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Sizing Up M&A
Despite the headlines, blockbuster deals aren’t the only activity worth talking about.
The continuing acquisition activity in the
LBM segment is discussed by virtually
everyone in the industry. Serial
acquirers and mega deals dominate the
headlines. However, an analysis of buying
activity shows a broad base of potential buyers
for companies along the entire size spectrum.
From the beginning of 2014 to the end of
May 2016, ProSales tracked the acquisition of
149 companies, which operated just over 1,000
locations. Of note, the BMC transaction with
Stock Building Supply is categorized as a
merger, so the Stock locations merged with
BMC are not counted in these statistics. The
nine most active buyers grabbed 52% of total
acquisitions of companies, adding roughly 852
additional locations to their holdings. This
equated to 84% of all locations acquired.
When discussing LBM acquisitions, it is
important to characterize them both in terms of
the number of companies acquired and the
number of locations acquired. A state-by-state
tally of those locations makes a much more
interesting statement about the geographic
appetite of acquirers.
So where did these acquisitions take place?
Roughly 30% of all acquired locations were in
the Midwest and 26% were found in the
Southeast. The East Coast (13%), West Coast
(12%) and South Central (11%) were the next
most common homes to acquired locations. The
Mountain and Southwest regions contributed a
combined 7% of all acquired locations.
The mega deals in the industry garner the
most headlines and spark discussion and
speculation in the marketplace. However, they
are not the only activity in the LBM segment.
The average number of locations per acquired
company in the past two and a half years was
just under seven locations per company. Exclude
the three deals that involved the greatest number
of locations—ProBuild (335 locations),
Norandex (103), and Roofi ng Supply Group
(83)—and the number drops to an average of
just over three locations per acquired company.
Many of the LBM businesses acquired in
the past two years have been one- or twolocation
companies. Indeed, even the largest and
most active buyers in the industry will acquire a
single-location company that is profi table, sells
an interesting mix of products, and is located in
a geographic area that is of interest to the buyer.
Just as the mega deals capture attention, the
most active buyers also loom large in industry
headlines. Over the period considered, US LBM
was by far the most active acquirer by number
of companies, with 28 deals completed. ABC
Supply and Beacon Roofi ng Supply racked up
15 and 12 acquisitions, respectively.
However, owners of LBM businesses
seeking to sell benefi ted from a very broad
base of buyers over the past two years. The
48% of acquired companies that were not
bought by the nine most active buyers
represented 71 separate acquisitions. These
companies were bought by 54 different
small- and medium-sized acquirers. Clearly,
the majority of these buyers bought only one
company each and a handful bought two other
companies during the period analyzed.
What this means for owners of LBM
operations across the revenue size spectrum is
that there is likely a buyer out there for every
well-run LBM business. That buyer may be on
its way to a record-setting number of
acquisitions, or it may be completing that one
transformative deal that will let it leapfrog a
few spots on the ProSales 100.