Building Products & Materials Group Overview

Introduction

Harris Williams is pleased to present our Building Products & Materials Industry Update for March 2020. This report provides commentary and analysis on current capital market trends and merger and acquisition dynamics within the global building products and materials industry. 

We hope you find this edition helpful and encourage you to contact us directly if you would like to discuss our perspective on current industry trends and M&A opportunities or our relevant industry experience.

Our Practice

Harris Williams is a leading advisor to the building products and materials industry. Our significant experience covers a broad range of end markets, industries, and business models.

Building Products

  • Building Envelope
  • Cabinets and Countertops
  • Decking and Siding
  • Drywall and Ceiling Tiles
  • Flooring
  • HVAC and Electrical
  • Insulation
  • Lighting
  • Lumber
  • Plumbing Fixtures
  • PVF and Water Management
  • Roofing
  • Tools and Hardware
  • Windows and Doors

Distribution & Services

  • Architectural and Engineering
  • Contracting
  • Distribution
  • Infrastructure Services
  • Installation
  • Site Development

Construction Materials

  • Aggregates
  • Asphalt
  • Brick
  • Concrete (Precast / Ready-Mix)
  • Glass
  • Industrial Minerals
  • Metals
  • Stone

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What We’re Reading

RLB: Construction Costs Rise 1.2% in Q4; up 5.2% YOY1

Construction Dive  2/13/2020

Construction consulting agency Rider Levett Bucknall tracked 12 different construction markets across the U.S. The study determined construction costs had risen approximately 5.2% between October 2018 and October 2019. The average increase between the third and fourth quarters was 1.2%.

San Francisco had the highest average YoY increase at roughly 7.8%. The San Francisco board also recently approved legislation that will likely drive its construction costs even higher. Los Angeles experienced the slowest growth of the 12 metro areas, seeing constructions costs rise only 1.1% on a YoY basis.

Read the full article here.

ABC’s Construction Backlog Indicator Falls to Close 20192

Associated Builders and Contractors  2/18/2020

ABC’s Construction Backlog Indicator fell to 8.4 months during the final month of 2019, a drop of over 4% since the prior month. This change seems to be primarily driven by seasonal factors.

“December’s nonresidential construction backlog fell to the reading’s lowest level since January 2019,” said ABC Chief Economist Anirban Basu. “This can almost certainly be attributed to seasonal factors, which disproportionately affect smaller contractors. Backlog for firms with less than $30 million in annual revenue fell to 7.1 months in January 2019 yet rebounded for the majority of the year above the eight-month threshold. While backlog among this group once again declined to 7.1 months in December, there is every reason to believe that it will bounce back over the course of 2020.”

Read the full article here.

Construction Contractor Confidence Remains Steady, Says ABC3

The American Surveyor  2/20/2020

After a surge in November, construction contractor confidence held steady to end the year, according to ABC. Average contractors are entering 2020 with confidence around sales, profits, and staffing levels. 70% of contractors expect an increase in sales during the first half of the new year.

Material prices have been generally stable and energy prices have declined slightly; however, labor remains expensive and skilled labor in the construction industry remains scarce. These factors will continue to impact margins during the first half of 2020.

Read the full article here.

New Home Sales Strong at Start of 20204

National Association of Home Builders  2/26/2020

Newly built, single-family home sales increased 7.9% in January, and were up 18.6% on a YoY basis. Builder confidence, low interest rates, and unusually warm weather are some of the main drivers behind the increase.

Housing supply has dropped to 5.1 months as well, 6.6% lower than January of 2019, indicating the need for additional housing inventory. Additionally, the median home sale price increased to $348,200, up over $40,000 since this time last year.

Read the full article here.

How the Coronavirus Could Impact the U.S. Construction Industry5

Construction Citizen  2/27/2020

Although the spread of COVID-19 (coronavirus) has been relatively slow in the U.S., U.S.-based companies have already begun to feel its impact. The disease has impacted technology and transportation companies, and poses a threat to the construction industry as well.

Richard Branch, chief economist for Dodge Data & Analytics, said that the American construction industry will not be immune to the coronavirus’ impact. For commercial builders that rely on Chinese-made goods or materials, this could lead to slower project completion times as well as higher material costs. Branch estimates China is the largest single supplier to the U.S., accounting for nearly 30% of all building product imports.

Read the full article here.

Public Markets6

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Public Comparables6

Building Products

As of February 29, 2020

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Building Products Distributors

As of February 29, 2020

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Construction Materials

As of February 29, 2020

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Relevant Transactions7

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Representative Building Products & Materials Transactions

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1. Construction Dive

2. Associated Builders and Contractors

3. The American Surveyor

4. National Association of Home Builders

5. Construction Citizen

6. Capital IQ

7. Mergermarket

 

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