Tecta America, a portfolio company of Altas Partners, is a national leader in commercial roofing services, with more than 85 locations across the U.S. The company provides installation of all types, including replacement, repairs and maintenance, new construction, disaster response, sustainability options and more. Harris Williams recently advised Tecta on its minority investment from Leonard Green & Partners.
Here, professionals from the Harris Williams Business Services Group shares insights on what made Tecta an exceptional investment opportunity, as well as their advice for buyers and investors interested in commercial and industrial services businesses.
What makes the commercial roofing sector an appealing space for buyers and investors?
Lucas: Commercial roofing is a large, resilient market that is highly fragmented and ripe for continued consolidation. Several tailwinds make this an exciting sector. Roofing repair, maintenance, and replacement services are critical, non-discretionary needs that can only be deferred a short time. Growth in commercial construction over the last three decades significantly increased the installed base of roofs, providing a large, stable base of demand for roofing services. In addition, the life cycle of roofing systems and materials has been shrinking, leading to a more frequent need for repairs and replacement. All of these factors contribute to stable, cycle-resistant revenue streams.
Baltimore: Time and labor constraints also contribute to industry dynamics. There are a limited number of people willing and able to repair and replace roofing. A constrained workforce limits industry capacity to address demand, which benefits margins.
What made Tecta particularly appealing to its investors?
Morris: The majority of Tecta’s revenue comes from non-discretionary repair and replacement services. While the company does offer new construction roofing, its reliance on this more discretionary revenue stream is minimal, which protects it from new housing construction market fluctuations.
Tecta has a proven acquisition record as well, having acquired more than 45 leading roofing service providers. With the support of its private equity partner, Altas, Tecta has sustained strong year-over-year growth and margin expansion.
Lucas: Tecta also offers the responsiveness of a local roofing contractor paired with the resources and stability of a national provider. National scale gives it significant purchasing efficiencies and a brand and talent model that creates an advantage in recruiting. It also provides the training, knowledge sharing and labor flexibility needed to retain its talented workforce.
Another advantage of Tecta’s national model is its ability to shift resources in response to local market situations. Tecta’s scale enables the company to flex labor assignments across geographies in response to local economics, extreme weather situations or other market factors.
Baltimore: Each market has its own unique characteristics with respect to the competitive environment, labor force dynamics, building code and prevalent roof system trends. A local understanding matters in this industry. While customer relationships are local, the right blend of a national and local presence is critical. Tecta does that very well.
Morris: Another characteristic worth highlighting is Tecta’s unyielding commitment to quality, expertise and professionalism. These traits have helped the company become an industry leader. The fact that Tecta workers are all company employees who are insured and bonded is another differentiator over many local companies.
What advice do you have for prospective buyers interested in this sector?
Lucas: Tecta is a great example of what to look for in this sector: a knack for growth via acquisition, an ability to combine regional or national scale with local operations, and a substantial base of recurring revenue.
In addition to covering commercial roofing, the Harris Williams Business Services Group has deep expertise in a wide range of subsectors. Learn more here: Business Services
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Published October 2021