TM Capital Building Products Report Continued Sector Growth Attracting M&A Activity
Industry Spotlight
www.tmcapital.com Case Study: PE-Backed Strategic Investment Grey Mountain Partners-Backed Consolidated Glass Acquires J.E. Berkowitz
In November 2016, Consolidated Glass Holdings, a fabricator and distributor of architectural glass, metals and specialty products and a portfolio company of Grey Mountain Partners (“Grey Mountain”) acquired J.E. Berkowitz L.P. (“J.E.
has been acquired by Berkowitz”). Based in Pedricktown, NJ, J.E. Berkowitz is a market leader in the fabrication of a full suite of glass products, including insulating, engineered, tempered and laminated glass, for a range of commercial buildings. The Company is a critical value-added glass fabricator providing“As the U.S. premiumhousing market products, continues its recovery, we believe now is the ideal time to position Builders FirstSource for its next phase of a portfolio company of coupled with design and project management services.growth and value creation. Together we will establish a broader, more efficient platform of manufacturing and distribution capabilities, supported by high-quality service from the best talent in the industry.” J.E. Berkowitz’s attractive and highly defensible profile coupled with favorable – Floyd Sherman, Chief Executive Officer of Builders FirstSource industry tailwinds garnered significant interest. TM Capital served as exclusive financial advisor to J.E. Berkowitz. The undersigned served as financial advisor to J.E. Berkowitz, L.P. in connection with this transaction. The combination of J.E. Berkowitz and Consolidated Glass Holdings establishes an industry leading company that can produce a wide range of products to serve multiple market segments. The transaction is yet another example of a financial sponsor building upon an investment in the “We are honored to have the opportunity to partner with Arthur Berkowitz and the JEB employees, and to support the CGH team as Building Products sector through additional strategic acquisitions they continue to grow the business.” to take advantage of what is expected to be an extended period of – Aditya Dabas, Senior Associate and Affiliate Manager with Grey Mountain Partners favorable industry trends.
Case Study: Financial Sponsor Investment High Road Capital Partners Acquires Midwest Wholesale Hardware
In February 2017, Midwest Wholesale Hardware (“Midwest”), an investment holding of Olympus Partners and premier, value-added national distributor of commercial and institutional door hardware, electronic access controls and
an investment holding of security products, was acquired by High Road Capital Partners, a private equity firm focused on middle market transactions. TM Capital served as exclusive financial advisor to Midwest.
Midwest, based in Kansas City, Missouri, offers the industry’s largest next- has been acquired by day fulfillment platform and operates distribution centers in California, Florida, Pennsylvania, South Carolina and Texas. The Company provides expert customer service and offers an extensive inventory of all major brands and hard-to-find components for maintenance and repair applications within the The undersigned served as financial advisor to Midwest Wholesale Hardware in connection commercial and institutional door hardware market. Management and High with this transaction. Road plan to accelerate the Company’s growth by expanding its distribution coverage, investing in innovative technology solutions and pursuing strategic acquisitions.
“We are excited to partner with Midwest Wholesale Hardware and…build upon the Company’s position as the premier after-market distributor of commercial door products. We look forward to supporting Midwest’s efforts to expand its geographic presence and capitalize on growth within the electronic access control market.”
– Ben Schnakenberg, Partner, High Road Capital Partners
www.tmcapital.com Building Products Industry Spotlight Market Demand Drivers
Overview
As strong tailwinds in the residential and non-residential construction markets endure, both strategic and financial investors remain highly acquisitive in the Building Products sector. A recovery in the U.S. housing market has spurred an increase in Building Products M&A transactions in recent months – in 2016, there were 295 reported Building Products M&A transactions in the U.S. and Canada (see figure 8, page 3). In addition to continued sector growth, there are several supplemental factors that should spur sector expansion and consolidation: (1) Single-family housing starts remain well below pre-recession levels, indicating a favorable outlook for continued growth in coming years; (2) Aging commercial building stock represents a sustainable addressable market for renovation and reuse projects; and (3) Macroeconomic trends, including historically low interest rates, low gas prices, rising income and low unemployment all contribute to increased home improvement spend. Corporate balance sheets continue to hold record amounts of capital enabling them to focus on consolidation and geographic expansion and financial sponsors continue to have significant dry powder, aligning forces for a strong M&A activity outlook.
Macroeconomic Factors Providing Robust Industry Tailwinds
Non-Residential Construction Spending
Investment interest in Building Products manufacturers and distributors typically ebbs and flows with end market construction cycles. Dodge Data & Analytics predicts 6% construction growth in 2016, with the value of construction starts reaching $712 billion. Growth in the construction industry will continue to be led by privately financed projects, bolstered by robust commercial construction – the value of private non- residential construction is projected to increase at a 2.1% 5-year CAGR to $488.1 billion in 2021 (see figure 1). With 81.6% of commercial buildings in the U.S. having been built prior to 2000, a substantial addressable market exists for renovation projects that will drive commercial construction in the near future (see figure 2). Furthermore, the Architectural Billings Index, a leading indicator for non-residential construction activity has been greater than 50 in 40 of 47 months since January 2013, indicating an increased level of interest in new building construction (see figure 3).
Figure 1: Non-Residential Building Construction
($ in billions) $600 $540 $509 $478 $488 $500 $473 $458 $467 $452 $438 $452 $441 $447 $414 $421 $423 $429 $400 $366 $375
$300 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E2017P2018P2019P2020P2021P Source: IBISWorld
Figure 2: Current Commercial Buildings by Year Figure 3: Architectural Billings Index Constructed (% of Total Buildings and % Floorspace)
20.0% 17% 60 15% 16% 16% 16% 15% 15.0% 12% 12%12% 13% 55 11%11% 11% 8% 10.0% 7% 50 5% 5.0% 45 40 — Before 1946 1960 1970 1980 1990 2000 2008 35 1946 to to to to to to to 30 1959 1969 1979 1989 1999 2007 2012 Year Constructed Percent of Total Buildings Percent of Total Floorspace Source: U.S. Energy Information Administration Source: American Institute of Architects
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Building Products Industry Spotlight Market Demand Drivers
Residential Construction Spending & Housing Starts
Historically low mortgage rates and favorable demographic trends – including increased consumer confidence and low unemployment – are propelling continued growth in the residential construction market. The National Association of Home Builders (“NAHB”) forecasts single-family production to expand by more than 10% in 2016 – builder confidence in the market for newly built single-family homes in December 2016 was at its highest level since 2005. New housing starts have grown consistently since 2009; 1.1 million new privately owned housing units started in 2016, representing a 10% 5-year CAGR. Despite decreasing multifamily housing starts, single-family housing starts have yet to reach the levels recorded in the prior decade. New household formations (“HF”) are a critical indicator in the housing market and explain some of the slow recovery in single-family starts. Even though HF figures have tripled since the 2008-2009 period, the ratio of Housing Units Started per HF remains below its 35-year historical average of 1.3 and has been so for five of the past six years (see figures 4 & 5).
Figure 4: U.S. Housing Units Started
(in thousands) 2,069 2,250 1,956 1,801 1,355 1,258 1,365 1,500 1,001 1,108 1,143 906 784 928 554 587 609 750 ― 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017P 2018P Single-family Multifamily
Figure 5: U.S. Household Formations and Housing Starts per Household Formation
3,000 2,389 4.0 1,627 3.0 2,000 1,343 1,375 1,358 1,041 1,157 1,232 2.0 772 770 1,000 722
1.0
Starts Per Per Starts
Formation
Household Household Household Household Formations 398 357 (Thousands) ― — 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Household Formations Housing Starts per Formation 35-Year Avg. (Housing Starts per Formation) Sources: U.S. Census Bureau (Figure 4); National Association of Home Builders & U.S. Census Bureau (Figure 5) Increasing home prices and greater sales of existing homes support demand for renovations; improved consumer confidence (a result of rising incomes, lower unemployment and home equity appreciation) will spur increasing levels of discretionary spending, including on big-ticket items such as home renovations. IBISWorld forecasts home improvement spending in the United States to increase at a 2.9% CAGR to $188 billion by 2021 (see figure 6). Furthermore, the LIRA remodeling activity, a leading indicator of strong demand for building products in the U.S., projects the value of homeowner improvements and repairs to increase from $304 billion in Q3 2016 to $327 billion by Q3 2017, (see figure 7).
Figure 6: U.S. Home Improvements Spending Figure 7: LIRA U.S. Remodeling Activity
($ in billions) ($ in billions) $350 $322 $327 $180 $185 $188 $304 $305 $313 $200 $163 $169 $174 $291 $297 $300 $286 $150 $250 $100 Repairs $200 $50 Homeowner
Improvements & & Improvements Q4 Q1 Q2 Q3 Q4P Q1P Q2P Q3P — 2015 2016 2017 2016E 2017P 2018P 2019P 2020P 2021P
Source: IBISWorld Source: Joint Center for Housing Studies at Harvard University
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Building Products Industry Spotlight M&A Activity
Trends in Building Products M&A Activity
Both strategic and financial acquirers are capitalizing on favorable macroeconomic trends and strong industry tailwinds in the construction and housing sectors. Consolidation continues to permeate the fragmented Building Products space, as evidenced by the 295 reported M&A transactions announced and executed in 2016 in the U.S. and Canada. Recent M&A activity within the Building Product sector has been characterized by many of the following trends: (1) Product-oriented Building Products companies are seeking to expand and penetrate into service categories; (2) Distributors are aggressively converging to create a one-stop Building Products solution; (3) Large, mature companies are seeking to make targeted acquisitions outside of their core product offerings; (4) Technological innovations are blurring the lines between commercial and residential product applications; and (5) Private equity firms with significant dry power are pursuing platform acquisitions in the Building Products space in order to establish a presence in the sector upon which to grow organically and through add-on acquisitions.
Figure 8: U.S. and Canada Building Products M&A Announced Deal Volume 500 397 382 349 400 311 324 286 75 72 300 304 300 293 295 300 262 71 265 33 207 206 44 211 33 45 57 39 50 33 184 55 44 200 28 21 32 35 278 322 310 278 253 256 259 267 221 261 243 262 100 186 152 171 207 183 ― 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Capital IQ Strategic Buyer Financial Buyer
Figure 9: U.S. and Canada Building Products M&A Disclosed Deal Volume (Dollar Amount)
($ in billions) $50.0 $42.4 $40.0 $32.3 $27.0 $30.3 $28.3 $30.0 $25.3 $16.7 $19.5 $18.5 $17.0 $20.0 $13.0 $10.8 $13.1 $10.0 $6.9 $8.8 $10.0 $3.9 — 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Capital IQ Strategic Buyer Financial Buyer
Product-Oriented Building Products Companies Seek to Expand or Acquire Service Capabilities
There is an increasing trend among Building Products manufacturers and distributors to expand service capabilities, with the goal of becoming a one-stop-shop for customers. Building Products manufacturers and distributors are equipped with specialized product expertise, making the addition of service capabilities a logical adjacency. Furthermore, exposure to installation and renovation services allows Building Products manufacturers to become more innovative in new product development by understanding firsthand the needs of the customers they serve and the performance of the products they sell. Building Products manufacturers are increasingly seeking add-on acquisitions of established service companies as a means of expanding their capabilities to accelerate growth. For example, Atlas Copco, a provider of sustainable productivity solutions including compressors, vacuum solutions, air treatment systems and construction equipment, recently acquired three companies with service capabilities – Vacuum Solutions, Air Repair Sales & Services and Air Supply Systems, Inc. – in an effort to service the equipment they sell to customers. Further supporting this trend, US LBM, the third largest specialty building materials distributor in the U.S. recently acquired Raymond Building Supply, a provider of lumber, garage doors, windows, cabinets, appliances and installation services.
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Building Products Industry Spotlight M&A Activity
Aggressive Consolidation by Building Products Distributors Deepening Existing Platforms
The wholesale Building Products sector continues to generate enormous M&A activity, with most transactions involving large distributors acquiring smaller targets. There is an increasing need for Building Products wholesalers to become a one-stop solution as customers seek to buy a wider variety of products from a smaller number of highly reliable suppliers. Among the most active companies in the space, SRS Distribution and Beacon Roofing Supply, distributors of roofing materials and exterior building products, completed six and five acquisitions in 2016, respectively.
Expansion into Product Adjacencies
Large Building Products companies are increasingly seeking and acquiring businesses outside of their core offering – as competition intensifies in the fragmented Building Products space, acquisition activity is likely to continue as companies seek to add adjacent product lines. The steep learning curve required to enter new product areas results in companies leveraging strong and proven platforms to break into new product areas through strategic acquisitions. Furthermore, expansion of products and service capabilities allows companies to diversify their construction cycle risk. As evidence of this trend, ABC Supply, the largest wholesale distributor of roofing in the U.S., closed five deals in 2016, including the acquisition of L&W Supply, a distributor of drywall and ceiling tiles, enabling the Company to expand its capabilities to the interiors of buildings.
Smart Technology in the Building Products Sector
The development of “smart” technology is transforming the Building Products sector. Manufacturers understand the importance of making their products “smart”, enabling end users to control usage, resulting in cost savings and the ability for products to “talk” to each other. Smart technology is also influencing the activities of Building Products distributors who receive higher margins for distributing technologically advanced building products, including advanced access security products and smart HVAC systems. As technology advances and traditional manufactured building products continue to incorporate software, controls and connectivity, companies operating in the Building Products space will need to adapt to the new technology, paving the way for potential M&A activity. In July 2016, Acuity Brands (“Acuity”), a provider of lighting solutions and services, acquired DG Logic, a provider of innovative software solutions that enable the “Internet of Things”, in order to support the Company’s efforts to provide “customers with solutions that will allow them to easily interact with various sets of data from various devices”, according to Acuity President Vernon Nagel1.
Consolidation Strategy Backed by Institutional Capital Taking Flight
Building Products manufacturers, distributors and service providers have recently gained interest from financial sponsors with significant dry powder that are aggressively pursuing add-on acquisitions in the Building Products space in order to increase their presence in the sector. Of the 295 U.S. and Canadian M&A transactions in 2016, 33 directly involved a financial buyer. Notably, Oncap acquired Tecta America, the largest provider of commercial roofing services in the United States, for $280 million. Although the direct number of private equity investments has yet to recover to pre-recession levels, private equity firms are building upon investments in the Building Products sector through additional tuck-in acquisitions. Since being acquired by Kelso & Company in August 2015, US LBM Holdings has acquired ten Building Products companies. Distribution International, a supplier of mechanical and industrial insulation, fabrication, refractory and HVAC products, has acquired five Building Products companies since being acquired by Advent International in December 2014. Similarly, Consolidated Glass, a portfolio company of Grey Mountain Partners, acquired J.E. Berkowitz, a high-quality architectural glass fabricator, in early November 2016.
1 GlobeNewswire – Acuity Brands Press Release
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Building Products Industry Spotlight M&A Activity
The charts below illustrate trends in the TEV/EBITDA multiples of disclosed M&A transactions and further break down M&A activity in the Building Products industry by sub-sector. In 2016, the median disclosed TEV/EBITDA multiple for a transaction in the Building Products industry was approximately 10x and the average disclosed deal size was $372 million. The most active sub-sectors within the Building Products industry for M&A activity in 2016 were Surfaces & Materials manufacturers and Building Products distributors, which disclosed 83 and 88 transactions in 2016, respectively.
Figure 10: U.S. and Canada Building Products Disclosed M&A Median TEV/EBITDA Multiples / Avg. Deal Size
($ in millions) 15.0x $500 12.2x 11.6x 9.0x 9.9x 9.9x $400 9.0x 9.4x 9.4x 10.0x 8.8x 8.2x 8.1x 8.6x 7.6x 7.4x 7.5x $300 6.4x 6.9x $200 5.0x
$100 Median DisclosedMedian
TEV/EBITDA Multiple TEV/EBITDA — —
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Size Deal Disclosed Avg. Source: Capital IQ Median TEV/EBITDA Multiple Average Deal Size
Figure 11: U.S. and Canada Windows, Doors & Cabinetry Disclosed M&A Volume / Avg. Deal Size
($ in millions) 50 46 $500 28 35 $400 32 31 27 25 27 23 22 23 24 $300 25 20 18 16 19 15 $200
Transactions $100 Total Disclosed Total ― — 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Size Deal DisclosedAvg. Source: Capital IQ Total Deal Volume Average Deal Size
Figure 12: U.S. and Canada HVAC & Lighting Disclosed M&A Volume / Avg. Deal Size
($ in millions) 100 89 $1,000 77 80 74 69 75 66 66 67 63 $750 59 60 57 62 49 54 52 54 50 $500
25 $250
Transactions Total DisclosedTotal ― —
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Size Deal Disclosed Avg. Source: Capital IQ Total Deal Volume Average Deal Size
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Building Products Industry Spotlight M&A Activity
Figure 13: U.S. and Canada Plumbing & Hardware Disclosed M&A Volume / Avg. Deal Size
($ in millions) 50 $800
$600 24 24 22 25 21 19 $400 17 16 15 16 16 17 13 13 13 12 11 10
Transactions $200 Total DisclosedTotal ― — 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Size Deal Disclosed Avg. Source: Capital IQ Total Deal Volume Average Deal Size
Figure 14: U.S. and Canada Surfaces & Materials Disclosed M&A Volume / Avg. Deal Size
($ in millions) 101 150 128 125 $1,200 100 99 100 88 87 84 83 $800 75 73 61 59 67 49 52 57
50 $400
Transactions Total Disclosed Total ― —
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Avg.Deal DisclosedSize Source: Capital IQ Total Deal Volume Average Deal Size
Figure 15: U.S. and Canada Building Products Distributors Disclosed M&A Volume / Avg. Deal Size
($ in millions) 100 88 89 88 $600 83 85 81 81 74 77 76 75 68 63 60 $400 46 47 50 36 28 $200
25
Transactions Total Disclosed Total ― —
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Size Deal Disclosed Avg. Source: Capital IQ Total Deal Volume Average Deal Size
Figure 16: U.S. and Canada Roofing, Siding & Insulation Disclosed M&A Volume / Avg. Deal Size
($ in millions) 47 50 $1,200 35 $1,000 31 28 28 27 25 27 $800 24 23 24 23 22 23 23 25 17 16 $600
$400 Transactions
Total DisclosedTotal $200 ― —
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Deal Avg.DisclosedSize Source: Capital IQ Total Deal Volume Average Deal Size
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Building Products Industry Spotlight M&A Activity
Strategic Consolidation – The following charts show a select group of Building Products consolidators that have been acquisitive within the sector over the past several years.
Windows, Doors & Cabinetry
Core Brand / Acquired Brands / Companies (Year Acquired) Acquirer
2016 2016 2016 2015 2015
28 Transactions Since 2012 2015 2015 2015 2015 2015 2014
6 Transactions Since 2012 2016 2015 2014 2014 2013
7 Transactions Since 2012 2016 2016 2015 2015 2015
8 Transactions Since 2012 2015 2015 2015 2014 2014
Windows segment 8 Transactions Since 2012 2015 2014 2013 2013
HVAC & Lighting
Core Brand / Acquired Brands / Companies (Year Acquired) Acquirer
Assets of
7 Transactions Since 2012 2016 2016 2015 2015 2013
12 Transactions Since 2012 2016 2016 2016 2015 2015
13 Transactions Since 2012 2016 2014 2014 2014 2014
Home & Life Solutions and Global 23 Transactions AC Segment Since 2012 2016 2016 2015 2014
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Building Products Industry Spotlight M&A Activity
Plumbing & Hardware
Core Brand / Acquired Brands / Companies (Year Acquired) Acquirer
3 Transactions Since 2012 2015 2015 2013
10 Transactions Since 2012 2016 2015 2014 2014 2013
6 Transactions Since 2012 2014 2013 2013 2012
4 Transactions Since 2012 2016 2015 2014 2012
Surfaces
Core Brand / Acquired Brands / Companies (Year Acquired) Acquirer
5 Transactions Since 2012 2014 2014 2013
9 Transactions Since 2012 2016 2015 2015 2015 2015
10 Transactions Since 2012 2015 2015 2015 2014 2013 2013
7 Transactions Since 2012 2015 2015 2014 2014 2014 2012
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Building Products Industry Spotlight M&A Activity
Distributors
Core Brand / Acquired Brands / Companies (Year Acquired) Acquirer
T&C Supply, Rooftek Roofing Inc. Supplies, Inc. 2016 2016 2016 2016 2015 Oregon Roofers Supply, Inc. 35 Transactions Since 2012 2015 2015 2015 2015 2015
2016 2016 2016 2016 2016
19 Transactions Since 2012 2016 2015 2015 2015 2014 Assets of
7 Transactions Since 2012 2015 2015 2014 2014 2014 Guilford Builders 6 Transactions Since Supply Co. 2012 2016 2016 2015 2015 2013
5 Transactions Since 2012 2016 2016 2016 2016 2015 Seifer Distributors, Inc. 2016 2016 2016 2016 2016
2016 2015 2015 2015
35 Transactions Since 2012 2015 2015 2015 2015 2015
2016 2016 2016
2016 2016 2016 2016
36 Transactions Since 2012 2015 2015 2015 2015
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Building Products Industry Spotlight Valuation Considerations
Valuation Considerations
The charts below illustrate the valuation metrics and stock performance of the Building Products industry by major sub-segment. In general, consumer-facing companies with strong brand names trade at a premium to more commoditized companies that rely heavily on raw material inputs (e.g. roofing, siding and insulation). Since the last report, the overall industry has seen an expansion in TEV / EBITDA multiples, with companies realizing significant sales and earnings growth and buyers willing to pay higher premiums to capture industry tailwinds. Forward multiples suggest that investors expect an acceleration of the housing market rebound as well as EBITDA growth, particularly in the Windows, Doors & Cabinetry and Materials sub-segments. The stock performance of all of the sectors across the Building Products categories have outpaced the S&P 500 over the past five years, with the exception of the Roofing, Siding and Insulation category. Figure 17: Guideline Public Company TEV / EBITDA Multiples
15.0x
12.0x 11.8x 11.9x 11.5x 11.7x 11.4x 11.7x 10.7x 11.0x 10.7x 10.1x 10.3x 10.2x 10.4x 10.1x 10.0x 9.2x 9.2x 9.0x 8.5x 8.4x 8.8x 8.4x 8.5x 7.7x
5.0x
LTM 2016E 2017P LTM 2016E 2017P LTM 2016E 2017P LTM 2016E 2017P LTM 2016E 2017P LTM 2016E 2017P LTM 2016E 2017P LTM 2016E 2017P 0.0x Windows, Plumbing & HVAC & Surfaces Roofing, Materials Distributors TM Capital Doors & Hardware Lighting Siding & Building Cabinetry Insulation Products Index Source: Capital IQ
Figure 18: Historical TEV / EBITDA Multiples Windows, Doors & 20.0x Cabinetry Plumbing & 16.0x Hardware Distributors 12.0x S&P 500 8.0x HVAC & Lighting 4.0x Materials
— Surfaces Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Roofing, Siding & Source: Capital IQ Insulation Figure 19: 5-Year Stock Performance Windows, Doors & 225% Cabinetry Surfaces 175% Plumbing & 125% Hardware Distributors 75% Materials
25% S&P 500
(25%) HVAC & Lighting Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Roofing, Siding & Source: Capital IQ Insulation
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Building Products Industry Spotlight Valuation Considerations
Recession Impact and Recovery
The charts below illustrate the impact of the Great Recession on the Building Products industry and the sector’s recovery compared to pre-recession levels. The ability to recover from the recession is measured by comparing each company’s expected 2016 EBITDA and revenue growth since its 2008, pre-recession, level. Companies in the Windows, Doors & Cabinetry and HVAC & Lighting sub- segments have displayed particularly strong sales and earnings performance compared to pre - recession levels, fueled by a recovery in building construction and home improvement spending in recent years.
Figure 20: Recession Impact and Recovery – Building Products Manufacturers 200%
156% 150% 150% 139% 105% 97% 102% 95% 100% 68% 63% 69% 60% 60% 55% 40% 45% 39% 50% 33% 31% 29% 14% 11% — (5%) (4%) (22%) (50%) ASSA Fortune Acuity Daikin Masco Tyman The Dixie Mohawk Apogee PPG Carlisle Owens ABLOY Brands Brands Group Corning
Windows, Roofing, HVAC & Plumbing & Doors & Surfaces Materials Siding & Lighting Hardware Cabinetry Insulation 2008 to 2016E EBITDA Growth 2008 to 2016E Revenue Growth
Figure 21: Recession Impact and Recovery – Building Products Distributors / Retailers
300% 537% 240%
200% 182% 166% 137% 150% 114% 100% 42% 44% 48% 38% 15% 22% 14% NA — NA 5% 5% — (3%) (32%) (100%) Builders Beacon Bluelinx Huttig Lowe's Pool The Home Universal Watsco Wolseley FirstSource Roofing Corporation Depot Forest Supply Products
Source: Capital IQ 2008 to 2016E EBITDA Growth 2008 to 2016E Revenue Growth
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Building Products Industry Spotlight Appendix
Appendix Selected Public Companies – Windows, Doors & Cabinetry ($ in millions)
Enterprise Revenue EBITDA Enterprise Value / EBITDA Revenue Growth EBITDA Margins Company Value LTM 2016E 2017P LTM 2016E 2017P LTM 2016E 2017P 5 yr. CAGR 2016E LTM 2016E American Woodmark Corporation $966 $982 $941 $1,019 $116 $109 $123 8.4x 8.9x 7.9x 15.8% 14.0% 11.8% 11.5% ASSA ABLOY AB 23,453 7,931 8,077 8,684 1,456 1,455 1,613 16.1 16.1 14.5 11.3% 4.8% 18.4% 18.0% Fortune Brands Home & Security, Inc. 9,891 4,908 5,002 5,398 753 780 896 13.1 12.7 11.0 8.5% 9.2% 15.3% 15.6% Masco Corporation 12,478 7,313 7,353 7,698 1,195 1,231 1,341 10.4 10.1 9.3 0.5% 2.9% 16.3% 16.7% Masonite International Corporation 2,398 1,978 1,979 2,096 225 251 289 10.7 9.6 8.3 5.8% 5.7% 11.4% 12.7% PGT Innovations, Inc. 793 442 459 503 69 77 94 11.6 10.3 8.5 22.4% 17.9% 15.5% 16.8% Ply Gem Holdings, Inc 1,973 1,880 1,891 2,010 227 227 256 8.7 8.7 7.7 12.8% 2.8% 12.1% 12.0%
Median $2,398 $1,978 $1,979 $2,096 $227 $251 $289 10.7x 10.1x 8.5x 11.3% 5.7% 15.3% 15.6% Mean 7,422 3,633 3,672 3,915 577 590 659 11.3 10.9 9.6 11.0% 8.2% 14.4% 14.8%
Selected Public Companies – Plumbing & Hardware ($ in millions)
Enterprise Revenue EBITDA Enterprise Value / EBITDA Revenue Growth EBITDA Margins Company Value LTM 2016E 2017P LTM 2016E 2017P LTM 2016E 2017P 5 yr. CAGR 2016E LTM 2016E ASSA ABLOY AB $23,453 $7,931 $8,077 $8,684 $1,456 $1,455 $1,613 16.1x 16.1x 14.5x 11.3% 4.8% 18.4% 18.0% Fortune Brands Home & Security, Inc. 9,891 4,908 5,002 5,398 753 780 896 13.1 12.7 11.0 8.5% 9.2% 15.3% 15.6% Ingersoll-Rand Plc 22,891 13,476 13,494 13,761 1,937 1,966 2,075 11.8 11.6 11.0 1.1% 1.5% 14.4% 14.6% Masco Corporation 12,478 7,313 7,353 7,698 1,195 1,231 1,341 10.4 10.1 9.3 0.5% 2.9% 16.3% 16.7% Mueller Water Products, Inc. 2,428 1,139 1,161 927 188 202 191 12.9 12.0 12.7 3.8% (0.3%) 16.5% 17.4% Newell Brands Inc. 34,538 10,689 13,404 15,135 1,781 2,406 2,850 19.4 14.4 12.1 19.5% 126.6% 16.7% 17.9% Rexnord Corporation 3,850 1,916 1,924 1,910 309 360 347 12.5 10.7 11.1 2.8% (6.2%) 16.1% 18.7% Richelieu Hardware Ltd. 1,159 641 643 684 72 71 79 16.2 16.3 14.6 10.1% 13.0% 11.2% 11.1% Spectrum Brands Holdings, Inc. 10,643 5,040 5,121 5,139 896 954 996 11.9 11.2 10.7 10.0% 9.2% 17.8% 18.6% Stanley Black & Decker, Inc. 21,799 11,332 11,416 11,930 1,881 1,812 1,992 11.6 12.0 10.9 4.0% 2.2% 16.6% 15.9% Toto Ltd. 6,265 4,953 5,082 5,095 567 573 611 11.0 10.9 10.3 5.9% 5.8% 11.5% 11.3% Tyman plc 794 474 563 641 72 93 107 11.0 8.5 7.4 15.8% 27.3% 15.3% 16.6% Villeroy & Boch AG 410 882 895 924 70 79 85 5.9 5.2 4.8 2.3% 3.5% 7.9% 8.8% Watts Water Technologies, Inc. 2,435 1,415 1,403 1,476 202 213 230 12.0 11.5 10.6 (0.1%) (4.4%) 14.3% 15.2%
Median $8,078 $4,930 $5,042 $5,117 $660 $676 $753 12.0x 11.5x 11.0x 4.9% 4.2% 15.7% 16.2% Mean 10,931 5,151 5,396 5,672 813 871 958 12.6 11.7 10.8 6.8% 13.9% 14.9% 15.5%
Selected Public Companies – HVAC & Lighting ($ in millions)
Enterprise Revenue EBITDA Enterprise Value / EBITDA Revenue Growth EBITDA Margins Company Value LTM 2016E 2017P LTM 2016E 2017P LTM 2016E 2017P 5 yr. CAGR 2016E LTM 2016E Acuity Brands, Inc. $9,048 $3,406 $3,312 $3,630 $586 $610 $684 15.4x 14.8x 13.2x 13.0% 22.4% 17.2% 18.4% Daikin Industries,Ltd. 31,470 17,727 18,202 18,115 2,794 2,533 2,681 11.3 12.4 11.7 12.2% 7.8% 15.8% 13.9% Eaton Corporation plc 38,383 19,937 19,785 19,742 3,267 3,269 3,365 11.7 11.7 11.4 4.3% (5.1%) 16.4% 16.5% Ingersoll-Rand Plc 22,891 13,476 13,494 13,761 1,937 1,966 2,075 11.8 11.6 11.0 1.1% 1.5% 14.4% 14.6% Johnson Controls International plc 57,339 37,674 37,545 30,094 3,510 4,589 4,812 16.3 12.5 11.9 (1.7%) 1.0% 9.3% 12.2% Koninklijke Philips N.V. 32,136 26,364 26,434 27,338 3,390 3,600 3,963 9.5 8.9 8.1 3.2% 1.4% 12.9% 13.6% Lennox International Inc. 7,512 3,579 3,629 3,793 494 524 588 15.2 14.3 12.8 5.0% 4.6% 13.8% 14.4% Schneider Electric S.E. 48,689 27,571 26,586 27,188 4,049 4,213 4,529 12.0 11.6 10.7 2.0% (7.2%) 14.7% 15.8% United Technologies Corporation 108,305 56,885 57,307 58,795 10,155 10,823 10,676 10.7 10.0 10.1 0.6% 2.2% 17.9% 18.9%
Median $32,136 $19,937 $19,785 $19,742 $3,267 $3,269 $3,365 11.8x 11.7x 11.4x 3.2% 1.5% 14.7% 14.6% Mean 39,530 22,958 22,922 22,495 3,354 3,570 3,708 12.7 12.0 11.2 4.4% 3.2% 14.7% 15.4%
Selected Public Companies – Surfaces ($ in millions)
Enterprise Revenue EBITDA Enterprise Value / EBITDA Revenue Growth EBITDA Margins Company Value LTM 2016E 2017P LTM 2016E 2017P LTM 2016E 2017P 5 yr. CAGR 2016E LTM 2016E Armstrong World Industries, Inc. $2,915 $2,423 $1,239 $1,276 $291 $318 $339 10.0x 9.2x 8.6x (14.6%) (48.8%) 12.0% 25.7% Caesarstone Ltd. 947 531 530 560 127 127 138 7.5 7.4 6.9 15.3% 6.1% 23.9% 24.0% Headwaters Incorporated 2,443 975 986 1,192 173 190 244 14.1 12.9 10.0 10.9% 10.2% 17.8% 19.3% Interface, Inc. 1,277 966 968 996 136 133 152 9.4 9.6 8.4 0.3% (3.4%) 14.1% 13.8% Internacional de Cerámica, S.A.B. de C.V. 423 422 NA NA 69 NA NA 6.1 NA NA NA NA 16.3% NA Louisiana-Pacific Corporation 2,971 2,146 2,219 2,489 262 337 459 11.4 8.8 6.5 10.8% 17.2% 12.2% 15.2% Mohawk Industries, Inc. 18,173 8,775 8,923 9,338 1,699 1,708 1,817 10.7 10.6 10.0 9.6% 10.5% 19.4% 19.1% Panariagroup Industrie Ceramiche S.p.A. 267 402 416 435 36 43 50 7.5 6.1 5.4 5.7% 11.2% 8.8% 10.5% Tarkett S.A. 3,102 2,945 2,931 3,063 301 346 376 10.3 9.0 8.3 5.5% 0.4% 10.2% 11.8% The Dixie Group, Inc. 176 403 395 395 17 NA NA 10.3 NA NA 7.9% (6.5%) 4.2% NA Trex Company, Inc. 2,083 473 477 517 112 125 142 18.5 16.7 14.7 12.3% 8.3% 23.7% 26.2%
Median $2,083 $966 $977 $1,094 $136 $190 $244 10.3x 9.2x 8.4x 8.8% 7.2% 14.1% 19.1% Mean 3,161 1,860 1,908 2,026 293 370 413 10.5 10.0 8.7 6.4% 0.5% 14.8% 18.4%
Source: Capital IQ. As of Dec. 31, 2016
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Building Products Industry Spotlight Appendix
Appendix Selected Public Companies – Roofing, Siding & Insulation ($ in millions)
Enterprise Revenue EBITDA Enterprise Value / EBITDA Revenue Growth EBITDA Margins Company Value LTM 2016E 2017P LTM 2016E 2017P LTM 2016E 2017P 5 yr. CAGR 2016E LTM 2016E Carlisle Companies Incorporated $7,160 $3,658 $3,690 $3,867 $740 $737 $763 9.7x 9.7x 9.4x 8.2% 4.2% 20.2% 20.0% Compagnie de Saint-Gobain S.A. 35,411 42,276 42,014 43,691 4,267 4,277 4,655 8.3 8.3 7.6 (1.5%) (1.4%) 10.1% 10.2% James Hardie Industries plc 7,386 1,823 1,726 1,901 455 433 468 16.2 17.1 15.8 8.1% 4.2% 24.9% 25.1% Louisiana-Pacific Corporation 2,971 2,146 2,219 2,489 262 337 459 11.4 8.8 6.5 10.8% 17.2% 12.2% 15.2% Owens Corning 8,256 5,591 5,603 5,772 1,041 1,044 1,077 7.9 7.9 7.7 1.0% 4.7% 18.6% 18.6% Ply Gem Holdings, Inc 1,973 1,880 1,891 2,010 227 227 256 8.7 8.7 7.7 12.8% 2.8% 12.1% 12.0%
Median $7,273 $2,902 $2,954 $3,178 $597 $585 $615 9.2x 8.8x 7.7x 8.2% 4.2% 15.4% 16.9% Mean 10,526 9,562 9,524 9,955 1,165 1,176 1,280 10.4 10.1 9.1 6.6% 5.3% 16.4% 16.8%
Selected Public Companies – Materials ($ in millions)
Enterprise Revenue EBITDA Enterprise Value / EBITDA Revenue Growth EBITDA Margins Company Value LTM 2016E 2017P LTM 2016E 2017P LTM 2016E 2017P 5 yr. CAGR 2016E LTM 2016E Architectural Paint Masco Corporation $12,478 $7,313 $7,353 $7,698 $1,195 $1,231 $1,341 10.4x 10.1x 9.3x 0.5% 2.9% 16.3% 16.7% PPG Industries, Inc. 29,778 14,751 15,084 14,861 2,527 2,705 2,715 11.8 11.0 11.0 2.8% (1.6%) 17.1% 17.9% The Sherwin-Williams Company 27,802 11,678 11,754 12,754 1,966 1,973 2,195 14.1 14.1 12.7 6.0% 3.7% 16.8% 16.8% The Valspar Corporation 10,123 4,191 4,260 4,312 674 728 747 15.0 13.9 13.6 1.5% (3.0%) 16.1% 17.1%
Median $20,140 $9,495 $9,554 $10,226 $1,580 $1,602 $1,768 13.0x 12.5x 11.8x 2.1% 0.7% 16.6% 16.9% Mean 20,045 9,483 9,613 9,906 1,590 1,659 1,749 12.8 12.3 11.6 2.7% 0.5% 16.6% 17.1%
Building Boards Canfor Corporation $1,885 $3,223 $3,214 $3,434 $367 $400 $405 5.1x 4.7x 4.7x 11.8% 7.8% 11.4% 12.4% Interfor Corporation 992 1,338 1,368 1,479 128 151 179 7.7 6.6 5.5 18.9% 6.7% 9.6% 11.0% Louisiana-Pacific Corporation 2,971 2,146 2,219 2,489 262 337 459 11.4 8.8 6.5 10.8% 17.2% 12.2% 15.2% West Fraser Timber Co. Ltd. 2,884 3,307 3,385 3,735 419 483 536 6.9 6.0 5.4 10.0% 8.7% 12.7% 14.3% Weyerhaeuser Co. 30,816 7,871 6,766 6,995 1,765 1,674 1,950 17.5 18.4 15.8 1.7% (4.2%) 22.4% 24.7%
Median $2,884 $3,223 $3,214 $3,434 $367 $400 $459 7.7x 6.6x 5.5x 10.8% 7.8% 12.2% 14.3% Mean 7,910 3,577 3,390 3,627 588 609 706 9.7 8.9 7.6 10.7% 7.3% 13.6% 15.5%
Flat Glass Apogee Enterprises, Inc. $1,563 $1,063 $978 $1,092 $154 $129 $157 10.2x 12.1x 9.9x 10.9% 4.7% 14.5% 13.2% Asahi Glass Co., Ltd. 12,523 11,260 11,311 11,664 1,828 1,889 2,009 6.8 6.6 6.2 1.1% (3.3%) 16.2% 16.7% Central Glass Co., Ltd. 1,283 1,990 2,079 1,933 206 224 204 6.2 5.7 6.3 8.0% 18.4% 10.3% 10.8% CRH plc 38,156 28,990 30,161 31,693 2,943 3,377 3,766 13.0 11.3 10.1 9.2% 18.7% 10.2% 11.2% Nippon Sheet Glass Co., Ltd. 3,985 5,268 5,603 5,078 327 530 575 12.2 7.5 6.9 1.9% 1.4% 6.2% 9.5% PPG Industries, Inc. 29,778 14,751 15,084 14,861 2,527 2,705 2,715 11.8 11.0 11.0 2.8% (1.6%) 17.1% 17.9%
Median $8,254 $8,264 $8,457 $8,371 $1,077 $1,209 $1,292 11.0x 9.3x 8.4x 5.4% 3.0% 12.4% 12.2% Mean 14,548 10,554 10,869 11,054 1,331 1,476 1,571 10.0 9.0 8.4 5.6% 6.4% 12.4% 13.2%
Other Materials BlueScope Steel Limited $5,836 $6,976 $6,779 $7,952 $639 $700 $1,070 9.1x 8.3x 5.5x (0.1%) 4.7% 9.2% 10.3% Compagnie de Saint-Gobain S.A. 35,411 42,276 42,014 43,691 4,267 4,277 4,655 8.3 8.3 7.6 (1.5%) (1.4%) 10.1% 10.2% Eagle Materials Inc. 5,291 1,185 1,128 1,187 397 362 420 13.3 14.6 12.6 19.5% 5.8% 33.5% 32.1% Fletcher Building Limited 6,210 6,534 6,564 6,888 626 617 713 9.9 10.1 8.7 4.1% 4.4% 9.6% 9.4% Gibraltar Industries, Inc. 1,376 1,058 1,001 1,024 119 118 132 11.6 11.6 10.4 5.5% (3.8%) 11.2% 11.8% Insteel Industries, Inc. 579 420 440 418 68 72 73 8.6 8.0 7.9 5.5% (1.7%) 16.1% 16.4% NCI Building Systems, Inc. 1,459 1,685 1,689 1,778 150 165 184 9.8 8.8 7.9 12.0% 8.0% 8.9% 9.8% Owens Corning 8,256 5,591 5,603 5,772 1,041 1,044 1,077 7.9 7.9 7.7 1.0% 4.7% 18.6% 18.6% Quanex Building Products Corporation 932 928 929 900 103 109 111 9.1 8.5 8.4 1.8% 43.9% 11.1% 11.8% Simpson Manufacturing Co., Inc. 1,819 845 857 931 163 175 191 11.2 10.4 9.5 7.3% 8.0% 19.3% 20.5% USG Corporation 5,517 3,864 3,111 3,113 607 641 662 9.1 8.6 8.3 1.3% (17.6%) 15.7% 20.6% Vulcan Materials Company 18,986 3,577 3,645 4,117 977 1,003 1,257 19.4 18.9 15.1 7.3% 6.5% 27.3% 27.5%
Median $5,404 $2,631 $2,400 $2,446 $502 $490 $541 9.4x 8.7x 8.4x 4.8% 4.7% 13.5% 14.1% Mean 7,639 6,245 6,147 6,481 763 774 879 10.6 10.3 9.1 5.3% 5.1% 15.9% 16.6%
Median $6,829 $5,743 $5,835 $5,903 $790 $849 $916 10.2x 9.0x 8.4x 5.1% 3.9% 12.9% 14.2% Mean 12,535 7,465 7,505 7,767 1,068 1,129 1,226 10.8 10.1 9.2 6.1% 4.8% 14.6% 15.6%
Selected Public Companies – Distributors ($ in millions)
Enterprise Revenue EBITDA Enterprise Value / EBITDA Revenue Growth EBITDA Margins Company Value LTM 2016E 2017P LTM 2016E 2017P LTM 2016E 2017P 5 yr. CAGR 2016E LTM 2016E Beacon Roofing Supply, Inc. $3,790 $4,127 $4,225 $4,304 $357 $344 $380 10.6x 11.0x 10.0x 18.4% 68.0% 8.7% 8.1% Boise Cascade Company 1,352 3,868 3,912 4,176 160 161 190 8.4 8.4 7.1 11.7% 7.7% 4.1% 4.1% Builders FirstSource, Inc. 3,126 6,276 6,319 6,629 342 373 446 9.1 8.4 7.0 52.0% 77.3% 5.4% 5.9% HD Supply Holdings, Inc. 12,378 7,654 7,380 7,434 864 875 921 14.3 14.2 13.4 2.7% 5.9% 11.3% 11.8% SIG plc 1,147 3,375 3,496 3,552 136 147 146 8.4 7.8 7.9 (0.1%) 8.9% 4.0% 4.2% Pool Corporation 4,708 2,541 2,563 2,714 272 276 299 17.3 17.0 15.7 7.4% 8.4% 10.7% 10.8% Watsco, Inc. 5,353 4,211 4,257 4,475 362 360 399 14.8 14.9 13.4 7.4% 3.5% 8.6% 8.4% Wolseley plc 16,739 18,048 17,930 21,103 1,300 1,304 1,557 12.9 12.8 10.8 1.1% 7.5% 7.2% 7.3%
Median $4,249 $4,169 $4,241 $4,389 $350 $352 $390 11.7x 11.9x 10.4x 7.4% 8.1% 7.9% 7.7% Mean 6,074 6,262 6,260 6,798 474 480 542 12.0 11.8 10.7 12.6% 23.4% 7.5% 7.6%
Source: Capital IQ. As of Dec. 31, 2016
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Building Products Industry Spotlight Appendix
M&A Activity by Financial Sponsors – Financial sponsors continue to target the Building Products market to deploy capital in order to take advantage of the industry’s strong growth dynamics. The charts below highlight investments and exits since January 2015 involving private equity firms and U.S. based Building Products companies.
Acquisitions of North American Building Products Companies by Private Equity Firms (2015 - 2016) ($ in millions)
Date Closed Target Acquiror Target Description
12/19/2016 Soft-Lite Windows Harvey Industries Manufacturer of vinyl replacement windows
12/6/2016 Delta Door and Hardware The Cook & Boardman Group Distributor and supplier of doors and related hardware
12/1/2016 Luminis Montreal The Luminaires Group Designer and manufacturer of decorative interior and exterior lighting
11/17/2016 Empire Today HIG Capital Provider of flooring and window products
11/3/2016 Northeast Wholesale Nail & PrimeSource Building Products Provider of fasteners and building materials Fastener Supply (Platinum Equity)
11/2/2016 J.E. Berkowitz Consolidated Glass Holdings Fabricator of a full suite of glass products including insulating, (Grey Mountain Partners) engineered, tempered and laminated glass
11/2/2016 Brock White Company The Sterling Group Supplier and distributor of construction and building materials including brick, stone and masonry accessories
10/13/2016 RBC Tile & Stone Virginia Tile Company (Fidus Wholesaler and distributor of tiles and stones Investment; Harren Equity Partners) 10/6/2016 Dealers Building Supply The Firefly Group Distributor of building products including doors, door hardware and fireplaces
10/6/2016 Henry Company (Graham American Securities Manufacturer of roofing and building-envelope products and systems Partners; OceanBridge Partners)
10/1/2016 Border Construction Specialties The Sterling Group Provider of construction products including concrete accessories, (Svodoba Capital Partners) masonry supplies and sustainable building products
10/1/2016 Trimlite TriWest Capital Partners Manufacturer of decorative glass inserts for steel door fabricators
9/16/2016 Swenson Granite Company Polycor (PNC Mezzanine Capital; Manufacturer and supplier of granite products TorQuest Partners)
9/6/2016 Fabcon Platinum Equity Manufacturer of precast concrete products including wall panels, wind-turbine towers and other related structures
8/11/2016 Winroc Foundation Building Materials Wholesaler and distributor of construction materials including drywall (Lone Star Funds; PennantPark and building and mechanical insulation Investment Corporation) 8/9/2016 Superior Plus (construction Foundation Building Materials Distributor of construction products including wall and ceiling products distribution) (Lone Star Funds; PennantPark products Investment Corporation) 8/3/2016 American Platform & Scaffolding Safway Group Holding (Odyssey Distributor and marketer of mast climbing platforms Investment Partners; Twin Bridge Capital Partners) 8/2/2016 Door Engineering and Senneca Holdings (Audax Group) Manufacturer of doors and fitting systems Manufacturing
8/1/2016 Keene Lumber Company US LBM Holdings (Kelso & Provider of building materials including cabinetry, hardware, decking, Company) flooring, roofing, siding and windows
6/6/2016 Kith Kitchens Pfingsten Partners Manufacturer of semi-custom framed and frameless kitchen and bath cabinetry
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Building Products Industry Spotlight Appendix
Acquisitions of North American Building Products Companies by Private Equity Firms (2015 - 2016) ($ in millions)
Date Closed Target Acquiror Target Description 6/2/2016 Exteria Building Products Novik (Clearview Capital) Designer and manufacturer of composite exteriors (Graham Partners)
6/2/2016 Panolam Industries International Insight Equity Designer and manufacturer of decorative laminate panels for (Apollo Global Management) commercial, institutional and residential applications
6/1/2016 Ken/API Supply Foundation Building Materials Provider of construction materials and supplies including drywall and (Lone Star Funds; PennantPark plaster items, wall and ceiling systems, steel framing and other Investment Corporation) related products 6/1/2016 Kent Gypsum Foundation Building Materials Distributor of drywall and related building materials (Lone Star Funds; PennantPark Investment Corporation) 6/1/2016 Raymond Building Supply US LBM Holdings (Kelso & Supplier of residential and commercial building products including Company) lumber, trusses, garage doors, windows, doors, cabinets and custom millwork 5/9/2016 Split Rail Fence & Supply Breakwater Investment Provider of fence services Management; Building Industry Partners 5/6/2016 SEI Group Narrow Gauge Capital; Siguler Provider of building products installation services Guff & Company; The Goldman Sachs Group 4/30/2016 Wall & Ceiling Supply Company GMS (AEA Investors) Provider of building material and applications including wallboard and construction
4/25/2016 Twin-Star International (TriVest Z Capital Partners Manufacturer of home furnishings and bathroom vanity products Partners)
4/14/2016 Moulure Alexandria Moulding Industrial Opportunity Partners Manufacturer and distributor of solid wood and wood composite mouldings
4/5/2016 ISC Surfaces Virginia Tile Company (Harren Distributor of flooring and surface-covering products Equity Partners)
4/5/2016 San Benito Shutter Co. LongWater Opportunities Manufacturer of wood shutter and panel components including wood, poly panels, draperies, blinds and other shutter hardware components 4/5/2016 Tierra Sol Ceramic Tile Shnier-Gesco (Blue Point Capital Distributor of ceramics and stones products Partners)
4/4/2016 M.R. Lee Building Materials GMS (AEA Investors) Provider of residential and commercial building materials including drywall, metal studs, insulation and access doors
4/4/2016 Royal Building Products (Window OpenGate Capital Manufactures and distributes home remodeling products and Door Profiles Business)
4/1/2016 Homewood Building Supply Building Industry Partners Manufacturer and supplier of wood products
4/1/2016 Professional Handling & GMS (AEA Investors) Distributor of drywall and related products Distribution
3/31/2016 Alco Doors US LBM Holdings (Kelso & Manufacturer and installer of interior and exterior doors Company)
3/31/2016 Kenseal Construction Products Frontenac Company; Navigation Distributor of building and construction materials including Capital Partners waterproofing, sealants, stucco, glazing and concrete masonry restoration products 3/31/2016 Wilway Lumber Sales Fraser Valley Building Supplies Provider of various types of building products including lumber, (Krystal Financial) plywood, roofing, electrical, plumbing, drywall and fencing products
3/30/2016 Design and Direct Source Materials Marketing (RAF Distributor of building products including ceramic tile, natural stone, Industries) wood and porcelain
3/29/2016 Chauvet & Sons Cortec Group Manufacturer, developer and innovator of entertainment lighting products
3/7/2016 3i Supply Distribution International (Advent Distributor of mechanical and industrial insulation products International; Audax Group)
3/6/2016 Safe-Way Garage Doors (Equity The Ellis Company Manufacturer of garage doors Capital Partners)
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Building Products Industry Spotlight Appendix
Acquisitions of North American Building Products Companies by Private Equity Firms (2015 - 2016) ($ in millions)
Date Closed Target Acquiror Target Description 2/2/2016 Cascade Windows (Altamont CenterOak Partners Manufacturer of custom vinyl windows, patio doors and sliding doors Capital Partners)
2/2/2016 ICP Adhesives and Sealants Innovative Chemical Products Provider of pressurized polyurethane foam adhesive formulations for Group (Audax Group) residential roofing, commercial roofing and insulation
2/1/2016 Parker's Building Supply US LBM Holdings (BlackEagle Distributor and supplier of building materials including hardware, Partners; Building Industry paint, power tools, windows, doors, cabinetry, lumber and more Partners; Kelso & Company) 2/1/2016 Sherman-Dixie Concrete Forterra (Lone Star Funds) Manufacturer of precast concrete pipe Industries
1/27/2016 Wolf-Gordon (Corinthian Capital Saw Mill Capital Manufacturer and distributor of wall-coverings and interior building Group) products 1/22/2016 Northern International Sterno Products (Compass Provider of outdoor lighting products Group Management) 1/13/2016 Kovach AV Capital; ORIX Mezzanine & Designers, manufacturers and installers of panel and glazing Private Equity systems for commercial building enclosures
1/8/2016 Quality Aluminum Products Blackford Capital Manufacturer of residential exterior aluminum products
1/7/2016 Darby Doors US LBM Holdings (BlackEagle Manufacturer and retailer of housing construction products including Partners; Building Industry doors, mill work, hardware, bath accessories and building specialties Partners; Kelso & Company) 1/7/2016 Paradigm Window Solutions CapitalWorks; Ironwood Capital Manufacturer of vinyl windows and patio doors (White Oak Partners)
1/4/2016 T&L Distributing Warrior Creek Provider of surface flooring services
1/1/2016 Gypsum Supply Company GMS (AEA Investors) Provider of construction and building products including drywall, ceilings, steel and insulation
12/31/2015 Worldwide Window Treatments Fleuron Enterprises (Ancor Manufacturer of drapery hardware Capital Partners)
12/23/2015 NexGen US LBM Holdings (BlackEagle Manufacturer and distributor of building materials incluidng roof, Partners; Kelso & Company) trusses, wall panels and floor trusses 12/21/2015 Builder Specialties Monomoy Capital Partners Provider of installation and building products including appliances, fireplaces, mantels, garage doors, carriage style garage doors, lighting and outdoor products 12/21/2015 CR Home Monomoy Capital Partners Provider of building products including appliances, countertops, garage doors, hearth products, tile and flooring, glass and mirror, lighting, cabinets and construction related products 12/14/2015 Grand Equipment Company Blackford Capital Distributor of construction equipment
12/12/2015 All-American Scaffold (Summit Safway Group Holding (Odyssey Provider of scaffolding and shoring products Equity Group) Investment Partners)
12/10/2015 Hathaway & Sons GMS (AEA Investors) Distributor of drywall and other specialty building products
12/9/2015 C.M.A. Supply Company Carter-Waters(Aiglon Capital Supplier of raw material for construction purposes including concrete Management; Merit Capital and masonry products Partners) 12/1/2015 Badgerland Supply GMS (AEA Investors) Manufacturer of wallboard and construction products
11/24/2015 Halco Lighting Technologies Summer Street Capital Partners Manufacturer of lighting products (Lineage Capital)
11/17/2015 Triumph Truss & Steel Company US LBM Holdings (BlackEagle Manufacturer of truss and steel products including engineered roof Partners; Kelso & Company) and floor trusses, structural steel and ornamental iron 11/6/2015 Crown Column & Millwork HB&G Building Products (Ares Manufacturer of synthetic and wood columns used in residential (Carousel Capital) Capital; Graham Partners; construction Wedbush Capital Partners)
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Building Products Industry Spotlight Appendix
Acquisitions of North American Building Products Companies by Private Equity Firms (2015 - 2016) ($ in millions)
Date Closed Target Acquiror Target Description 11/6/2015 Duo-fast Carolinas SouthernCarlson (Tenex Capital Distributors of fasteners and pneumatic tools to the furniture and Management) construction industries
11/5/2015 M3 Glass Technologies LongWater Opportunities Manufacturer of fabricated and decorative glass products
10/30/2015 USI Silver State USI (Seven Mile Capital Partners) Provider of residential and commercial installation systems including fiberglass, mirrors, shower doors, garage doors, fireplaces and storefront glass installation services 10/22/2015 Building Supply Association US LBM Holdings (BlackEagle Distributor and supplier of building products specializing in home Partners; Building Industry furnishing, material delivery, repairing and window programs Partners; Kelso & Company) 10/20/2015 Willard A Selle Distribution International (Advent Distributor of insulation products specializing in the lamination of International; Audax Group) fiberglass insulation for metal buildings
10/19/2015 Florida Screen Enterprises The RiteScreen Company Producer of door and window manufacturing components (Enhanced Capital Partners; Seven Point Equity Partners) 10/12/2015 Cabinet Supply Rugby IPD (Leading Ridge Provider of building products including cabinets hardware, custom Capital Partners) door, drawer, hardwood lumber, hardwood plywood and sand-paper
10/6/2015 Zane Offenbacher Aquatics (Antson Manufacturer and seller of fireplace tools and accessories Capital)
10/5/2015 GBS Building Supply US LBM Holdings (BlackEagle Manufacturer of building and construction products including window Partners; Kelso & Company) panels, doors, siding, roofing materials, insulation products, millwork, cabinets, locks and railings 10/5/2015 LaCantina Doors JELD-WEN (Corporate Capital Manufacturer of opening door systems which include folding door Trust; Onex; Piper Jaffray, Triton system, Bi-fold doors, aluminum doors, wood doors, impact doors Pacific Capital Partners) and temperature control doors 10/1/2015 Quantum Windows & Doors Nitze-Stagen Capital Partners; Manufacturer of wood windows and doors (Pendulum Investments) Swiftsure Capital
9/30/2015 Commercial Refrigerator Door Hussmann (Clayton, Dubilier & Manufacturer of temperature controlled doors Company Rice)
9/30/2015 Zarsky Lumber Kodiak Building Partners Operator of a chain of building-supply stores (Building Industry Partners)
9/24/2015 Harvey Industries Dunes Point Capital Manufacturer and distributor of building products including windows, doors, siding and roofing
9/24/2015 LouMac Distributors US LBM Holdings (BlackEagle Distributor of furniture items including vinyl, aluminum, fiberglass, Partners; Kelso & Company) windows, interior doors and entry door systems
9/10/2015 Coating and Foam Solutions Accella Performance Materials Provider of roofing products and services (Arsenal Capital Partners)
9/10/2015 Cretex Concrete Products Forterra (Lone Star Funds) Manufacturer of precast and prestressed concrete construction products
9/10/2015 Karona JELD-WEN (Onex) Manufacturer of specialty stile and rail doors
9/7/2015 Signature Glass Holdings Binswanger Glass (Grey Manufacturer of commercial glass and glazing systems Mountain Partners)
9/4/2015 Gold & Reiss US LBM Holdings (BlackEagle Manufacturer of kitchen cabinets Partners; Building Industry Partners; Kelso & Company) 9/2/2015 Coldwater Veneer Industrial Opportunity Partners Manufacturer of hardwood veneer and plywood
9/1/2015 Grabber Construction Products Dot Foods (Svoboda Capital Manufacturer of fasteners and fastening systems Partners)
9/1/2015 J&G Concrete Products Baymark Partners Manufacturer of concrete pipes
8/31/2015 Thermo-Tech Windows and Bounds Equity Partners Manufacturer of vinyl windows and patio doors Doors
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Building Products Industry Spotlight Appendix
Acquisitions of North American Building Products Companies by Private Equity Firms (2015 - 2016) ($ in millions)
Date Closed Target Acquiror Target Description 8/28/2015 Arrow Building Center Aiglon Capital Management; Supplier of building materials including lumber, hardware and home Marquette Capital Partners; improvement products Triangle Capital 8/20/2015 US LBM Holdings Kelso & Company (Stanley Distributor of building materials including lumber, roof and floor Osborne) trusses, siding and more
8/19/2015 Superior Manufacturing Group Checkers Industrial Safety Manufacturer of floor matting products Products (Audax Group; Harvey & Company) 8/3/2015 MGM Industries, Inc. Custom Window Systems, Inc. Manufacturer of custom PVC vinyl window and door products for (Nautic Partners, LLC) homeowners, builders and remodelers
7/31/2015 ProBuild Holdings, Inc. Builders FirstSource, Inc. Manufacturer and distributor of lumber and building materials to (Devonshire Investors) (JLL Partners, Inc. and Warburg professional builders, contractors and project-oriented consumers Pincus LLC) 7/14/2015 Better Life Technology, LLC Century Park Capital Partners Manufacturer of rollout vinyl flooring
7/10/2015 Cali Bamboo High Road Capital Partners Manufacturer of bamboo based, green building products including bamboo fencing, flooring, decking, paneling and other accessories
7/6/2015 Artissimo Designs Inc. Excelsior Capital Partners Designer, manufacturer and marketer of wall décor based on (Huron Capital Partners) purchased or licensed imagery
6/30/2015 Advanced Flooring & Design Interior Specialists Manufacturer of a range of products for floors and interiors including (Littlejohn & Company) ceramic tiles, natural stone, hardwood, carpet, window coverings and sheet vinyl products 6/29/2015 Northwest Carpets Lexmark Carpet Mills Manufacturer of solution-dyed, broadloom carpet focused exclusively (H.I.G. Capital, LLC) on the hospitality market
6/19/2015 Royal Adhesives and Sealants American Securities Manufacturer and distributor of industrial adhesives and sealants, (Arsenal Capital Partners, PNC commercial roofing adhesives and mirror mastics Erieview Capital) 6/9/2015 Carolina Drawers Olon Industries Manufacturer of solid wood and ply wood drawer box products (Huron Capital)
6/9/2015 Rock Ridge Stone Salt Creek Capital Distributor of natural stone products used in outdoor applications
6/3/2015 Insulation Fabricators, Inc. Distribution International (Advent) Fabricates and distributes thermal and acoustical insulation products for industrial and commercial markets
6/3/2015 A.H. Harris & Sons Frontenac Company Distributor of construction supplies to the heavy & highway, commercial, industrial and residential markets
5/31/2015 Valterra Products Brookside Equity Partners, Scott Manufactures and distributes recreational vehicle plumbing Capital Partners equipment and supplies including valves for sanitation, plumbing and winterizing 5/29/2015 Vestal Manufacturing Enterprises Spell Capital Partners Manufacturer of metal building products including building materials, (MVC Capital) fireplace accessories, iron castings and cast iron dampers
5/27/2015 Advanced Building Products, Inc. SRS Distribution Manufacturer and installer of aluminum replacement and storm (Berkshire Partners) windows
5/19/2015 DiversiTech Corporation The Jordan Company Manufactures and distributes an extensive proprietary portfolio of condensate management equipment, HVACR maintenance chemical and electrical accessories 5/13/2015 Termo-Cell Industries US GreenFiber Manufactures thermal and acoustical cellulose insulation, specialty (Tenex Capital Management) fibers and hydroseeding mulches
5/11/2015 PrimeSource Building Products Platinum Equity Distributor of fasteners and other building materials including nails, screws and compressors
4/17/2015 Direct Cabinet Sales US LBM Holdings (Building Distributor and designer of kitchen cabinetry and related products Industry Partners, BlackEagle Partners) 4/17/2015 Rosen Materials US LBM Holdings (Building Distributor of residential and commercial building products including Industry Partners, BlackEagle kitchen and bath cabinetry, countertops, stucco, roofing and Partners) insulation 4/16/2015 New Energy Bedrooms Hillsdale Furniture Manufacturer and importer of bedroom furniture (Brookside Equity Partners)
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Building Products Industry Spotlight Appendix
Acquisitions of North American Building Products Companies by Private Equity Firms (2015 - 2016) ($ in millions)
Date Closed Target Acquiror Target Description 4/10/2015 Rio Brands (Guardian Capital Webster Capital, Morgan Stanley Supplier of outdoor furniture and sportsman accessories Partners) Alternative Investment Partners
4/8/2015 Kitchen Kaboodle Lynx Equity Provider of kitchen appliances and accessories and home products
4/2/2015 Metalcrafts Tecta America Manufacturer of roofing and sheet metal products (Oaktree Capital Management)
4/1/2015 Design Specialties Blackthorne Partners, Individual Manufacturer of glass fireplace doors Investor
4/1/2015 RDL Supply The Cook & Boardman Group Distributor of commercial doors, door frames, door hardware and (Ridgemont Equity Partners) related accessories
3/25/2015 J&B Materials Gypsum Management and Supplier and distributor of building materials including drywall, metal Supply studs, plaster, pool and general building materials (AEA Investors) 3/23/2015 Merchants Metals Atlas Holdings Manufacturer and distributor of ornamental steel and aluminum fence systems
3/20/2015 Petry Roofing Supply SRS Distribution Distributor of residential and commercial roofing products servicing (Berkshire Partners) the Greater St. Louis market
3/19/2015 Great Western Building Materials Foundation Building Materials (CI Distributor of building products and related equipment including Capital Partners) gypsum wallboards, acoustical ceiling products, metal framing products and plaster products 3/19/2015 ProWall Building Products Foundation Building Materials (CI Manufacturer of one-coat stucco, surface coatings and expanded Capital Partners) polystyrene (EPS) products
3/17/2015 Pronamic Industries Flanders Distributor and manufacturer of fiberglass materials used in the air (Insight Equity) filtration and related industries
3/13/2015 Hanson Building Products, Lone Star Funds Manufacturer of a diversified range of concrete and clay building Building Products business in products North America and U.K. 3/2/2015 Lampert Yards US LBM Holdings (Building Supplier of lumber and building materials to homeowners, Industry Partners, BlackEagle professional builders and commercial builders Partners) 2/27/2015 Phillips Tile Residential Design Services (DBI Provider of floor and wall tiles, natural stone and synthetic counter (Goense & Company, Greyrock Capital, Huntington Capital, Trive tops for residential home builders Capital Group) Capital) 2/26/2015 ATIS Group Desjardins Capital régional et Manufacturer of doors and windows in Canada (Cornerstone Capital Partners, coopératif (Fondaction) Cyprium Partners) 2/25/2015 J.A. Jack & Sons, Inc. Harrison Gypsum, LLC Miner and processer of limestone for industry and agricultural (H.I.G. Capital, LLC) sectors
2/18/2015 Kitchen Creations Lynx Equity Manufacturer and custom designer of kitchen and bath cabinetry
2/9/2015 IPS Corporation (Calera Capital) Nautic Partners Manufacturer of adhesives, solvent cements, plumbing specialty items and various components and supplies
2/9/2015 Carroll Chair Mity Enterprises Manufacturer of tables and chairs (Prospect Capital)
1/26/2015 Glassworks Binswanger Glass (Grey Provider of glass fabrication, installation of shower doors, mirrors, (Bounds Equity Partners) Mountain Partners, Guff & table glass, windows and patio door services Company) 1/2/2015 Kiva Kitchen & Bath Morrison Supply Provides plumbing fixtures, hardware, appliances, cabinetry, and (Rock Hill Capital) (Advent International) counter tops for bathrooms and kitchen
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Building Products Industry Spotlight Appendix
Exits of U.S. Based Building Products Companies by Private Equity Firms (2015 - 2016) ($ in millions) Date Company Name Enterprise Exit Type Acquiror Company Description Value Closed (Exiting P.E. Sponsor) 11/18/2016 World and Main - Houston Merger / Hardware Distributor of hardware products to independent (Littlejohn & Co.) Acquisition Distribution hardware retailers Warehouses, Inc. 11/15/2016 Koroseal Interior Products Merger / Sangetsu Manufacturer and distributor of custom interior $134.0 (Peak Rock Capital) Acquisition Corporation products
11/9/2016 Halex Merger / GCP Applied Manufacturer and distributor of flooring products $47.0 (American Capital) Acquisition Technologies
9/20/2016 United Copper Industries Merger / Southwire Manufacturer and distributor of copper building wires (KPS Capital Partners) Acquisition and cables
6/15/2016 Rugby IPD Merger / Hardwoods Distributor of specialty building products, including $170.0 (Building Industry Partners; Acquisition Distribution hardwood plywood, composite panels, solid surface Leading Ridge Capital) countertops, doors and millwork 5/25/2016 GMS IPO Distributor of drywall, acoustical and other specialty $147.0 (AEA Investors) building materials
4/21/2016 InterWrap Merger / Owens Corning Manufacturer of laminated textiles $450.0 (Quad-C Management) Acquisition
2/29/2016 LSI Corporation of America Merger / Stevens Industries Manufacturer of laminated casework cabinets (CoBe Capital) Acquisition
1/20/2016 Superior Tool Merger / Magna Industries Manufacturer and distributor of a complete range of (Prospect Partners) Acquisition consumer and branded pipe working, and specialty plumbing tools 12/18/2015 Nudo Merger / Grupo Verzatec Manufacturer of custom prelaminated panels for $160.0 (BNY Mellon; GarMark Acquisition various commercial and industrial construction Partners; RFE Investment) applications 12/17/2015 Clarion Industries Merger / Kronospan Manufacturer of fiberboard and laminate flooring (Palladium Equity Partners) Acquisition
12/1/2015 BMC Stock Holdings Reverse Building Materials Provider of building materials and installation services $549.0 (3P Equity Partners; Building Merger Holding in the United States Industry Partners) 11/2/2015 Woodcraft Industries Merger / Quanex Building Manufacturer of hardwood and engineered wood $248.5 (Olympus Partners) Acquisition Products furniture
10/1/2015 Roofing Supply Group Merger / Beacon Roofing Distributor of residential and commercial roofing $1,142.0 (Clayton, Dubilier & Rice) Acquisition Supply products
8/24/2015 Interline Brands Merger / The Home Depot Provider of logistics and supply chain management $1,625.0 (Goldman Sachs Group; P2 Acquisition services Capital Partners) 8/24/2015 Quest Construction Products Merger / Building Materials Manufacturer of protective systems and coatings for (Audax Group; Moelis Capital Acquisition Corporation of the construction industry Partners) America 7/31/2015 ProBuild Holdings Merger / Builders Distributor of lumber and building materials to $3,448.1 (Devonshire Investors) Acquisition FirstSource builders, contractors, and tradesmen in the United States 4/1/2015 Ainsworth Engineered Merger / Norbord Manufacturer and supplier of oriented strand board $616.2 (Brookfield Capital Partners) Acquisition including flooring products, stair tread panels, stringers and risers for stairs 3/9/2015 AF Lighting Merger / Almo Manufacturer and distributor of specialty lighting and (Consortium of PE firms) Acquisition electrical products through catalogs, online portals and retail outlets 2/24/2015 M&M Manufacturing Merger / MiTek Industries Fabricator of custom sheet metal products for (TGF Management) Acquisition residential and commercial applications
1/29/2015 Monarch Merger / Mattamy Homes Provider of construction services including the $278.3 (Taylor Morrison Home) Acquisition development and construction of single-family homes and condominiums 1/16/2015 CENTRIA Incorporated Merger / NCI Group, Inc.; Designer, developer, and manufacturer of engineered $245.0 (Riverfront Capital Fund; Acquisition Steelbuilding.com wall, roof, and floor systems, as well as provides coil SMST Management) coating services 1/14/2015 Climatec Building Merger / Robert Bosch Provider of energy efficiency, building automation, $226.0 Technologies Group Acquisition security and life-safety services (Pegasus Capital Advisors)
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Building Products Industry Spotlight Contact Information
TM Capital’s Industrial Team
W. Gregory Robertson Michael S. Goldman Jonathan I. Mishkin Managing Director Managing Director Managing Director (212) 809-1410 (212) 809-1419 (212) 809-1413 [email protected] [email protected] [email protected]
Jerome S. Romano Paul R. Smolevitz Andy B. Krna Managing Director Managing Director Vice President (617) 259-2206 (212) 809-1416 (212) 809-1442 [email protected] [email protected] [email protected]
TM Capital Corp. Disclaimer The information and opinions in this report were prepared by TM Capital Corp. (“TM”). The information herein is believed by T M to be reliable but TM makes no representation as to the accuracy or completeness of such information. There is no guarantee that th e views and opinions expressed in this communication will come to pass. TM may provide, may have provided or may seek to provide ad visory services to one or more companies mentioned herein. In addition, employees of TM may have purchased or may purchase securities in one or more companies mentioned in this report. Opinions, estimates and analyses in this report constitute the current judgment of the author as of the date of this report. They do not necessarily reflect the opinions of TM and are subject to change without notice. TM has no o bligation to update, modify or amend this report or to otherwise notify a reader thereof in the ev ent that any matter stated herein, or any opinion, estimate, forecast or analysis set forth herein, changes or subsequently becomes inaccurate. This report is provided for info rmational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy in any jurisdiction.
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TM Capital Corp. is a partner-owned investment banking firm based in New York, Boston and Atlanta, which has completed over 300 transactions with a combined value in excess of $17.5 billion. Since 1989, we have advised clients navigating a full range of critical transactions, including complex mergers, acquisitions, debt and equity financings, minority and majority recapitalizations, restructurings, and advisory services including takeover defense, fairness and solvency opinions and valuations. We have built deep industry expertise in key sectors and our team regularly publishes research highlighting current and emerging trends in targeted industries and markets. TM Capital is a member firm of Oaklins, the world’s most experienced mid-market M&A advisor with over 700 M&A professionals in over 60 offices operating in the major financial centers in the world. Members have closed over 1,500 transactions totaling more than $75 billion in value over the past five years. TM Capital is an independent investment banking firm that is affiliated with Oaklins. Oaklins is the collective trade name of independent member firms affiliated with Oaklins International Inc. For details regarding the nature of this affiliation, please refer to www.oaklins.com/legal.
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