July 19th, 2018
Merger Mania: Ply Gem-NCI Deal is Latest Example of Consolidation
Is continued consolidation the future of the door and window industry? Given the latest high-profile deal — the merger of Ply Gem and NCI — it certainly seems to be.
“The mega deal is the order of the day in building products right now,” said Michael Collins, an investment banker and a partner in Building Industry Advisors who specializes in mergers and acquisitions in the door and window industry (he’s also a blogger and columnist for DWM). “First, (private equity firm) Clayton, Dubilier & Rice merged Ply Gem with Atrium and now that larger company has been combined with another key player to form an even larger entity.”
Collins has tracked mergers & acquisitions (M&A) in the door and window industry for several years. In March 2018, he wrote a column for DWM magazine noting that while 2017 was a relatively slow year for M&A activity with only nine transactions completed, the long-term trend points to more such deals. For example, Collins notes that there were 21 M&A agreements in 2015 and 16 in 2016 following a steady decline from 2007 to 2014. But from 2004 to 2007, M&A in the fenestration industry was strong, with more than 100 deals completed during that time, according to Collins’ research.
Collins says most acquisitions since 2000 have involved companies already in the building products industry (strategic buyers), though private-equity firms have played an important role, too.
“We have tracked 410 acquisitions, mergers or IPOs since 2000 in which either the buyer or seller was a U.S.-based door or window manufacturer,” he writes. “Of these, 76 percent of the deals were consummated by a strategic buyer already in the fenestration industry and the remaining 24 percent were completed by private equity funds. … This is an industry where internal consolidation predominates.”
Collins also says window brands seem to be preferred targets.
“The acquisition activity of 2017 illustrated two continuing trends in fenestration M&A: window manufacturers account for the majority of acquired companies, and luxury window manufacturers, in particular, remain of interest to buyers,” he writes.
As for Ply Gem and NCI, Collins notes that the unique deal — the two publicly traded companies engaged in a tax-free stock swap — bodes well for the health of the industry.
“A lot of highly successful companies are continuing to place large bets on the future success of the building and remodeling industries, and this deal is typical of that trend,” he says.
Collins says he’s going to put together a research study on the Ply Gem-NCI merger in the near future, so stay tuned. We’ll report on it when it becomes available.