BUILDING PRODUCTS M&A VOLUME SURGES - BUILDING PRODUCTS INDUSTRY UPDATE | JUNE 2021 - Capstone Partners
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
BUILDING PRODUCTS M&A VOLUME SURGES
BUILDING PRODUCTS INDUSTRY UPDATE | JUNE 2021
3
TABLE OF CONTENTS
Key Industry Takeaways 4
Industry Outlook 5
M&A Overview & Valuation
Drivers 6
Notable Transactions 7
Select Transactions 8
Construction Input Pricing 9
Segment Highlight: Tools,
Hardware & Fasteners 10
Segment Highlight:
Hardscapes 11
Construction Backlog
Improves in April 12
Construction Indices 13
Public Company Data 14
Firm Track Record 15
Report Contributors 16
Endnotes 17
Contact Our Building Products &
Construction Services Experts
Darin Good
Managing Director
303-549-5674
dgood@capstonepartners.com
Crista Gilmore
Director
303-531-5013
cgilmore@capstonepartners.com
Brian Krehbiel
Director
970-215-9572
bkrehbiel@capstonepartners.com
Capstone Partners is one of the largest and most active independently-owned
investment banking firms in the United States. Over the past 20 years, thousands
of business owners, investors, and creditors have trusted us to help guide their
strategic decisions and maximize financial outcomes at every stage of the
corporate lifecycle.
MIDDLE FULL SUPERIOR TOP ESTABLISHED
MARKET SERVICE CLIENT RANKED BRAND
FOCUS CAPABILITIES RESULTS PERFORMANCE REPUTATION
A DIFFERENT KIND OF FIRM. BUILT FOR THE MIDDLE MARKET.
Mergers & Capital Financial Special ESOP
Acquisitions Advisory Advisory Situations Advisory
&
Restructuring
• Sell-side Advisory • Transaction Advisory • Special Situations
• Equity Advisory • Interim Management
• Buy-side Advisory • Debt Advisory • Turnaround
• Recapitalizations • Performance • Restructuring
• Infrastructure Finance Improvement
• Mergers & Joint • Bankruptcy
Ventures • Valuation Advisory
• Insolvency
• Litigation Support
Sign Up for Industry Insights.
Delivering timely, sector-specific intelligence to your inbox
One of our core capabilities is to deliver sector-specific intelligence
designed specifically for industry leaders, private equity firms and
their advisors. Our industry reports and featured articles deliver
real-time access to key sector data including:
• Emerging industry trends
• Acquirer and investor appetites
• Mergers & acquisitions market analysis
• Notable transactions
• Public company data
Receive email updates with our proprietary data, reports, and insights
as they're published for the industries that matter to you most.
Subscribe
capstonepartners.com
Building Products Industry
Merger and Acquisition Volume Surges
KEY INDUSTRY TAKEAWAYS
Capstone Partners’ Building Products & Construction Services Group is pleased to share its Building Products
report. Merger and acquisition (M&A) activity has returned at a rapid pace as buyers are operating on greater
financial footing and business owners are capitalizing on favorable valuations and the current tax environment.
Several key report takeaways are outlined below.
1. M&A volume has increased nearly 50% year-over-year (YOY) driven by consolidation among strategic
buyers and private equity’s attraction to building products providers with strong growth profiles.
2. Construction input prices have continued to rise which has caused delays and disruptions to supply
chains and project completions.
3. Industry optimism is buoyed by healthy backlog levels, evidenced by YOY gains in the Commercial &
Institutional segment.
4. Leading public companies with favorable end market exposure have recorded strong revenue gains
through year-to-date (YTD).
5. A shortage of labor, at all levels, is further restricting a high rate of growth and will result in a prolonged
cycle of moderate growth and prosperity.
Capstone Partners has developed a full suite of corporate finance solutions, including M&A advisory, debt
advisory, financial advisory, and equity capital financing to help privately owned businesses and private equity
firms through each stage of the company’s lifecycle, ranging from growth to an ultimate exit transaction.
To learn more about Capstone’s wide range of advisory services and Building Products & Construction
Services industry expertise, please contact Capstone Managing Director Darin Good.
4
Building Products | June 2021
INDUSTRY OUTLOOK
Robust demand in the Building Products industry Select public building products providers have
has been fueled by healthy backlogs of experienced significant growth through YTD,
construction projects, elevated housing starts, and particularly those catering to Residential end
a recovery of commercial & institutional markets. With consumers increasingly focused on
construction. However, the pandemic has driven home renovation, remodeling building products
input prices upwards and increased the scarcity of providers have experienced strong demand.
select construction materials, causing delays and Notably, Masonite International (NYSE:DOOR), a
disruptions to many project timelines. Through leading manufacturer of doors to the Construction
April, construction input prices have increased industry, experienced a 17.3% increase in net sales
19.7% YOY led by outsized gains in softwood in the three months ending on April 4, 2021, driven
lumber, crude petroleum, and natural gas, by gains in average unit price and growth in its
according to the U.S. Bureau of Labor Statistics.1 In residential business, according to its most recent
addition, approximately 37% of architecture firms earnings release.4
have reported that elevated costs of basic
construction materials have been a serious Lumber products providers have experienced
challenge to operations, according to The unprecedented revenue increases fueled by
American Institute of Architects.2 favorable pricing and the strength of the
Residential Construction and Remodeling markets.
While pricing remains a key concern for Notably, Boise Cascade (NYSE:BCC), and
contractors, industry optimism has been Louisiana-Pacific (NYSE:LPX) recorded revenue
supported by healthy levels of nonresidential increases of 56% and 74%, respectively, according
construction projects entering the planning stage. to their earnings releases.5,6 “While there continues
Notably, the Dodge Momentum Index, which has to be a heightened level of economic uncertainty,
shown to lead construction spending for low mortgage rates, continuation of work-from-
nonresidential buildings by 12 months, recorded an home practices by many in the economy, the
8.6% increase in April, according to Dodge Data & demographics in the U.S., have created a favorable
Analytics.3 The increase has largely been demand environment for new residential
attributed to the growth of institutional building construction, particularly single-family housing
construction, which had been severely hampered starts, which we expect to continue in 2021 and
throughout the pandemic. The segment’s recovery into next year,” Nate Jorgenson, Boise Cascade
has been evidenced by the 77% increase in CEO & Director commented in the company’s
projects entering the planning stage over the last earnings call. 7
three months, according to Dodge.
Producer Price Index:
Inputs to Construction Industries
One Month % Change 12 Month % Change
25%
20% March 2020: COVID-19
Percent Change
declared a pandemic
15%
10%
5%
0%
-5%
-10%
Apr-17 Apr-18 Apr-19 Apr-20 Apr-21
Source: U.S. Bureau of Labor Statistics
5
Building Products | June 2021
M&A OVERVIEW & VALUATION DRIVERS
M&A volume has surged in the Building Products
industry in 2021 YTD, with 143 transactions
announced or completed, an increase of 49% YOY.
Darin Good
Impending capital gains tax increases imposed
Managing Director
under the Biden administration have encouraged
many business owners to reevaluate their exit “M&A activity is at record levels as Baby
timeline. Building products providers that had Boomers choose between liquidity and
envisioned a liquidity event in the next two to ownership under an environment of higher
three years, have increasingly pursued a sale regulation and income taxes.”
process prior to year end to avoid a substantial tax
liability. In addition, low interest rates, heightened
buyer competition, and healthy construction
backlogs bode well for elevated transaction
valuations for industry participants with strong
growth profiles.
Transaction Volume
M&A activity has proliferated through the year-to-date as tax
Public companies have actively pursued implications, favorable valuations, and a low interest rate
acquisition targets through YTD, accounting for environment have provided a healthy backdrop.
29% of total transactions. Notably, Patrick 400
Industries (Nasdaq:PATK) has continued to bolster
350 316
Number of Transactions
its building products and distribution portfolio and
recently acquired Alpha Systems (May, 300
243 233
undisclosed), a leading manufacturer and 250 214
distributor of component products and 200
accessories. Private strategics have also remained 143
150
active acquirers through YTD, accounting for 39% 96
of total volume, seeking product diversification, 100
cost synergies, and margin improvement. 50
0
Private equity buyers have continued to target the 2017 2018 2019 2020 YTD YTD
sector, comprising approximately 32% of M&A 2020 2021
volume. Sponsor attraction to the industry has
been supported by premium valuations upon exit
of portfolio holding companies. Notably, from 2017 Private Strategic Buyers Remain Active
to YTD 2021, the average transaction EBITDA Strategics have increasingly consolidated, with private
multiple for a private-equity sold company stood buyers leading M&A activity, while private equity firms have
sought add-ons to portfolio holdings
at 13.8x, far outpacing the overall average of 11.1x
over the same time period. Sponsors have
demonstrated robust appetite for building product
providers with diversified end markets, broad 19.6%
geographies, and a strong management team that STRATEGIC 29.4%
has a low degree of key person risk. Private equity Public
firms have sought to drive value for platform Private 11.8%
investments through add-on acquisitions, FINANCIAL
evidenced by Angeles Equity Partners and Platform
Clearlake Capital’s nine acquisitions through its Add-on 39.2%
American Construction Source (ACS) platform.
Notably, ACS was recently acquired by Bain Capital
Private Equity-backed US LBM in May for an Year-to-date (YTD) ended May 25
undisclosed sum (see more details on next page). Source: Capital IQ, FactSet, PitchBook, and Capstone Research
6
Building Products | June 2021
NOTABLE TRANSACTIONS
Bain Capital Private Equity-backed U.S. LBM has agreed to acquire leading national building
materials distribution platform, American Construction Source (ACS) for an undisclosed
sum. ACS provides lumber and building materials through its expansive portfolio of brands,
operating in over 70 locations. It serves homebuilders, repair and remodel contractors, and
do-it-yourself consumers. The transaction marks U.S. LBM’s fourth acquisition since being
acquired by Bain Capital Private Equity and follows its purchase of Higginbotham Bros. &
To Acquire Co. in May for an undisclosed sum.
"With the addition of the ACS portfolio, U.S. LBM will strengthen our position in the Midwest
and California, and expand our reach to Colorado and Washington, two quickly growing
Construction markets. We look forward to working with the ACS team and their local
operators to continue leveraging their strong relationships, experience and teams to grow
in their respective markets,“ said U.S. LBM President & CEO L.T. Gibson in a press release.8
Leading building material and service provider Builders FirstSource (Nasdaq:BLDR) has
agreed to acquire Cornerstone Building Alliance SW for an enterprise value of $400 million,
equivalent to 1.2x revenue. Cornerstone is the largest independently operated supplier of
building materials in Arizona with sales of approximately $330 million as of April 2021,
according to a press release.9 The acquisition adds to Builder FirstSource’s purchase of
John’s Lumber in May (undisclosed) as it continues to bolster its lumber and building
materials offerings.
To Acquire
The addition of Cornerstone also expands Builders FirstSource’s geographic footprint and
significantly enhances its product offerings. “This acquisition is aligned with our strategy of
investing organically and through M&A, to shift our portfolio toward high-value and faster-
growth categories. Alliance’s service area represents the third largest single-family market
and includes the fastest growing county, Maricopa, in the country,” said Dave Flitman,
President and CEO of Builders FirstSource in a press release.
Gypsum Management & Supply (NYSE:GMS) has agreed to acquire Westside Building
Material for an enterprise value of $135 million. Westside Building Material is a leading
independent supplier of steel framing, wallboard, acoustical ceilings, insulation, and related
building products. It services the Commercial and Residential markets, with its distribution
network comprising 10 locations, with nine concentrated in California. Westside recorded
approximately $200 million in net revenues for the 12-month period ending on December
To Acquire 31, 2020, according to a press release.10
GMS provides wallboard, suspended ceiling systems, and complementary construction
products, operating through a network of over 265 distribution centers across the U.S. and
Canada. The addition of Westside bolsters its presence in the California metro and allows
GMS to penetrate the Las Vegas market. “Westside’s differentiated platform provides a
unique opportunity for GMS to expand our reach and capture significant growth
opportunities in strategically important west coast markets,” commented John Turner,
president and CEO of GMS in a press release.
7
Building Products | June 2021
SELECT TRANSACTIONS
Enterprise EV / LTM
Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA
Cornerstone Builders FirstSource
05/24/21 Supplies building materials in Arizona. $400.0 1.2x -
Building Alliance (Nasdaq:BLDR)
Floor and Decor Manufactures, designs, and provides commercial
05/13/21 Spartan Surfaces flooring solutions. $90.0 1.1x -
Outlets
Westside
05/11/21 GMS (NYSE:GMS) Provides building materials. $135.0 - -
Building
Manufactures custom doors, windows, molding, trims,
05/10/21 Palm City Millwork Glenn Rieder and shutters for the Residential market. - - -
Rock & Block Distributes hardscapes, masonry, and
05/10/21 SiteOne (NYSE:SITE) - - -
Hardware landscape supplies.
John’s Lumber & Builders FirstSource Offers lumber, molding and trim, decking,
05/06/21 windows, doors and siding products. $24.9 0.5x -
Hardware (Nasdaq:BLDR)
Highway Simplex Manufactures and distributes materials for the
05/06/21 Concrete Construction industry. - - -
Materials Supplies
Alpha Patrick Industries Provides adhesives, sealants, cleaners, injection
05/03/21 molding, roofing, and flooring products. - - -
Systems (Nasdaq:PATK)
Distributes products and services for the Building and
05/03/21 Flagg Wilsonart - - -
Remodeling industry.
Foundation Provides drywall and accessories, steel framing,
05/03/21 ABC Builders Supply insulation, tools and fasteners. - - -
Building Materials
New Enterprise Manufactures and sells stone, sand asphalt,
04/30/21 Hempt Bros and concrete. - - -
Stone & Lime
04/26/21 Columbia Millworks Sunpro Supplies door and millwork products. - - -
West Shore
04/19/21 Hullco Manufactures vinyl windows and doors. - - -
Home
American
04/02/21 Foley Lumber Provides building materials for contractors. - - -
Construction
Manufactures building products including spiral stairs,
03/30/21 SSI Opportunities Marwin straight stairs, and barn doors. - - -
03/26/21 DriTac Flooring Sika (SWX:SIKA) Provides wood and resilient flooring adhesives. - - -
J&S Designer
03/25/21 Stark Carpet Offers hardwood flooring and fabrics. - - -
Flooring
Nova Wildcat Ferguson Designs and manufactures decorative and functional
03/16/21 hardware for kitchens, baths, and bedrooms. - - -
Amerock (LSE:FERG)
Manufactures and supplies doors, frames,
03/08/21 James Doorcheck Cook & Boardman and hardware. - - -
Rock Mountain Specialty Products
03/04/21 Distributes insulation and building materials. - - -
Construction & Insulation
Danbury Plumbing &
03/01/21 F.W. Webb Provides plumbing and heating products. - - -
HVAC Supply
Louis T. Ollesheimer
02/26/21 SRS Distribution Distributes roofing materials and equipment. - - -
& Son
Industrial business Pacific Avenue Comprises the building products manufacturing and
02/23/21 distribution business. $38.0 - -
of Gilbraltar Capital
Source: Capital IQ, PitchBook, FactSet, and Capstone Research
8
Building Products | June 2021
CONSTRUCTION INPUT PRICING – UPSTREAM SUPPLY
Producer Price Index – Commodities Construction
(Index Base Year 1982 = 100, Not Seasonally Adjusted)
1 Month % 12 Month %
April 2021 April 2020 March 2021
Change Change
Asphalt Felts and Coatings 262.6 246.4 259 1.4% 6.6%
Concrete Products 287.3 279.9 283.3 1.4% 2.6%
Copper Base Scrap 620.1 345.6 600.5 3.3% 79.4%
Fabricated Structural Metal Products 268.7 238.5 261.3 2.8% 12.7%
Glass 144.3 138.8 143.5 0.6% 4.0%
Hardware 233.5 227.5 232.2 0.6% 2.6%
Hardwood Lumber 268.3 203.9 259.2 3.5% 31.6%
Iron and Steel 322.8 204.7 289.6 11.5% 57.7%
Nonferrous Wire and Cable 300.9 238.5 287.1 4.8% 26.2%
Plumbing Fixture Fittings and Trim 346.5 339.9 346.3 0.1% 1.9%
Plywood 344.3 202 312.9 10.0% 70.4%
Softwood Lumber 469.4 212.3 441 6.4% 121.1%
Source: U.S. Bureau of Labor Statistics
Copper Base Scrap Copper Base Scrap Producer Price Index
Copper scrap prices have increased substantially, 700
rising over 79% year-over-year, according to the 600
Index 1982 = 100
U.S. Census Bureau.11 Pandemic-induced 500
production constraints have contributed to price
400
increases in addition to heightened consumer and
manufacturing use. Notably, copper’s extensive 300
usage in electric vehicle batteries and 200
semiconductor wiring has contributed to depleting 100
inventories, lending to forecasts of further price
0
increases in the near term.
Jan-20 Jun-20 Nov-20 Apr-21
Softwood Lumber Softwood Lumber Producer Price Index
Softwood lumber prices have soared over the past 700
year, rising approximately 121% according to the 600
Index 1982 = 100
U.S. Census Bureau. At the onset of the pandemic, 500
initial price increases were induced by lockdown
400
and social distancing measures which constrained
production. As the Housing market surged, lumber 300
mills struggled to meet demand, causing a 200
significant supply imbalance. This disparity has 100
resulted in an average price increase of nearly
0
$36,000 for new single-family homes, according to
NAHB.12 Lumber price volatility has also been fueled Jan-20 Jun-20 Nov-20 Apr-21
by tariffs on Canadian lumber imports into the U.S. Source: U.S. Census Bureau and Capstone Research
9
Building Products | June 2021
SEGMENT HIGHLIGHT: TOOLS, HARDWARE & FASTENERS
The Tools, Hardware & Fasteners segment has
benefited from the rising value of construction and
the surge in housing starts, which have increased
Brian Krehbiel
67% YOY in April, according to the U.S. Census
Director
Bureau.13 In addition, DIY (do-it-yourself)
construction projects have also bolstered demand, “New construction and existing or
as many homeowners have undertaken renovation renovation markets have been strong
projects which is forecast to continue in the near through COVID and are expected to
continue into the future. The trends in
term. Low levels of housing inventory and strong power tools are better efficiency, higher
demand has driven an increase in repair and capacity batteries, and improved
remodel construction as older homes, which often ergonomics and functionality.”
require improvements, are being purchased.
Leading public companies have captured
heightened revenues through Q1, capitalizing on
robust activity in Residential and Commercial
markets. Fortune Brands Home & Security
Industrial Fastener Market Poised to Grow
(NYSE:FBHS), a leading home and security
products provider, recorded a 26% increase in
$200
sales YOY, with its Outdoors & Security sales
segment rising 47%, according to its earnings
release.14 In addition, global provider of fastening
U.S. Dollars in Billions
$150
solutions, Illinois Tool Works (NYSE:ITW)
experienced a 10% increase in revenue, led by its $105.9 $110.2
$97.8 $101.8
Construction Products segment, according to its $100 $90.3 $94.0
earnings release.15
The segment also benefits from the diversity of $50
serviced end markets, with Construction, Framing,
Plumbing, Automotive, and Aerospace extensively
using tools and fastener products throughout the $0
production process. Notably, the highly 2020 2021 2022 2023 2024 2025
competitive Fastener market is projected to reach Source: Grand View Research
$110.2 billion by 2025, growing at a compound
annual rate of 4.1%, according to Grand View Research.16 Tools, hardware & fastener providers are expected to
remain in high demand as construction backlogs remain healthy. Industry participants with a diverse client
base, strong supplier relationships, and effective cost controls are forecast to attract elevated buyer interest.
Notable industry transactions include:
American Securities acquires ABC Builders Supply – American Securities, through its portfolio company
Foundation Building Materials, has acquired ABC Builders Supply in May for an undisclosed sum. ABC is a
premier distributor of tools, fasteners, drywall, steel framing, and accessories. The acquisition bolsters
American Securities building products portfolio and expands Foundation Building Materials presence in the
Residential and Commercial markets in Virginia. The transaction highlights private equity’s appetite for
enhancing sector portfolio construction through a buy-and-build strategy.
Würth Industry of North America acquires Atlantic Fasteners – Würth Industry North America has acquired
Atlantic Fasteners, a leading manufacturer of structural bolts and distributor of standard and specialty
fasteners. Terms of the transaction were undisclosed (February). Würth Industry North America is a division
within the Würth Group, a global fastener distribution provider. The addition of Atlantic Fasteners improves
Würth’s geographic footprint in the mid-Atlantic region, bolsters its distribution and manufacturing
capabilities, and adds the capability to manufacture anchor bolts to further support its customer base.
10Building Products | June 2021
SEGMENT HIGHLIGHT: HARDSCAPES
Hardscape demand has remained robust through
2020 and into YTD 2021 as homeowners have
increasingly pursued home remodeling and
renovation projects amid the pandemic. Notably
NAHB’s Remodeling Market Index (RMI) reached a
historic high in Q1 2021, with strongest current
market conditions experienced in small remodeling
projects under $20,000, according to NAHB.17 As
consumers place greater emphasis on home
improvement and outdoor living space, hardscape
demand is poised to continue in the near term.
Consolidation in the Hardscape segment has
experienced healthy volume through YTD, with
strategic buyers seeking geographic expansion,
additional product offerings, and margin
improvement. Leading hardscape and landscape
supplies provider SiteOne (NYSE:SITE) has been an
active buyer, rapidly adding hardscape businesses
to its platform to bolster its product portfolio.
Select acquisitions by SiteOne are included in the
table below.
Select SiteOne (NYSE:SITE) Acquisitions
Date Target Description
05/10/21 Rock & Block Hardscape Supply Supplies hardscapes, masonry, and
landscape products.
04/01/21 Arizona Stone & Architectural/Solstice Stone Distributes hardscapes, natural stone,
and landscape supplies.
01/06/21 Stone Center of Virginia Offers hardscapes, natural stone, and
landscape supplies.
01/04/21 Dirt and Rock Supplies natural and cultured stone, dirt,
rock, and landscape materials.
Crista Gilmore
Director
“COVID accelerated trends within the Outdoor Living and Hardscapes industries which
continue to have momentum as consumers look to expand the square footage of their
homes by creating outdoor living spaces.”
11Building Products | June 2021
CONSTRUCTION BACKLOG IMPROVES IN APRIL
Construction Backlog CBI Map of Regions and Backlog Month
The Associated Builders and Contractors (ABC) Northeast
Construction Backlog Indicator (CBI) is a forward- April 2021: 7.9 months
Midwest
April 2020: 7.8 months
looking national economic indicator that reflects April 2021: 6.9 months
the amount of work that will be performed by April 2020: 7.0 months
commercial and industrial contractors in the +0.1
MONTHS
coming months. The CBI registered 7.9 months in
April, a slight increase from March’s reading of 7.8
-0.1
months, according to ABC.18 MONTHS
+0.8
MONTHS
The Commercial & Institutional segment has
demonstrated an expanding backlog of projects,
with levels increasing to 8.0 months in April from
-0.5
7.7 months in March. The western U.S. has achieved MONTHS
the highest YOY increase with backlog levels rising
0.8 months. Construction input availability and West
supply chain disruptions will continue to be key April 2021: 8.8 months
focuses for industry participants in forecasting April 2020: 8.0 months South
revenues and project pipelines for the remainder April 2021: 8.2 months
April 2020: 8.7 months
of the year.
The chart below displays the national annual
average, broken down by quarter. While project Source: Associated Builders & Contractors
backlogs have demonstrated a strong recovery,
overall quarterly levels remain lower YOY.
CBI - National Backlog Average
2010 – Q1 2021
Q1 Q2 Q3 Q4
50
45
40
Number of Months
35
9.0
30 8.5 8.7 9.5 8.9
8.2 8.8
8.1 8.0 7.4
25
7.0 9.9 8.8
20 8.5 8.5 8.5 8.6 7.7
7.7 8.2
8.1
15 7.2 8.8
7.9 8.1 8.4 8.6 9.0 9.0 7.9
10 7.3 7.4
6.1
5 7.8 8.0 8.3 8.7 8.7 8.3 9.7 8.6 8.5 7.9
5.8 7.1
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: Associated Builders & Contractors
12Building Products | June 2021
CONSTRUCTION INDICES
Remodeling Market Index Remodeling Market Index (RMI)
The Remodeling Market Index (RMI) is based on a
quarterly survey of NAHB remodeler members that Current Market Conditions
provides insight on current market conditions as Future Market Indicators
well as future indicators for the remodeling market.
100
The RMI survey asks remodelers to rate five
Quarterly, Seasonally Adjusted
90
aspects of the remodeling market as "good," "fair,"
or "poor." Each question is measured on a scale 80
from 0 to 100, where an index number of 50 70
indicates a higher share of remodelers view
60
conditions as good rather than poor.
50
The RMI posted a reading of 86 in Q1 2021, an 40
improvement from the previous quarter’s level of
30
79. Current conditions have garnered heightened
optimism, with the index reaching a reading of 89. 20
Notably, the current market for small remodeling 10
projects has captured the strongest activity levels,
0
with an index level of 92.
2001 2006 2011 2016 2021
Source: NAHB Remodeling Market Index
Architecture Billings Index Architecture Billings Index
AIA’s monthly Architecture Billings Index (ABI) is a
Billings Design Contracts
leading economic indicator for nonresidential
construction activity, with a lead time of
approximately 9–12 months. The index is derived April April
from AIA’s Work-on-the-Boards survey, which has
gathered data on shifts in billings from
57.9 61.7
architectural firm leaders for over 20 years.
Market conditions for architecture firms have
improved significantly, with the index rising to 57.9
in April, marking the highest ABI score since before
the Great Recession.
Billings by Sector
March March
55.6 55.7
Commercial/ Institutional: Residential:
Industrial:
59.1 56.7 56.9 Source: The American Institute of Architects
13Building Products | June 2021
PUBLIC COMPANY DATA
Price % 52 Wk Market Enterprise LTM EV / LTM
Company 05/27/21 High Cap Value Revenue EBITDA Margin Revenue EBITDA
Plumbing / HVAC
AAON, Inc. $65.96 81.2% $3,458.6 $3,361.6 $492.9 $115.0 23.3% NM NM
A. O. Smith Corporation $71.10 97.3% $11,408.4 $10,897.4 $3,027.4 $596.6 19.7% 3.6x 18.3x
Lennox International Inc. $346.77 97.3% $13,099.8 $14,426.1 $3,840.8 $741.5 19.3% 3.8x 19.5x
Masco Corporation $60.47 88.2% $15,346.4 $17,885.4 $7,577.0 $1,599.8 21.1% 2.4x 11.2x
Average: 91.0% $10,828.3 $11,642.6 $3,734.5 $763.2 20.9% 3.2x 16.3x
Decking / Siding / Drywall
Eagle Materials Inc. $148.13 96.6% $6,277.8 $7,063.7 $1,622.6 $534.5 32.9% 4.4x 13.2x
James Hardie Industries plc $32.83 95.2% $14,586.1 $15,312.3 $2,908.7 $783.9 27.0% 5.3x 19.5x
Trex Company, Inc. $97.10 87.4% $11,201.6 $11,364.0 $926.0 $277.5 30.0% 12.3x 41.0x
Average: 93.1% $10,688.5 $11,246.6 $1,819.1 $532.0 $0.3 7.3x 24.6x
Building Systems
Apogee Enterprises, Inc. $38.08 89.2% $977.4 $1,156.8 $1,230.8 $144.8 11.8% 0.9x 8.0x
Armstrong World Industries, Inc. $105.13 97.5% $5,034.4 $5,686.8 $940.1 $316.6 33.7% 4.9x 18.0x
Cornerstone Building Brands, Inc. $16.95 95.7% $2,130.8 $5,376.6 $4,770.6 $804.7 16.9% 1.1x 6.7x
Owens Corning $106.62 97.0% $11,137.7 $13,884.7 $7,369.0 $1,601.5 21.7% 1.9x 8.7x
Average: 94.8% $4,820.1 $6,526.2 $3,577.6 $716.9 21.0% 2.2x 10.3x
Window / Door
Masonite International Corporation $119.41 90.3% $2,925.6 $3,570.3 $2,352.2 $404.1 17.2% 1.5x 8.8x
Quanex Building Products $26.56 91.5% $887.7 $1,010.9 $885.1 $121.2 13.7% 1.1x 8.3x
Average: 90.9% $1,906.7 $2,290.6 $1,618.7 $262.7 15.4% 1.3x 8.6x
Lumber / Wood Products
Boise Cascade Company $67.03 85.6% $2,636.3 $2,719.9 $6,125.6 $607.4 9.9% 0.4x 4.5x
Louisiana-Pacific Corporation $68.05 89.1% $6,958.3 $6,698.3 $3,220.0 $1,167.3 36.3% 2.1x 5.7x
UFP Industries, Inc. $79.92 88.8% $4,942.1 $5,459.6 $5,946.9 $538.9 9.1% 0.9x 10.1x
Average 87.8% $4,845.6 $4,959.3 $5,097.5 $771.2 18.4% 1.1x 6.8x
Building Product Distribution
Beacon Roofing Supply, Inc. $56.41 92.6% $3,941.0 $6,189.1 $7,225.9 $702.1 9.7% 0.9x 8.8x
Builders FirstSource, Inc. $45.15 83.6% $9,352.1 $11,456.1 $10,945.6 $1,086.5 9.9% 1.0x 10.5x
GMS Inc. $45.86 97.3% $1,964.9 $2,958.0 $3,137.5 $328.8 10.5% 0.9x 9.0x
Watsco, Inc. $288.82 93.8% $10,227.0 $10,698.8 $5,182.9 $556.1 10.7% 2.1x 19.2x
Average 91.8% $6,371.3 $7,825.5 $6,623.0 $668.4 10.2% 1.2x 11.9x
EV = enterprise value; LTM = last twelve months
$ in millions, except per share data
NM = Not Meaningful Source: Capital IQ as of May 27, 2021
One Year Total Returns as of May 27, 2021
Dow Jones Decking / Lumber / Building
Plumbing Building Window
S&P 500 Industrial Siding / Wood Product
/ HVAC Systems / Door
Average Drywall Products Distribution
40.6% 37.7% 41.3% 47.9% 83.0% 72.2% 119.5% 95.3%
Source: FactSet
14Building Products | June 2021
FIRM TRACK RECORD
Capstone Partners’ Building Products & Construction team has represented clients across various
construction specialties. Our deep industry focus allows us to provide our clients with real-time transaction
feedback and immediate access to key decision makers among the most active acquirers and investors in
the construction industry. A sampling of closed transactions are shown below.
HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY
a portfolio company of
MANAGEMENT BUYOUT
HAS RECAPITALIZED HAS PARTNERED WITH SUPPORTED BY
WITH
a portfolio company of
HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY HAS RECAPITALIZED
WITH
a portfolio company of
HAS BEEN
RECAPITALIZED BY HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY
a portfolio company of
15Building Products | June 2021
BUILDING PRODUCTS REPORT CONTRIBUTORS
Darin Good
Managing Director
dgood@capstonepartners.com | 303-549-5674
Darin is an advocate for his clients, guiding them through the complex process of raising
debt, equity or selling their company. During the past 24 years, Darin has led business
owners and their board of directors through this process over 70 times. Courts, trade
groups and national publications recognize Darin’s expertise where he provides
testimony as an expert witness and speaks about topics involving mergers and
acquisitions. Prior to joining Capstone, Darin started, operated, made acquisitions and
sold three successful companies in construction, import and distribution, and
commercial real estate management. Three sell side transactions that Darin performed
are published and taught in business schools around the globe. Darin teaches these
cases at the University of Denver, where he received his Bachelor of Science in Finance.
Crista Gilmore
Director
cgilmore@capstonepartners.com | 303-531-5013
Crista started her career at KPMG LLP then accepted a Senior Associate role with a $12
billion multi-strategy hedge fund managing the monthly PnL close process for several
funds. She was promoted to Vice President, Valuations responsible for pricing the
portfolio of over 8,000 securities monthly, as well as reporting to the Valuation
Committee on a bi-monthly basis. At Capstone, Crista works with clients to improve
their financial metrics and reporting capabilities. Additionally, she performs research,
valuation analysis, prepares marketing documentation, manages client data rooms and
responds to due diligence inquiries. Crista graduated summa cum laude from Drake
University with a degree in Finance and Accounting. She also earned a Master’s of
Accounting degree from Drake University and is a CFA Charterholder.
Brian Krehbiel
Director
bkrehbiel@capstonepartners.com | 970-215-9572
Prior to joining Capstone Partners in 2011, Brian spent five years with a boutique
investment bank performing sell-side transactions, financial modeling and value-add
client services. At Capstone, Brian is a member of the Building Products & Construction
Services team assisting clients with sell-side, buy-side and debt and equity raise
transactions. Prior to his career in Investment Banking, Brian developed construction
industry and operations experience owning and managing a successful family-owned
residential construction company. His education and industry expertise are resources
used in all aspects of the transaction process. Brian graduated from the University of
Northern Colorado with a BS degree in Finance and he is a CFA Charterholder.
Connor McLeod
Research Associate
cmcleod@capstonepartners.com | 617-619-3319
Connor is a Research Associate at Capstone Partners primarily specializing in Building
Products & Construction Services, Consumer & Retail, and Healthcare. Prior to joining
Capstone Partners, Connor was a specialist with the Investor Services team at
BlackRock. Connor holds a BA in Economics from Bates College and is a Series 7
Registered Securities Representative.
16Building Products | June 2021
ENDNOTES
1. U.S. Bureau of Labor Statistics, “Producer Price Indexes,” https://www.bls.gov/ppi/, accessed May 25, 2021.
2. The American Institute of Architects, “ABI April 2021: Architecture firm billings continue to rebound at a brisk pace,”
https://www.aia.org/pages/6401805-abi-april-2021-architecture-firm-billings-, accessed May 26, 2021.
3. Dodge Data & Analytics, “Dodge Momentum Index Increases In April,” https://www.construction.com/news/Dodge-Momentum-Index-Increases-In-
April-2021, accessed May 27, 2021.
4. Masonite International, “Masonite International Corporation Reports 2021 First Quarter Financial Results and Raises Annual Outlook,”
https://investor.masonite.com/Investors/Overview/default.aspx, accessed May 27, 2021.
5. Boise Cascade, “Q1 2021 Earnings Release Slides,” https://www.bc.com/portal/investor-relations/presentations/, accessed May 25, 2021.
6. Louisiana-Pacific, “LP Building Solutions Reports First Quarter 2021 Results, Provides Second Quarter Outlook, and Announces an Additional $1 Billion
Share Repurchase Authorization,” https://investor.lpcorp.com/news-releases/news-release-details/lp-building-solutions-reports-first-quarter-
2021-results, accessed May 26, 2021.
7. Seeking Alpha, “Boise Cascade Company (BCC) CEO Nate Jorgensen on Q1 2021 Results - Earnings Call Transcript,”
https://seekingalpha.com/article/4425871-boise-cascade-company-bcc-ceo-nate-jorgensen-on-q1-2021-results-earnings-call-transcript,
accessed May 27, 2021.
8. Cision, “US LBM To Acquire ACS American Construction Source,” https://www.prnewswire.com/news-releases/us-lbm-to-acquire-acs-american-
construction-source-301298367.html, accessed May 26, 2021.
9. Modern Distribution Management, “Builders FirstSource to Buy Cornerstone Building Alliance for $400 million,”
https://www.mdm.com/news/operations/mergers-acquisitions/builders-firstsource-buys-cornerstone-alliance/, accessed May 27, 2021.
10. Pro Sales, “GMS Acquires Westside Building Material,” https://www.prosalesmagazine.com/news/deals/gms-acquires-westside-building-material_o,
accessed May 26, 2021.
11. U.S. Bureau of Labor Statistics, “Producer Price Index – Logging,” https://www.bls.gov/regions/mid-
atlantic/data/producerpriceindexlogging_us_tables.htm, accessed May 25, 2021.
12. NAHB, “Skyrocketing Lumber Prices Add Nearly $36,000 to the Price of a New Home,” https://nahbnow.com/2021/04/skyrocketing-lumber-prices-
add-nearly-36000-to-the-price-of-a-new-home/, accessed May 25, 2021.
13. U.S. Census Bureau, “MONTHLY NEW RESIDENTIAL CONSTRUCTION, APRIL 2021,” https://www.census.gov/construction/nrc/pdf/newresconst.pdf,
accessed May 29, 2021.
14. Fortune Brands Home & Security, “FORTUNE BRANDS REPORTS EXCEPTIONAL SALES AND PROFIT GROWTH IN 1Q 2021; INCREASES 2021 ANNUAL
OUTLOOK BASED ON CONTINUED EXPECTED OUTPERFORMANCE IN A STRONG HOUSING MARKET,” https://ir.fbhs.com/news-releases/news-
release-details/fortune-brands-reports-exceptional-sales-and-profit-growth-1q, accessed May 27, 2021.
15. Illinois Tool Works, “ITW Reports Record First Quarter 2021 Results,” https://s25.q4cdn.com/220651370/files/doc_financials/2021/q1/ITW-Reports-
First-Quarter-2021-Results.pdf, accessed June 1, 2021.
16. Grand View Research, “Industrial Fastener Market Worth $110.24 Billion By 2025 | CAGR: 4.1%,” https://www.grandviewresearch.com/press-
release/global-industrial-fasteners-market, accessed May 25, 2021.
17. NAHB, “Remodeling Market Index (RMI),” https://www.nahb.org/news-and-economics/housing-economics/indices/remodeling-market-index,
accessed May 25, 2021.
18. Associated Builders and Contractors, “ABC’s Construction Backlog Inches Up in April; Contractor Optimism Slips,” https://www.abc.org/News-
Media/News-Releases/entryid/18751/abc-s-construction-backlog-inches-up-in-april-contractor-optimism-slips, accessed May 25, 2021.
Common Goals. Uncommon Results.
Disclosure
This report is a periodic compilation of certain economic and corporate information, as well as completed and announced merger and
acquisition activity. Information contained in this report should not be construed as a recommendation to sell or buy any security. Any
reference to or omission of any reference to any company in this report should not be construed as a recommendation to buy, sell or
take any other action with respect to any security of any such company. We are not soliciting any action with respect to any security
or company based on this report. The report is published solely for the general information of clients and friends of Capstone
Partners. It does not take into account the particular investment objectives, financial situation or needs of individual recipients.
Certain transactions, including those involving early-stage companies, give rise to substantial risk and are not suitable for all investors.
This report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not
be relied upon as such. Prediction of future events is inherently subject to both known and unknown risks and other factors that may
cause actual results to vary materially. We are under no obligation to update the information contained in this report. Opinions
expressed are our present opinions only and are subject to change without notice. Additional information is available upon request.
The companies mentioned in this report may be clients of Capstone Partners. The decisions to include any company in this report is
unrelated in all respects to any service that Capstone Partners may provide to such company. This report may not be copied or
reproduced in any form or redistributed without the prior written consent of Capstone Partners. The information contained herein should
not be construed as legal advice.
17Market Presence
With a long-established U.S. footprint, together with an international partner
platform, we provide clients with broad expertise and access to key market
relationships on a global basis. Our presence is backed by ~200 professionals in the
U.S. with 450+ professionals across 43 countries.
218 $12.5B 30% 6th
M&A transactions aggregate of our deals globally ranked for
completed in 2020 transaction value are cross- deals under $500m
border
$65.1M 51 65%
average deals involving foreign completed with a
transaction private equity firms European partner
value
United States International
170+ professionals 450+ professionals
12 offices 60+ offices in 43 countries
Boston · Chicago · Dallas · Asia: China · India · Japan · Thailand
Denver Detroit · Los Angeles · Africa: Congo · Egypt · Ghana · Ivory Coast · Mauritius · Morocco · Nigeria · Senegal · South Africa
New York Orange County · Americas: Toronto · Vancouver · Argentina · Brazil · Chile · Colombia · Mexico · Panama & Central
Philadelphia Richmond · San America · Peru
Diego · Tampa Europe: Belgium · Bosnia & Herzegovina · Croatia · Czech Republic · Finland · France · Germany ·
Hungary · Ireland
Italy · Netherlands · Poland · Portugal · Russia · Serbia · Slovakia · Slovenia · Spain · Sweden ·
United Kingdom
capstonepartners.comYou can also read
