategic acquisitions, enabling the company to
capture a leading market position in central Ohio and establish
a foundation for regional expansion.
In April 2017, Accella Performance Materials completed the
acquisition of the North American Spray Polyurethane Foam
(SPF) Business of Covestro LLC. The business manufactures
spray polyurethane foam for insulation and roofing in
residential and commercial applications. Commercial and
production operations are conducted in a facility located in
Spring, Texas which employs approximately 40 people. The
transaction is expected to close in April 2017. Accella has been
backed by Arsenal Capital Partners since 2012.
John Televantos, Partner at Arsenal Capital, said: “This
combination further strengthens Accella’s position as the
leading independent Polyurethane systems house in North
America, and will enhance the value Accella brings to market
with expanded technology, leading brands, and great
people. We are committed to support the ongoing growth of
Accella and invest in strategies that will further transform the
business.”
In March 2017, Wingate Partners completed the acquisition
of Binswanger Glass, a provider of architectural glass
and aluminum products for commercial, residential, and
automotive aftermarket applications. Binswanger operates
64 locations in 15 states. Binswanger received developmental
capital from Grey Mountain Partners in March 2016. Yukon
Partners provided mezzanine funding for the transaction.
dormakaba Holding AG (SWX:DOKA) announced the
completion of two acquisitions to strengthen its position in
the North American market. In February 2017, dormakaba
completed the purchase of the Door and Mechanical Security
Division from Stanley Black & Decker (NYSE:SWK) for $725
million. Included in the sale were commercial hardware brands
BEST Access, phi Precision, and GMT, which generated
revenues and EBITDA of approximately $270 million and $52
million, respectively. Transaction Multiples: 2.7x Revenue and
13.9x EBITDA (9.0x EBITDA post synergies)
In December 2016, dormakaba acquired Mesker Openings
Group for $142.5 million. Mesker’s broad product portfolio
includes hollow metal doors, hollow metal frames, hardware,
and wood doors sold under recognized brands Mesker Door,
Hollow Metal Xpress, Design Hardware, and Wood Door
Xpress. Products are sold to customers in the commercial,
industrial, and institutional markets. The Huntsville, Alabama-
based company operates five manufacturing and distribution
facilities. Transaction Multiples: 2.1x Revenue and 8.9x
EBITDASources: S&P Capital IQ, PitchBook, Equity Research, Company Filings, public data.
Building Products Insider
15
Building Products M&A ActivityMergers & Acquisitions
“With these two acquisitions, dormakaba has become one of
the top 3 providers in the attractive North American market,
and can now offer customers the full portfolio of door
hardware and access control solutions from a single source,”
the company said.
In February 2017, Paradigm Window Solutions acquired
Vista Window Company. The manufacturer of vinyl
replacement windows and doors operates locations in
Ohio and Georgia and sells to distributors and specialty
remodelers in the Midwest and Southeast. Vista represents
the first add-on for PWS, which was acquired by
CapitalWorks and Ironwood Capital in December 2015. With
the acquisition, PWS expands its “...geographic reach and
diversifies its channels to market” said John Corrigan, Vice
President at CapitalWorks. Industry veteran Mark Savan will
lead the combined organization as CEO.
In February 2017, High Road Capital acquired Midwest
Wholesale Hardware, a value-added distributor of hardware,
electronic access control, and security products to the
commercial and institutional door hardware market. Midwest
is based in Kansas City, Missouri and operates additional
distribution centers in California, Florida, Pennsylvania,
South Carolina, and Texas. The company was founded in
1987. Midwest CEO Chris Casazza commented on the new
partnership: “With High Road’s support, we will accelerate
our growth by expanding our distribution coverage and
investing in innovative technology solutions, particularly
in electronic access control systems, the industry’s fastest
growing segment. We also expect to pursue acquisitions.”
Ben Schnakenberg, a Partner at High Road Capital Partners,
said: “Midwest Wholesale Hardware has industry-leading
national fulfillment capabilities, offers best-in-class
customer service, and is a value-added partner to its
customers and suppliers. We look forward to supporting
Midwest’s efforts to expand its geographic presence and
capitalize on growth within the electronic access control
market.”
Midwest was previously backed by Olympus Partners,
which acquired the company in 2014.
In January 2017, Armstrong World Industries (NYSE:AWU)
acquired Tectum in a $31.4 million cash transaction. The
Newark, Ohio-based manufacturer of acoustical panels
has served the commercial building market for more
than 65 years. The company operates two facilities
in Newark and Columbus, Ohio. Tectum products will be
integrated within Armstrong’s Ceilings Solutions umbrella,
a leading growth engine for the company, according to
a press release announcing the transaction. Transaction
Multiple: 1.3x Revenue
In January 2017, Industrial Opportunity Partners (IOP)
purchased Union Corrugating, a maker of metal roofing
systems and roofing parts for residential, commercial,
and agricultural building applications. Headquartered in
Fayetteville, North Carolina, the company operates 10
additional manufacturing facilities across the Southeast,
Mid-Atlantic, and Midwest regions.
In January 2017, Headwaters (NYSE:HW) completed the
acquisition of Magnolia Window and Door. The Baldwin,
Georgia-based company manufactures vinyl windows
for the new construction and replacement markets. The
company’s geographic footprint spans seven states in
the Southeastern U.S. Magnolia was founded in 1997.
Magnolia General Manager Jimmy Sisco commented on
the new partnership: “Headwaters is a quality company,
and is aggressively expanding its sales and manufacturing
footprint in windows. We are pleased to be part of that
expansion and look forward to growing our business under
the Headwaters umbrella of building products companies.”
In January 2017, Ireland-based Allegion plc (NYSE:ALLE)
acquired Republic Doors and Frames. The Tennessee-
based company manufactures hollow metal doors and
frames for commercial applications. Republic’s footprint
also consists of regional services centers in Atlanta, Dallas,
Orlando, Houston, and Seattle. The company reported sales
of $20 million in 2015.
Republic will complement Allegion’s Steelcraft® brand in
the Americas region, according to a company statement.
Tim Eckersley, regional President, said: “By adding Republic
Doors & Frames to the Allegion family, we’re expanding
our product offering, improving our operating efficiency
and growing our distribution footprint. This will not only
drive growth for us in the U.S., but will enhance the overall
customer experience in this sector that’s core to our
business.”
Sources: S&P Capital IQ, PitchBook, Equity Research, Company Filings,public data.
Building Products Insider
16
Building Products M&A ActivityMergers & Acquisitions
In December 2016, M&M Manufacturing, a subsidiary of
MiTek Industries, which is owned by Berkshire Hathaway
(NYSE:BRK.A), acquired Snappy Co. (Snappy), a leading
branded manufacturer and supplier of galvanized pipe,
duct, and fittings for the residential HVAC market. Snappy
operates production facilities in Minnesota and New York.
Snappy was a portfolio company of Blue Wolf Capital
Partners, which it acquired in 2012.
In December 2016, The Cook & Boardman Group
completed the acquisition of Memphis, Tennessee-based
Delta Door, a move to expand its footprint into the
Tennessee, Arkansas and Mississippi markets, according
to a company statement. The distributor of commercial
doors, frames, and hardware serves architects, contractors,
and facility managers of nonresidential buildings. Delta
Door was founded in 1964. Delta Door is the second
add-on acquisition for Cook & Boardman, which has been
backed by Ridgemont Equity Partners since 2014. The
company purchased RDL Supply in April 2015, a Texas-
based distributor and the largest supplier of RediFrame
commercial steel door frames in the U.S., according to the
sponsor.
In December 2016, Harvey Industries, a portfolio company
of private equity sponsor Dunes Point Capital, acquired
Streetsboro, Ohio-based Soft-Lite, a maker of replacement
vinyl windows and sliding doors. Soft-Lite’s windows are
primarily sold direct to private label window dealers.
Harvey Building Products was attracted to Soft-Lite’s
product quality, reputation, and strong financial performance,
according to CEO Jim Barreira, who commented on
the strategic partnership, saying, “Our business models
complement one another, helping us to win in different market
segments. This expanded scale will make us even stronger
and better able to provide the best possible products and
service to our expanded customer base.” The acquisition will
accelerate Harvey’s plans to expand its commercial business.
Soft-Lite represents the first add-on acquisition for Harvey
Industries, which was acquired by Dunes Point Capital in
September 2015. In addition to manufacturing replacement
windows and doors, Harvey distributes siding, roofing,
and other building materials. The company employs about
1,500 people and operates two manufacturing facilities,
14 showrooms, and 35 warehouse distribution centers
throughout the Northeast.
In November 2016, Quikrete Holdings acquired Contech
Engineered Solutions for $950 million. Contech provides
solutions for stormwater management, bridge structure,
and drainage applications. Contech’s broad offering
spans concrete, steel, and HDPE products and related
services for civil engineering markets. The company
employs approximately 1,400 people from more than 60
facilities across North America. The acquisition is expected
to “significantly advance” Quikrete’s growth strategy,
according to COO Will Magill. In 2015, Contech had revenue
of $695 million.
Contech was acquired in 2012 by an investor consortium
comprised of Anchorage Capital Group, Littlejohn &
Company, Tennenbaum Capital Partners, and Farallon
Capital Management. Transaction Multiple: 1.4x Revenue
In November 2016, Pella Corporation purchased
Duratherm Windows Corporation, a Vassalboro, Maine-
based manufacturer of custom hardwood windows and
doors serving the luxury marketplace. “Duratherm rounds
out Pella’s collection of elite brands and expands our
geographic footprint on both the East and West coasts,”
said Pella CEO Tim Yaggi. With the acquisition, Pella’s
manufacturing footprint grows to 13 U.S. locations.
In November 2016, Australia-based Boral Limited
(BLD:ASX) announced it was acquiring Headwaters
(NYSE:HW) for $2.54 billion, a move to “increase its
exposure to the U.S. building and construction markets”,
Boral said. The addition will more than double the size of
Boral’s U.S. business to combined revenue of $1.8 billion,
adding scale to its fly ash business, which the company
stated plays favorably into “the infrastructure spend
underway in the U.S.” Headwaters’ broader residential
exterior building products portfolio includes specialty
siding, trim board, decking, architectural stone, roofing,
and block products. Transaction Multiples: ~10.6x EBITDA
(2017E) and 7.5x EBITDA (with synergies).
Headwaters acquired Krestmark Industries in August 2016.
The manufacturer of replacement and new construction
vinyl windows provided an entry to the growing Texas
residential market. The $240 million purchase price
valued Krestmark at 9.2x adjusted EBITDA (1.9x revenue),
according to analyst estimates.
Sources: S&P Capital IQ, PitchBook, Equity Research, Company Filings, public data.
Building Products Insider
17
Building Products M&A ActivityMergers & Acquisitions
In September and May 2016, Fortune Brands Home &
Security (NYSE: FBHS) completed the acquisitions of
luxury kitchen and bath brands Riobel and ROHL, joining
the number-one positioned Moen brand. Products include
faucets, sinks, fixtures, and water filtration products. The
ROHL acquisition includes the luxury ROHL and Perrin &
Rowe brands, as well as the Michael Berman collection,
which generate approximately $70 million in annual sales.
Riobel is a Canadian premium showroom brand with annual
sales of approximately $40 million.
The acquisitions follow the formation of a new Global
Plumbing Group (GPG) which is aimed to “accelerate
growth opportunities and transform Fortune Brands’
plumbing business,” the company said. “The GPG platform,
strategic acquisitions, and joint ventures reflect our
continued focus on growing the business. We continue to
look at other growth opportunities for the GPG and hope
to execute additional transactions as part of our strategy to
drive incremental growth,” said Fortune Brands CEO Chris
Klein. Fortune Brands is looking to grow its plumbing sales
to $2.5 billion by 2020, Klein said.
In April 2016, Industrial Opportunity Partners acquired
Alexandria Moulding, in partnership with management.
Alexandria manufactures solid wood and wood composite
mouldings. Products include stock mouldings, stair parts,
wall coverings, boards, post covers, and columns, as well
as variety of hardwoods and softwoods, which are sold
to retailers, building products distributors, and industrial
customers. The company is based in Alexandria, Ontario,
and operates U.S. facilities in Washington and Pennsylvania.
MATERIALS
Cemex (BMV:CEMEX CPO) completed the sale of certain
U.S. assets to Eagle Materials (NYSE:EXP), Quikrete
Holdings, and Grupo Cementos de Chihuahua, S.A.B. de
C.V. (BMV: GCC *).
In February 2017, Eagle Materials (NYSE:EXP) purchased
Cemex’s Fairborn, Ohio cement plant and related assets
for $400 million —a move that increases its U.S. cement
capacity by roughly 20 percent, Eagle said. The acquisition
furthers the company’s strategy to grow its cement
business, said CEO Dave Powers, stating: “The Fairborn
plant extends our U.S. cement system and connects but
does not overlap with the market reach of our existing
plants. This high-quality cement plant is a compelling
fit with our strategic objectives and our criteria for new
investment. These assets will allow us to participate more
fully in the U.S. construction industry and further positions
the company in target U.S. heartland growth markets.”
Transaction Multiples: 5.0x Revenue and 12.1x EBITDA
In January 2017, Quikrete Holdings completed the purchase
of the U.S. Reinforced Concrete Pipe Manufacturing
Business (Rinker Materials) for $540 million, inclusive of a
$40 million earnout contingent on future performance. The
business operates more than 30 pipe and precast plants in
20 states, solidifying Quikrete’s market leadership position
in concrete drainage products, according to Concrete
Products. The acquisition also deepens its capabilities in
the infrastructure market, following the November 2016
purchase of Contech Engineered Solutions.
In November 2016, GCC acquired a cement plant located
in Odessa, Texas; two cement distribution terminals
located in Amarillo and El Paso, Texas; and the concrete,
aggregates, asphalt, and building materials businesses
in El Paso, Texas and Las Cruces, New Mexico. With the
acquisition, GCC adds 1 million metric tons of cement
capacity to its existing 4.6 million tons, and supports the
company’s U.S. expansion strategy with a 45 percent
increase in its cement capacity, reported the Wall Street
Journal. GCC CEO Enrique Escalante commented on the
transaction: “This acquisition represents a significant
advance in our strategy of sustainable cement growth in
the United States, in markets contiguous to those of GCC´s
geographic footprint. With these assets and colleagues
joining the company, we will enhance the competitive
advantage of our logistics system, expand our product
portfolio, and optimize our operations by sharing best
practices.” The purchase price was $306 million.
In February 2017, Summit Materials (NYSE:SUM) completed
the acquisitions of Everist Materials and Razorback
Concrete Company for a combined cash purchase price
of $110 million. Combined, the Everist and Razorback
aggregates operations bring more than 100 million tons of
permitted reserves in Colorado and Arkansas, Summit said.
Sources: S&P Capital IQ, PitchBook, Equity Research, Company Filings,public data.
Building Products Insider
18
Building Products M&A ActivityMergers & Acquisitions
Everist is a supplier of aggregates, ready-mixed concrete,
and asphalt in west-central Colorado, broadening Summit’s
footprint in the region to include markets bordering Denver,
said Summit CEO Tom Hill. “We view this region as an
exciting opportunity for Summit, where a combination
of transportation infrastructure projects along the I-70
corridor and robust private construction spending activity
stand to benefit our business in the years ahead,” Hill said.
Razorback is a supplier of aggregates and ready-mixed
concrete in central and northeastern Arkansas, establishing
a new market region for Summit, Hill said. “We believe the
Arkansas market is poised for higher construction activity
levels over the longer term, driven by positive employment
and population trends and increased public infrastructure
spending,” Hill added.
In May 2016, Summit Materials entered the Las Vegas
market with the purchase of aggregates and ready-mix
concrete supplier Sierra Ready Mix. The cash purchase
price was $40 million. Sierra operates a sand and gravel pit
and two ready-mix concrete facilities. Commenting on the
acquisition, Summit CEO Tom Hill said: “Sierra’s vertically
integrated operations are a good fit within our Utah-based
Kilgore platform and a very sound entry into Las Vegas,
the next large market south of the Wasatch Front in
Utah. Sierra has a solid position in a sizeable market at an
attractive point in the recovery cycle.”
LUMBER
In March 2017, Universal Forest Products (NASDAQ:UFPI)
completed the acquisition of Quality Hardwood Sales
(QHS), a manufacturer of hardwood products, including
components for cabinets used in homes and recreational
vehicles. QHS is based in Nappanee, Indiana and was
founded in 2001. The company reported net sales of
$30 million in 2016. The addition establishes UFP’s first
operation dedicated to hardwood products, the company
said.
The transaction follows the 2016 acquisitions of Robbins
Manufacturing in August and Idaho Western in June.
Tampa, Florida-based Robbins manufactures treated wood
products with facilities in Florida, Georgia, and North
Carolina. The company reported net sales of $86 million
in 2016. “Bringing [Robbins] into the Universal family of
companies allows us to be an even stronger powerhouse
in the preservative-treated market in the Southeast, and
solidifies our position as the leading manufacturer of
premier treated products in the United States,” said UFPI
CEO Matthew Missad, commenting on the transaction.
Idaho Western is an Idaho-based distributor serving
customers in the retail building materials, manufactured
housing, and recreational vehicle industries. Products
range from lumber and plywood to siding and doors. The
company generated net sales of approximately $21 million.
“This strategic acquisition will allow us to bolster our
foothold in the manufactured housing and retail markets by
expanding our product offering and our geographic reach,”
Missad said.
In December 2016, Blue Wolf Capital Partners acquired
the North American Building Products Business of
Tenon Holding, Nacs USA, which includes operating
divisions The Empire Company, Southwest Moulding
Company, Ornamental Mouldings, Ornamental Products,
and Creative Stair. The business, renamed Novo
Building Products, manufactures stair parts, moldings,
doors, and other building products. Customers include
lumberyards, door shops, retail home centers, and millwork
manufacturers.
DISTRIBUTORS
Beacon Roofing Supply (NasdaqGS:BECN) has completed
four acquisitions so far in 2017:
In April 2017, Lowry’s Specialty Distribution (Lowry’s),
a distributor of waterproofing, sealants, air barriers, and
related products with operations in California, Hawaii,
Utah, and Arizona. The acquisition strengthens Beacon’s
waterproofing business in the western United States and
marks its first entry into Hawaii.
In March 2017, Acme Building Materials, a distributor
of residential roofing and related building products in
Eastern Michigan with branches in Flint, Rochester Hills,
and Brighton. With the acquisition, Beacon brings its count
of Michigan locations to ten, strengthening its residential
business in the region.
Sources: S&P Capital IQ, PitchBook, Equity Research, Company Filings, public data.
Building Products Insider
19
Building Products M&A ActivityMergers & Acquisitions
In January 2017, Eco Insulation Supply (EIS), a Stamford-
based distributor of insulation and related accessories
serving Connecticut, Southern New England, and the
New York City metropolitan area. The acquisition furthers
Beacon’s stated strategy to grow its insulation footprint
though additional acquisitions, said CEO Paul Isabella, in a
press release announcing the transaction.
In January 2017, American Building & Roofing, a distributor
of primarily residential roofing and related building
products in the Pacific Northwest. The company operates
seven branches around Washington State, expanding
Beacon’s presence in the region, and particularly in . the
Seattle market.
Beacon completed five acquisitions in 2016.
US LBM Holdings, backed by Kelso & Company since
August 2015, has completed 14 tuck-in acquisitions to date
under its ownership, including in January 2017, Ridout
Companies, comprised of Ridout Lumber Companies
of Arkansas and Missouri, Ridout Door Manufacturing
Company, and Arkansas Wholesale Lumber Company.
Ridout is an Arkansas-based distributor of building
products and materials to the professional builder and
DIY markets. Products include lumber, windows, doors,
roofing, cabinets, decking, and flooring, as well as design
and installation services. Ridout is the largest distributor
in Arkansas, according to U.S. LBM, with a geographic
footprint that consists of 12 locations in Arkansas and 1
location in Missouri. U.S. LBM completed six acquisitions
in 2016, among the acquired companies: Keene Lumber
Company in Western Michigan; residential and commercial
door manufacturer American Lumber Corporation (ALCO
Doors) based in Baltimore; and R. G. Darby Company, a
supplier of doors, millwork, and other building products to
the multifamily construction industry.
In October 2016, ABC Supply completed the acquisition
of L&W Supply from USG Corporation (NYSE:USG) in
a transaction valued at $670 million. L&W Supply is a
leading specialty distributor of drywall, ceiling tiles, steel
framing and other building materials used by commercial
and residential contractors. The acquisition marks one
of the largest in ABC’s history, adding 136 distribution
branches and $1.43 billion in sales, expanding its footprint
to over 700 locations in 49 states. Sales of the combination
organization exceeds $8 billion. Transaction Multiples: .5x
Revenue and 12.9x EBITDA
In July 2016, Hardwoods Distribution (TSX: HWD)
acquired Rugby Architectural Building Products, a
distributor of non-structural architectural grade building
products to the commercial, industrial, retail, residential,
and institutional construction markets. The $120 million
purchase price consisted of a $13 million earnout contingent
on future performance. Headquartered in Concord, New
Hampshire,Rugby serves more than 22,000 customers from
31 facilities in 48 states. The company has accelerated its
growth through acquisitions, completing 12 tuck-ins since
2011 with financial backing from private equity sponsors
Leading Ridge Capital Partners and Building Industry
Partners. Rugby reported adjusted sales and EBTIDA of
$282 million and $12.5 million, respectively, for the LTM
period ended March 31, 2016. Transaction Multiples: .43x
Revenue and 9.6x EBITDA
Sources: S&P Capital IQ, PitchBook, Equity Research, Company Filings,public data.
Building Products Insider
Industry Valuations
Relative Valuation Trends
BGL Building Products indices de�ned on Pages 21 and 22.SOURCE: S&P Capital IQ.
Building Products Distributors Lumber and Wood Manufacturers
Aggregates and Cement Producers
Commercial-Focused Building Products ManufacturersResidential-Focused Building Products Manufacturers
Homebuilders
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
EV/EBITDA 14.9x 14.7x 15.0x 15.1x 13.2x 11.9x 11.3x 11.6x 13.6x 13.1x 11.7x 11.5x 11.4x 11.1x 11.0x 10.9x 10.9x
EV/Revenue 1.3x 1.4x 1.4x 1.5x 1.3x 1.3x 1.3x 1.3x 1.4x 1.4x 1.3x 1.4x 1.4x 1.5x 1.5x 1.4x 1.6x
0.00x
0.25x
0.50x
0.75x
1.00x
1.25x
1.50x
1.75x
2.00x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
EV/EBITDA 12.4x 13.3x 15.1x 14.7x 14.4x 14.2x 12.6x 13.9x 15.0x 14.5x 12.6x 13.1x 12.8x 11.7x 11.4x 13.2x 11.6x
EV/Revenue 1.3x 1.3x 1.3x 1.4x 1.4x 1.4x 1.3x 1.5x 1.6x 1.7x 1.7x 1.6x 1.5x 1.4x 1.5x 1.7x 1.7x
0.00x
0.25x
0.50x
0.75x
1.00x
1.25x
1.50x
1.75x
2.00x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
EV/EBITDA 12.8x 12.9x 12.9x 13.0x 12.9x 13.0x 11.8x 12.9x 12.9x 12.8x 12.0x 12.0x 12.5x 13.3x 12.5x 11.1x 11.5x
EV/Revenue 1.0x 1.0x 1.0x 1.0x 1.0x 1.0x 0.9x 1.0x 0.9x 0.9x 0.8x 1.0x 1.2x 1.1x 1.0x 0.9x 1.0x
0.00x
0.25x
0.50x
0.75x
1.00x
1.25x
1.50x
1.75x
2.00x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
EV/EBITDA 13.4x 11.0x 10.4x 10.4x 9.9x 9.6x 9.1x 9.9x 9.7x 9.7x 8.2x 9.1x 10.5x 9.8x 8.8x 9.1x 8.7x
EV/Revenue 1.3x 1.1x 1.2x 1.3x 1.3x 1.3x 1.3x 1.5x 1.3x 1.4x 0.9x 1.0x 1.0x 0.8x 0.8x 0.8x 0.9x
0.00x
0.25x
0.50x
0.75x
1.00x
1.25x
1.50x
1.75x
2.00x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
EV/EBITDA 10.6x 10.3x 11.6x 11.6x 12.1x 11.5x 10.6x 10.3x 11.3x 10.8x 11.1x 9.9x 10.0x 9.6x 9.9x 10.6x 10.2x
EV/Revenue 1.4x 1.4x 1.6x 1.5x 1.6x 1.7x 1.6x 1.6x 1.8x 1.7x 1.7x 1.7x 1.6x 1.6x 1.8x 2.0x 2.0x
0.00x
0.25x
0.50x
0.75x
1.00x
1.25x
1.50x
1.75x
2.00x
2.25x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
EV/EBITDA 29.3x 22.4x 17.3x 16.7x 13.0x 13.6x 11.9x 13.0x 13.4x 13.4x 12.4x 11.9x 11.8x 11.8x 11.8x 11.0x 11.4x
EV/Revenue 1.9x 1.6x 1.4x 1.4x 1.4x 1.4x 1.3x 1.4x 1.4x 1.3x 1.3x 1.2x 1.2x 1.2x 1.2x 1.1x 1.2x
0.00x
0.25x
0.50x
0.75x
1.00x
1.25x
1.50x
1.75x
2.00x
0.0x
3.0x
6.0x
9.0x
12.0x
15.0x
18.0x
21.0x
24.0x
27.0x
30.0x
20
Building Products Insider
Industry Valuations
Relative Valuation Trends
NOTE: Figures in bold and italic type were excluded from median and mean calculation.(1) As of 4/28/2017.(2) Market Capitalization is the aggregate value of a �rm's outstanding common stock.(3) Enterprise Value is the total value of a �rm (including all debt and equity).SOURCE: S&P Capital IQ.
($ in millions, except per share data) Current % of Market Enterprise Total Debt/ TTMCompany Name Country Ticker Stock Price (1) 52W High Capitalization (2) Value (3) Revenue EBITDA EBITDA Revenue Gross EBITDARESIDENTIAL FOCUSED BUILDING PRODUCTS MANUFACTURERSThe Sherwin-Williams Company United States NYSE:SHW $334.68 99.0% $31,168.2 $32,104.6 2.7x 15.8x 1.0x $12,043.0 49.9% 16.9%Compagnie de Saint-Gobain S.A. France ENXTPA:SGO 53.99 98.1% 29,928.8 36,486.9 0.9x 8.4x 2.4x 41,267.8 25.5% 10.1%Masco Corporation United States NYSE:MAS 37.02 98.5% 11,822.8 14,147.8 1.9x 11.7x 2.5x 7,414.0 33.7% 16.3%Fortune Brands Home & Security, Inc. United States NYSE:FBHS 63.74 96.6% 9,784.4 11,066.6 2.2x 13.9x 1.9x 5,065.2 36.5% 15.7%James Hardie Industries plc Ireland ASX:JHX 16.94 98.2% 7,469.0 7,920.8 4.1x 17.0x 1.2x 1,863.1 36.4% 24.2%Owens Corning United States NYSE:OC 60.85 96.9% 6,809.3 9,008.3 1.5x 8.0x 2.0x 5,924.0 25.1% 19.1%JELD-WEN Holding, inc. United States NYSE:JELD 33.03 96.0% 3,464.5 5,145.7 1.4x 16.4x 5.3x 3,666.8 21.8% 8.4%Armstrong World Industries, Inc. United States NYSE:AWI 46.75 97.4% 2,517.0 3,248.8 2.6x 10.7x 3.8x 1,234.5 30.5% 18.6%Masonite International Corporation United States NYSE:DOOR 83.20 97.5% 2,501.8 2,913.7 1.5x 12.8x 2.1x 1,974.0 20.8% 11.5%Trex Company, Inc. United States NYSE:TREX 73.19 93.6% 2,152.1 2,133.5 4.4x 18.0x 0.0x 479.6 39.0% 24.7%Simpson Manufacturing Co., Inc. United States NYSE:SSD 41.71 86.2% 1,987.7 1,821.1 2.1x 11.1x 0.0x 881.0 47.7% 18.7%Headwaters Incorporated United States NYSE:HW 23.76 99.0% 1,779.3 2,475.7 2.4x 14.4x 4.2x 1,068.9 29.0% 16.7%American Woodmark Corporation United States NasdaqGS:AMWD 91.90 98.7% 1,491.8 1,297.9 1.3x 10.9x 0.2x 1,012.4 21.3% 11.8%Ply Gem Holdings, Inc United States NYSE:PGEM 19.25 96.3% 1,316.8 2,105.6 1.1x 9.4x 3.7x 1,911.8 24.2% 11.8%Gibraltar Industries, Inc. United States NasdaqGS:ROCK 39.25 81.7% 1,239.3 1,278.7 1.3x 10.5x 1.7x 1,008.0 25.3% 12.0%Gri�on Corporation United States NYSE:GFF 24.00 88.4% 1,057.4 1,968.8 1.0x 10.8x 5.3x 1,930.1 24.5% 9.5%Quanex Building Products Corporation United States NYSE:NX 20.40 93.2% 702.3 960.7 1.0x 10.1x 2.9x 921.8 23.1% 10.4%PGT Innovations, Inc. United States NYSE:PGTI 10.90 87.3% 543.5 752.2 1.6x 10.2x 3.4x 458.6 30.9% 16.1%Median $40.48 96.7% $2,327.0 $2,694.7 1.6x 11.0x 2.2x $1,887.5 27.3% 15.9%Mean $59.70 94.6% $6,540.9 $7,602.1 1.9x 12.2x 2.4x $5,006.9 30.3% 15.1%
COMMERCIAL FOCUSED BUILDING PRODUCTS MANUFACTURERSLennox International Inc. United States NYSE:LII $165.39 95.6% $7,057.8 $8,112.5 2.2x 14.7x 2.1x $3,719.8 29.7% 14.3%Kingspan Group plc Ireland ISE:KRX 34.80 100.0% 6,220.6 6,757.7 2.0x 15.2x 1.7x 3,281.4 30.2% 13.1%USG Corporation United States NYSE:USG 30.30 87.4% 4,417.5 5,091.5 1.7x 8.9x 2.1x 3,037.0 22.7% 16.9%Valmont Industries, Inc. United States NYSE:VMI 152.35 92.2% 3,440.8 3,810.3 1.5x 11.4x 2.2x 2,562.5 26.0% 13.2%AAON, Inc. United States NasdaqGS:AAON 36.65 97.1% 1,928.9 1,885.1 4.9x 20.3x 0.0x 384.0 30.8% 24.2%NCI Building Systems, Inc. United States NYSE:NCS 17.50 96.7% 1,240.2 1,610.9 0.9x 11.1x 2.7x 1,706.6 24.7% 8.5%Forterra, Inc. United States NasdaqGS:FRTA 19.24 84.5% 1,234.7 2,294.4 1.7x 11.2x 5.7x 1,364.0 22.0% 14.1%Median $34.80 95.6% $3,440.8 $3,810.3 1.7x 11.4x 2.1x $2,562.5 26.0% 14.1%Mean $65.18 93.4% $3,648.6 $4,223.2 2.1x 13.3x 2.4x $2,293.6 26.6% 14.9%
BUILDING PRODUCTS DISTRIBUTORSThe Home Depot, Inc. United States NYSE: HD $156.10 99.9% $187,502.5 $208,565.5 2.2x 13.5x 1.5x $94,595.0 34.2% 16.3%Lowe's Companies, Inc. United States NYSE:LOW 84.88 99.0% 72,832.2 87,873.2 1.4x 11.7x 2.1x 65,017.0 34.6% 11.6%Wolseley plc United States NYSE:LPX 25.74 95.6% 3,714.7 3,432.4 1.5x 10.9x 1.2x 2,233.4 22.8% 13.8%Watsco, Inc. Switzerland LSE:WOS 63.46 92.8% 15,940.5 17,650.0 0.8x 11.8x 1.9x 20,227.7 28.4% 7.2%Beacon Roo�ng Supply, Inc. United States NYSE:WSO 138.80 87.0% 4,553.1 5,017.6 1.2x 13.8x 0.8x 4,241.4 24.5% 8.6%Builders FirstSource, Inc. United States NasdaqGS:BECN 49.57 95.1% 2,978.2 4,007.6 1.0x 11.0x 3.0x 4,152.8 24.8% 8.8%Lumber Liquidators Holdings, Inc. United States NasdaqGS:BLDR 16.01 98.7% 1,798.8 3,586.4 0.6x 10.3x 5.2x 6,367.3 25.1% 5.5%CanWel Building Materials Group Ltd. United States NYSE:LL 24.55 98.8% 696.8 726.5 0.8x NM NM 960.6 32.2% -5.5%Huttig Building Products, Inc. Canada TSX:CWX 4.33 83.5% 293.4 434.3 0.6x 11.9x 3.9x 728.3 12.6% 5.1%Bluelinx Holdings Inc. United States NasdaqCM:HBP 8.80 95.2% 228.0 283.2 0.4x 10.6x 2.1x 713.9 21.2% 3.7%Median $37.66 95.4% $3,346.4 $3,797.0 0.9x 11.7x 2.1x $4,197.1 25.0% 7.9%Mean $57.22 94.6% $29,053.8 $33,157.7 1.0x 11.7x 2.4x $19,923.7 26.0% 7.5%
TTM Enterprise Value / TTM Margins
21
Building Products Insider
Industry Valuations
Relative Valuation Trends
NOTE: Figures in bold and italic type were excluded from median and mean calculation.(1) As of 4/28/2017.(2) Market Capitalization is the aggregate value of a �rm's outstanding common stock.(3) Enterprise Value is the total value of a �rm (including all debt and equity).SOURCE: S&P Capital IQ.
($ in millions, except per share data) Current % of Market Enterprise Total Debt/ TTMCompany Name Country Ticker Stock Price (1) 52W High Capitalization (2) Value (3) Revenue EBITDA EBITDA Revenue Gross EBITDALUMBER AND WOOD MANUFACTURERSWeyerhaeuser Co. United States NYSE:WY $33.87 98.5% $24,798.8 $31,244.8 4.9x 19.7x 4.5x $6,387.0 22.9% 24.8%Louisiana-Paci�c Corporation United States NYSE:LPX 25.74 95.6% 3,714.7 3,432.4 1.5x 10.9x 1.2x 2,233.4 22.8% 13.8%West Fraser Timber Co. Ltd. Canada TSX:WFT 44.86 98.5% 3,506.1 3,821.3 1.1x 6.9x 0.7x 3,423.3 34.7% 16.7%Norbord Inc. Canada TSX:OSB 30.90 99.5% 2,660.1 3,234.7 1.9x 8.9x 2.0x 1,766.0 21.9% 21.1%Universal Forest Products, Inc. United States NasdaqGS:UFPI 95.29 85.9% 1,955.0 2,194.8 0.6x 10.3x 1.3x 3,404.5 14.5% 6.2%Canfor Corporation Canada TSX:CFP 14.99 99.9% 1,990.8 2,404.0 0.8x 6.1x 0.8x 3,221.6 31.0% 13.6%Deltic Timber Corporation United States NYSE:DEL 77.37 90.5% 942.4 1,177.4 5.4x 26.1x 5.3x 219.4 31.5% 20.5%Median $33.87 98.5% $2,660.1 $3,234.7 1.5x 10.3x 1.3x $3,221.6 22.9% 16.7%Mean $46.15 95.5% $5,652.6 $6,787.1 2.3x 12.7x 2.3x $2,950.7 25.6% 16.7%
AGGREGATES AND CONCRETE PRODUCERSLafargeHolcim Ltd Switzerland SWX:LHN $56.71 92.8% $34,350.5 $53,174.4 2.0x 9.9x 3.8x $26,486.1 41.9% 19.1%CRH plc Ireland ISE:CRG 36.47 97.1% 30,483.3 36,933.5 1.3x 10.8x 2.5x 28,611.8 32.6% 11.4%HeidelbergCement AG Germany DB:HEI 92.64 90.0% 18,380.4 30,144.3 1.8x 9.6x 4.2x 16,023.3 61.2% 17.4%Vulcan Materials Company United States NYSE:VMC 120.88 87.5% 16,033.1 17,757.0 4.9x 18.7x 2.1x 3,592.7 27.9% 26.4%Martin Marietta Materials, Inc. United States NYSE:MLM 220.19 90.2% 13,790.8 15,429.6 4.3x 16.2x 1.8x 3,576.8 25.4% 26.7%CEMEX, S.A.B. de C.V. Mexico NYSE:CX 9.22 95.8% 12,852.6 24,438.9 1.8x 8.9x 3.6x 13,680.1 35.3% 21.4%Boral Limited Australia ASX: BLD 4.60 83.2% 5,396.9 4,478.9 1.4x 9.7x 2.6x 3,072.9 33.0% 12.1%Buzzi Unicem SpA Italy BIT:BZU 25.71 95.5% 4,840.4 5,896.8 2.0x 8.6x 2.8x 2,817.8 37.7% 20.5%Eagle Materials Inc. United States NYSE:EXP 95.97 86.7% 4,645.9 4,942.6 4.2x 12.1x 1.2x 1,184.7 26.6% 31.2%Wienerberger AG Austria WBAG:WIE 23.43 96.9% 2,739.8 3,474.6 1.1x 8.7x 2.5x 3,139.3 32.4% 12.1%Summit Materials, Inc. United States NYSE:SUM 25.66 97.0% 2,729.5 4,164.3 2.6x 13.0x 4.9x 1,626.1 34.1% 19.8%Titan Cement Company S.A. Greece ATSE:TITK 26.14 97.8% 2,059.7 2,863.0 1.7x 9.3x 3.0x 1,593.1 29.0% 18.6%Grupo Cementos de Chihuahua, S.A.B. de C.V. Mexico BMV:GCC * 4.72 92.9% 1,569.2 2,119.2 2.9x 11.7x 3.7x 796.2 26.4% 23.5%U.S. Concrete, Inc. United States NasdaqCM:USCR 62.00 86.9% 985.2 1,358.7 1.2x 9.3x 3.1x 1,168.2 21.0% 12.5%Median $31.31 92.8% $5,118.6 $5,419.7 1.9x 9.8x 2.9x $3,106.1 32.5% 19.4%Mean $57.45 92.2% $10,775.5 $14,798.3 2.4x 11.2x 3.0x $7,669.2 33.2% 19.5%
HOME BUILDERSD.R. Horton, Inc. United States NYSE:DHI $32.89 95.2% $12,352.7 $14,627.7 1.1x 9.3x 2.0x $13,128.6 20.4% 12.0%Lennar Corporation United States NYSE:LEN 50.50 93.9% 11,593.4 17,898.1 1.6x 12.8x 5.2x 11,293.8 21.5% 12.0%NVR, Inc. United States NYSE:NVR 2,111.25 96.3% 7,912.5 8,026.4 1.3x 10.9x 0.8x 5,966.3 18.4% 12.3%PulteGroup, Inc. United States NYSE:PHM 22.67 92.8% 7,152.5 10,013.1 1.3x 9.4x 3.1x 7,864.7 24.9% 13.4%Toll Brothers, Inc. United States NYSE:TOL 35.99 96.3% 5,852.1 9,117.0 1.8x 16.1x 7.5x 5,161.7 19.6% 9.4%CalAtlantic Group, Inc. United States NYSE:CAA 36.22 88.5% 4,149.9 7,586.2 1.1x 9.1x 4.3x 6,631.2 21.8% 12.5%KB Home United States NYSE:KBH 20.60 96.5% 1,756.6 3,909.2 1.0x 17.5x 11.2x 3,734.9 16.4% 6.0%M.D.C. Holdings, Inc. United States NYSE:MDC 31.01 97.1% 1,600.6 2,252.8 1.0x 13.7x 5.9x 2,326.8 17.6% 7.1%Meritage Homes Corporation United States NYSE:MTH 38.95 94.5% 1,570.2 2,656.0 0.9x 10.8x 4.9x 3,117.2 18.1% 7.7%Cavco Industries, Inc. United States NasdaqGS:CVCO 118.75 97.6% 1,068.0 993.8 1.3x 19.7x 1.1x 753.1 17.6% 6.7%Taylor Morrison Home Corporation United States NYSE:TMHC 23.10 99.6% 1,203.7 3,612.0 1.0x 10.5x 4.3x 3,673.8 19.2% 9.2%William Lyon Homes United States NYSE:WLH 22.00 97.1% 702.6 1,807.0 1.3x 17.8x 11.3x 1,406.0 17.1% 6.8%M/I Homes, Inc. United States NYSE:MHO 27.16 95.6% 673.4 1,298.2 0.7x 9.7x 5.0x 1,773.9 19.9% 7.5%Century Communities, Inc. United States NYSE:CCS 27.30 97.5% 608.5 1,033.2 1.0x 13.2x 5.8x 994.4 19.6% 7.8%Beazer Homes USA, Inc. United States NYSE:BZH 12.41 78.5% 396.7 1,574.6 0.9x 45.8x 39.0x 1,816.9 14.2% 1.9%Hovnanian Enterprises, Inc. United States NYSE:HOV 2.34 79.1% $347.3 $1,993.9 0.7x 15.0x 12.4x 2,728.7 14.2% 5.0%Median $34.44 95.7% $6,502.3 $8,571.7 1.2x 12.8x 4.3x $6,298.7 20.0% 12.0%Mean $292.64 94.6% $6,546.3 $9,178.8 1.3x 13.0x 3.9x $7,013.5 20.1% 10.6%
TTM Enterprise Value / TTM Margins
22
Building Products Insider
Industry Valuations
Sector Performance
Source: S&P Capital IQ.As of 4/28/2017.
By Sector
Overall Market
5.6% 5.3%
14.9%17.4%
27.5% 27.3%
69.9%
58.3%
0%
20%
40%
60%
80%
S&P 500 DJIA
Retu
rns
YTD 1 Year 3 Year 5Y
15.7%9.8%
16.0% 14.5%5.9%
18.2%18.8% 20.9%15.9% 16.7% 17.2% 19.4%
33.8%
47.4%
80.8%
13.6%9.0%
29.5%
97.4%
139.6%
174.4%
77.6%
64.1%
90.3%
0%
40%
80%
120%
160%
200%
Residential-Focused BuildingProducts
Commercial-Focused BuildingProducts
Building Products Distributors Lumber and Wood Manufacturers Aggregates and Cement Producers Home Builders
Retu
rns
YTD 1 Year 3 Year 5Y
23
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recapitalized by
ZS Fund L.P.
E C S R E F I N I N G
Prospect Capital Corporation(NASDAQ: PSEC)
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