IBS Highlights Growing Interest in
Building Technologies
Private equity firms and strategic acquirers are taking
notice as the housing market continues to strengthen
and builders increase their use of more-advanced
products and technologies.
Industry Commentary
North America
Elliot Farkas
+1 312 364 8157
efarkas@williamblair.com
Patrick Nally
+1 312 364 8634
pnally@williamblair.com
Europe
Matthew Zimmer
+44 207 868 4502
mzimmer@williamblair.com
Dirk Felsmann
+49 69 509527 614
dfelsmann@williamblair.com
In January the National Association
of Home Builders (NAHB) hosted
its annual International Builders’
Show (IBS) in Las Vegas. Having
attended the conference, which was
held in conjunction with the National
Kitchen & Bath Association’s Kitchen
& Bath Industry Show, it is clear
that composites and other specialty
materials are playing an increasingly
important role in the residential
construction industry. Having met
with numerous private equity
investors and corporate executives
at the conference, it is also clear that
financial and strategic buyers are very
interested in acquiring assets with a
differentiated angle in the space.
In the article, we examine the themes
that were generating the most interest
at this year’s IBS. We also discuss how
these trends are driving interest from
acquirers in specialty materials for
building products applications.
Housing Industry
Participants Optimistic
About Continued Recovery
Among conference attendees and
presenters, there was a tone of
measured optimism about the
continued recovery and growth of
the residential construction industry.
David Crowe, NAHB chief economist,
said that despite some headwinds
there are multiple signs pointing to
the continued growth of the housing
industry and the overall U.S. economy.
All of this adds up to a strong—but
not spectacular—forecast for housing
activity growth in 2016.
Crowe said that 2015 saw strong
residential construction activity, with
home building spending far outpacing
the year’s tepid GDP growth. Quarterover-quarter increases in home
building spending in 2015 ranged
from a high of 27% in the first quarter
to a low of 8% in the third quarter.
Builder sentiment, as measured by the
NAHB/Wells Fargo Housing Market
Index, reached its highest level since
the housing crisis. Crowe also pointed
to 2015’s sharp increase in household
formations and rental prices as very
positive leading indicators for the
housing industry. Tempering this
optimism, however, are concerns
about U.S. exports, the cost of labor,
and the unprecedented levels of 25- to
34-year-olds living with their parents.
Specialty Materials Innovation
and Adoption Accelerate in Home
Building Products
A quick walk through the exhibitor
halls at this year’s conference showed
the growing importance of products
with differentiated technologies or
specialty materials for home builders.
Whether for end-uses such as flooring,
roofing, walls, or decking, many of
the exhibitors were promoting new
products made from composites,
high-performance plastics, and other
specialty materials.
Contractors are increasingly
demanding these products because
they offer superior performance,
strength, and/or durability, resulting
in an improved value proposition
over the product’s entire life cycle.
Building technologies made from
specialty materials can also provide
benefits to builders and home owners
such as easier installation, reduced
maintenance, improved weather
resistance, and enhanced
color retention.
Because of these differentiated,
valuable attributes and the
associated superior market position
and growth prospects, specialty
building technology companies
have significantly outperformed
companies selling general or
commodity building products over
the past decade. Specialty materials
companies also have superior
financial profiles, making them
more attractive acquisition
investments for both strategic
acquirers and financial sponsors.
Buyer M&A Appetite Remains
Strong
At the conference we had numerous
meetings and conversations with
representatives from private equity
firms, executives, and corporate
development professionals from
strategic acquirers. From these
conversations and from recent
transactions we have completed,
it is clear that financial sponsors
and strategic acquirers are actively
looking for opportunities to increase
their presence in specialty building
products. Financial sponsors,
Household Formations Provide Tailwind to Continued
Home-Building Recovery
One of the primary factors pointing to a continued recovery in the residential
real estate industry is a sharp increase in new household formation over the
past two years, according to NAHB Chief Economist David Crowe. In his
presentation at this year’s International Builders’ Show, Crowe said that
despite some macroeconomic headwinds, the U.S. housing market should
see solid growth in 2016.
New U.S. households formed (in 000s)
1,879
2,000
1,800
1,598
1,493
1,600
1,371
1,400
1,213
1,200
1,024
928
1,000
792
800
654
624 576 554
561
600
414
422
400
200
0
‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15e
Source: National Association of Home Builders
Building technologies made
from specialty materials
can also provide benefits
to builders and home owners
such as easier installation,
reduced maintenance, improved
weather resistance, and
enhanced color retention.
in particular, have become very
interested in investing in building
products companies that offer
highly differentiated product
performance properties.
Additional value drivers in specialty
building products transactions include
leading brands/market positions,
advanced manufacturing capabilities,
and proven management teams.
These characteristics played a large
role in the four building technology
transactions for which William Blair
served as the exclusive advisor since
November 2015.
In November William Blair advised
Plaskolite, Inc. in connection with
the company receiving a controlling
investment from Charlesbank Capital
Partners. Plaskolite is one of North
America’s largest manufacturers of
rigid plastic sheet and sells a broad
range of ABS, acrylic, polycarbonate,
PETG, and polystyrene sheet and
related sheet coatings and specialty
polymers. These are used in
applications such as lighting fixtures,
windows, spas/shower tubs, signs,
and furniture.
In December William Blair advised
Nudo Products, Inc. (NPI), a portfolio
company of RFE Investment Partners,
on its sale to Grupo Verzatec. NPI is
a leading provider of specified wall
panels and other specialty materials
for building products applications,
operating under the Nudo, Marlite,
Midwest Folding Products, and Prime
Panels brands.
In December William Blair advised
Lynx Grills, Inc., a portfolio company
of Century Park Capital Partners,
LLC, in connection with its sale to
The Middleby Corporation (NASDAQ:
MIDD). Lynx is a leading designer and
manufacturer of premium branded
residential outdoor equipment,
including a comprehensive line
of grills, island accessories,
specialty cooking appliances,
and refrigeration products.
Recent Building Technology Transactions
Not Disclosed
Not Disclosed
has been acquired by
has been acquired by
November 2015
December 2015
Not Disclosed
Not Disclosed
has been acquired by
has been acquired by
December 2015
January 2016
®
In January William Blair advised
Wolf-Gordon Inc., a portfolio company
of Corinthian Capital, in connection
with its sale to Saw Mill Capital.
Wolf-Gordon is a leading value-added
designer and specialty distributor
of specified high-end wallcoverings,
textiles, and specialty paint to
the commercial construction and
renovation markets.
We expect building products
companies with highly differentiated
products and technologies to continue
to generate widespread acquisition
interest as the housing market
continues to strengthen. To learn more
about the trends that are shaping dealmaking activity in specialty building
products, please do not hesitate to
contact us.
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