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Building Products

Optimism Fuels M&A Page 4

Investor interest in the Building Products industry is continuing, with

market indicators pointing to strengthening fundamentals against a

backdrop of economic growth, improving employment, and rising

consumer confidence.

Renewed optimism in the economy is fueling appetite, with acquisition

growth a primary strategy in value creation, driving an active M&A

market.

May 2017Brown Gibbons Lang & Company

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M&A and Capital Markets Activity• Building Products M&A reached a record level in 2016, with activity

signaling broad investor appetite across all industry subsectors. Boral

Limited’s announced acquisition of Headwaters headlined deal activity,

underscoring continuing strong interest from international buyers in U.S.

assets. Melrose Industries (Nortek), dormakaba (Stanley Black & Decker

assets, Mesker Openings), and aluplast (Chelsea Building Products) also

participated in cross-border deals. In Materials, Cemex accelerated its

divestiture activity with Eagle Materials, GCC, and Quikrete picking up

strategic assets. Quikrete also made headlines with Contech Engineered

Solutions, ramping up its position in the infrastructure market.

• Private equity remains active, with sponsors seeking new platforms and

add-ons for existing investments. American Securities (Henry Company),

Blue Wolf Capital Partners (Novo Building Products), Graycliff Partners

(Oberfields), Madison Dearborn Partners (U.S. LUMBER), and Sun Capital

Partners (Arrow Tru-Line) were among the announced platforms. Add-on

activity included buys from Audax Private Equity (Fomo Products) and

Arsenal Capital Partners (Covestro assets), among others, while private

equity-backed distribution platforms of Kelso & Company (U.S. LBM

Holdings) and The Sterling Group (Construction Supply Holdings) were

acquisitive.

• The capital markets environment remains robust evidenced by rising

public equity valuations, plentiful debt and equity capital, and valuation

multiple expansion. M&A activity is expected to increase in 2017

supported by availability of capital, the expectation of growth, lower

taxes, and potential regulatory changes. In 2016, middle market M&A

activity1 was down 9.0 percent year-over-year, with a corresponding

5.1 percent decrease in value. Transaction activity is off to a slower start in

2017 with first quarter deal volume and value down 8.8 percent and

11.1 percent, respectively, from the year-ago period.

• 2016 marked an active year for middle market loan fund raising amid

growing institutional interest in private credit. For borrowers, strong

liquidity should translate into ample leverage and favorable terms for the

foreseeable future. Standard & Poors Leveraged Commentary & Data

(S&P LCD) reported total leverage of 4.7x for the middle market1

(enterprise values of $25 million to $500 million) in March 2017.

• In March 2017, median EBITDA multiples for strategic and financial buyers

were 7.0x and 8.3x, respectively, on transactions valued less than

$250 million, and 9.2x and 7.9x on transactions valued between

$250 and $500 million, according to S&P LCD.

1 Middle market defined as enterprise values between $25 million and $500 million.

2

For more information on how

BGL’s Global Industrials Practice can assist

your company, please contact:

Delivering Results to the Global Middle Market

Andrew K. Petryk Managing Director & PrincipalHead: [email protected]

Kevin H. Sargent Director & [email protected]

Public Equity Markets• Broader market indices have gained traction in recent weeks on strong

corporate earnings and anticipated tax reform. In early March, the Dow

Jones Industrial Average (DJIA) soared to an all-time high—surpassing

21,000—fueled by expectations of pro-business policy changes that will

boost the economy.

• Building products stocks have rallied on positive secular trends with

composite indices outperforming the broader market. Home Builders and

Distributors are leading with year-to-date returns of 18.2 percent and

16.0 percent, respectively, as compared to a 5.6 percent increase in

the S&P 500 index. Manufacturers are also showing strong gains, with

Residential and Nonresidential Building Products Manufacturers posting

15.7 percent and 9.8 percent returns, respectively.

*As of April 28, 2017.

Operating Highlights• Market indicators point to strengthening industry fundamentals against a

backdrop of improving employment and consumer confidence. Housing

demand is rising, evidenced by positive trends in housing starts and new

and existing home sales, with pent-up demand resulting from household

formations, rising home values, and low existing home inventory among

the catalysts expected to sustain growth. Continued low interest rates

should serve to stimulate demand.

• Continued gains in nonresidential construction spending are anticipated

with increased infrastructure investment prolonging the current growth

cycle.

3

Building Products Insider

Market Update

4

Positive secular trends in the construction and remodeling

markets are driving strong performance in building

products companies. Investor sentiment remains optimistic,

buoyed by expectations of sustained economic growth,

with investment activity continuing at a brisk pace as

acquisitions drive value creation.

Residential Construction

Housing Starts

New housing starts decreased in March 2017 to a SAAR of

1,215,000, down 6.8 percent from February, but finished

9.2 percent higher than the prior-year reading. Single-family

starts decreased 6.2 percent to 821,000. U.S. housing starts

climbed to the highest level in nearly a decade in February.

Despite strong momentum, residential activity remains

significantly below prerecession levels, suggesting room for

continued growth. Housing starts have remained above one

million units since April 2015 (24 consecutive months), which

compares to the last peak when annual starts soared above

two million units, and a historical average of 1.5 million units.

Residential construction spending is currently 74 percent of

prerecession levels.

According to the latest estimates published in February 2017,

the National Association of Home Builders (NAHB) forecasts

new housing starts for 2017 and 2018 of 1,242,000 and

1,332,000, representing 5.6 percent and 7.3 percent increases,

respectively, over a 2016 level of 1,176,000.

Builder Confidence

Home builder confidence remains strong, registering a 68 on

the NAHB/Wells Fargo Housing Market Index (HMI) in April,

which is down modestly from 71 in March. The March reading

marked a 12-year high—the highest level since June 2005—

according to the NAHB.

Repair & Remodeling

Improving home values have spurred an increase in

remodeling expenditures. The Joint Center for Housing

Studies (JCHS) at Harvard University reported four quarters

of consecutive gains in home improvement spending in 2016,

ticking up to 6.8 percent in 4Q16. Repair and remodeling is

projected to grow as homes built in the prior market peak

from 2004 to 2007 come into their first repair and remodeling

cycle. The JCHS is forecasting quarterly growth in the

7.0 percent range in 2017.

Home Values are Rising

Consumer confidence is high, supported by a 5.8 percent rise

over the past 12 months in the Standard & Poor’s CoreLogic

Case–Shiller National Composite Home Price Index. The

February increase marks 13 consecutive months of expansion.

New and Existing Home Sales Remain Strong

New home sales increased to 621,000 units in March 2017—up

5.8 percent from 587,000 in February and 15.6 percent year-

over-year (537,000)—marking the highest volume since 2008.

Existing home sales increased to 5.71 million in March 2017—

up from 5.47 million in February—the fastest pace in a decade

reported the National Association of Realtors (NAR). Existing

home inventory stood at a 3.8-month supply in March,

unchanged from February. Unsold inventory fell to 3.5 months

in January 2017, which was the lowest level since 1999. The

NAR is forecasting 2.0 percent growth in 2017.

Nonresidential Construction

Nonresidential construction spending remained unchanged at

$701.9 billion in February, reported Associated Builders and

Contractors. Spending levels have remained above the

$700 billion threshold for seven consecutive months.

Nonresidential spending of $708.2 billion in December 2016

increased 4.6 percent over the previous year.

In its semiannual Consensus Construction Forecast, the

American Institute of Architects projected a 5.6 percent

increase in the nonresidential sector in 2017 and 4.9 percent

growth in 2018.

Dodge Data & Analytics, in its annual Executive Conference

held last October, delivered a positive outlook for

construction activity, highlighting job growth, low interest

rates, low inflation, and infrastructure funding among the key

drivers for increased spending, reported Construction Dive. In

its 2017 Construction Outlook, Dodge forecasted construction

starts activity to increase to $713 billion in 2017, representing

a 5 percent increase from $676 billion in 2016. The biggest

gains are expected in single-family housing and institutional

buildings.

The U.S. is “entering a more mature phase of expansion,”

Chief Economist Robert Murray told conference attendees,

forecasting moderate growth in construction activity into


Market Update

5

0

500

1,000

1,500

2,000

2,500

1959 1966 1973 1980 1987 1994 2001 2008 2015

(in T

hous

ands

)

Market Indicators

New Housing Starts - Single and Multifamily New Housing Starts - Annual Averages

Value of Construction Put in Place 30-Year Mortgage Rate

Recessionary Period

Long-term Average

New Home Sales Existing Home Sales and Months Supply

National S&P CoreLogic / Case-Shiller Index Repair & Remodeling

$252.5$256.6

$260.9$264.4 $267.0

$270.8$274.7

$278.0 $280.0$285.9

$291.9$297.0

$300.4$306.2

$312.3$317.4 $318.6

6.2% 6.1% 6.0% 5.9% 5.7% 5.5% 5.3% 5.1%4.8%

5.6%

6.3%6.8%

7.3% 7.1% 7.0% 6.9%

6.1%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

$225

$250

$275

$300

$325

$350

$375

$400

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2014 2015 2016 2017P 2018P

Rate of Change(In B

illio

ns)

Repair & Remodeling Expenditures Four-Quarter Moving Totals Four-Quarter Moving Rate of Change

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

Jun-

05

Jan-

07

Oct

-08

Jun-

10

Feb-

12

Oct

-13

Jun-

15

Feb-

17

(In T

hous

ands

)

Total Construc�on Total Residen�al Total Nonresiden�al

0%

2%

4%

6%

8%

10%

Jan-

05

Jul-0

6

Jan-

08

Jul-0

9

Feb-

11

Aug-

12

Feb-

14

Sep-

15

Mar

-17

0

500

1,000

1,500

2,000

2,500

Jan

-05

Jul-

06

Jan

-08

Au

g-0

9

Feb

-11

Au

g-1

2

Mar

-14

Se

p-1

5

Mar

-17

(In

Th

ou

san

ds)

Total In Structures with 1 Unit In Structures with 5 Units or More

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Jan-

10

Mar

-11

May

-12

Aug

-13

Oct

-14

Dec

-15

Mar

-17

Months of Su

pp

ly (In

Thou

sand

s)

0

200

400

600

800

1,000

1,200

1,400

1,600

Jan-

05

Jul-0

6

Jan-

08

Jul-0

9

Feb-

11

Aug-

12

Feb-

14

Aug-

15

Mar

-17

(In T

hous

ands

)

100

120

140

160

180

200

220

Jan-

07

Jun-

08

Nov

-09

May

-11

Oct

-12

Apr-

14

Sep-

15

Feb-

17


Market Update

Infrastructure Funding Gap

Source: 2016 Failure to Act, ASCE.

By 2025, the cumulative infrastructure “funding gap” is projected to swell to more than $2.0 trillion.

$0 $500 $1,000 $1,500 $2,000 $2,500

Schools

Rail

Public Parks & Recreation

Levees

Hazardous & Solid Waste

Dams

Inland Waterways & Marine Ports

Airports

Electricity

Water/Wastewater Infrastructure

Surface Transportation

Schools RailPublic Parks &

RecreationLevees

Hazardous &Solid Waste

DamsInland

Waterways &Marine Ports

Airports ElectricityWater/Waste

waterInfrastructure

SurfaceTransportation

Estimated Funding $490 $125 $12 $10 $4 $6 $22 $115 $757 $45 $941

Funding Gap $380 $29 $102 $70 $3 $39 $15 $42 $177 $105 $1,101

$4,590 $4,590

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$2,526

$2,064

Total Needs

Infrastructure Systems, 2016-2025

Total Needs

Total Needs

$2,042

$150

$934

$157

$114

$154

$870

$37

$45

$80

$7

$ in billions

$ in billions

$4,590

Funding Gap

EstimatedFunding

$ in billions

2018. Murray indicated that the construction market lagged

the recovery in the broader economy—pegging 2012 for the

rebound—suggesting room for continued growth, reported

Construction Dive. “This is a very measured upturn. It’s

not a boom,” Murray said. “Construction spending can be

expected to see moderate gains through 2017 and beyond.”

Dodge is projecting the industry to cycle sometime in 2018

or 2019, emphasizing it will be a more gradual decline. “We

don’t have that boom and bust situation [that was] present

in the past decade. When the slowdown ultimately comes,

it’s not going to be a repeat of what we experienced in

2009,” Murray observed.

Infrastructure Opportunity

Infrastructure investment in the U.S. is not making the

grade, with the nation’s critical infrastructure systems

earning a D+ in the Infrastructure Report Card released

by the American Society of Civil Engineers (ASCE)

this January. The study is performed every four years

and evaluates the condition of national infrastructure

categories to assess needs and investment. The 2017

study identified a material funding gap to remedy needed

improvements, which the ASCE estimated at more than

$2 trillion through 2025, of which surface transportation

accounted for the largest share at more than $1 trillion.

The National Association of Manufacturers, in a report

titled Building to Win, outlined an analysis of funding

requirements to revitalize U.S. infrastructure over the next

10 years, estimating the gap at $1.1 trillion. “Infrastructure

is absolutely critical to the ability of manufacturers to

compete and succeed. From a position of economic

strength, I don’t think we have the option of failing

to address our infrastructure challenges,” remarked

Jay Timmons, CEO of the National Association of

Manufacturers, in a video discussing the Report Card.

The economic impact of continued underinvestment in

infrastructure is staggering, a figure the ASCE estimates

at $3.9 trillion by 2025, putting the U.S. at risk of losing its

global competitiveness. Numerous studies have shown that

U.S. infrastructure spending has lagged other developed

countries. The World Economic Forum, in The Global

Competitiveness Report for 2016-2017, revealed that the

U.S. ranked number 11 among the 138 economies studied

for overall infrastructure quality, behind Hong Kong, Japan,

France, and Germany, among others.

Globally, infrastructure investment has declined as a

share of GDP in 11 of the G20 economies, according to

a 2016 McKinsey study Bridging Global Infrastructure

Gaps, triggered by the recent financial crisis. Among the

countries to dial back infrastructure spending were the

European Union, the United States, Russia, and Mexico.

Between 2016 and 2030, McKinsey estimates $3.8 trillion

per year in infrastructure investment is required globally to

support projected economic growth.

6


Market Update

“When it comes to your infrastructure you should be

worried,” said Norma Jean Mattei, 2017 president of ASCE.

“President Trump is onto something as he calls for a new

program of national rebuilding.” The Trump administration

has declared its intentions to prioritize infrastructure

spending, proposing plans for a $1 trillion bill to fortify

the country’s deteriorating

systems over the next

10 years. While industry

is urging swift action to

address current infrastructure

challenges, the reality is that

tax and healthcare reform

may slow progress, with some

industry experts predicting the

implementation of a spending

plan may not materialize

until 2018.

Investors maintain a bullish

outlook, with investment

in infrastructure expected to extend the current growth

cycle. The Trump infrastructure plan is expected to boost

companies servicing related markets, which is directing

M&A and private investment into the sector.

“A decrease in public funding and weakened economic

conditions in many regions are driving tremendous global

demand for private investments in infrastructure,” said Marc

Lipschultz, Global Head of KKR’s Energy & Infrastructure

business. In July 2015, KKR announced the closing

of a second global infrastructure fund, KKR Global

Infrastructure Investors II, raising $3.1 billion. The fund

will target investments in the energy supply chain, water

systems, roads, railways, airports, and communications

networks.

International private

equity funds are

targeting the U.S.

for investment.

In March 2017, 3i

Group announced

the formation of

a North American

infrastructure business

to target investment

opportunities in the

region, stating its

“ambition to build a

significant business in

this market,” said 3i CEO Simon Burrows. 3i is building on

its investment success in the European market.

EQT Partners raised $4.2 billion for its third infrastructure

fund, EQT Infrastructure III, which closed in February

2017. The fund will seek investment opportunities in

the energy, transportation and logistics, environmental,

telecom, and social infrastructure sectors primarily in

North America and Europe.

Infrastructure Investment Gap: The Economic Impact

2016-2025 $1,167 $508 $819 $337 $784 $3,615

2026-2040 $1,981 $3,215 $1,071 $1,073 $2,003 $14,201

$ in billions

SurfaceTransportation

Water/Wastewater

Inland Waterways& Marine

Aggregate Economic Impact of All SectorsAirportsElectricity

Losses to the National Economy Due to Infrastructure Investment Gaps

Gross Domestic Product

Source: 2016 Failure to Act, ASCE.

“Good infrastructure allows us to be more competitive in the world. We know work we’ve done shows that if we don’t have a competitive infrastructure, it will cost this economy $3.9 trillion in our gross domestic product.” Greg DiLoreto Chair of ASCE’s Committee on America’s Infrastructure

7


Market Update

Public equities have rallied on news of a proposed

infrastructure revitalization plan. The S&P 1500

Construction & Engineering index outperformed the

broader market, with a one-year return of 16.9 percent,

compared to 14.9 percent for the S&P 500.

Interest Rates

The prolonged low interest rate environment has been

stimulative to the housing market recovery. Industry

participants are closely following the Federal Reserve,

which raised rates 25 basis points in March, marking the

third rate hike since December 2015, and is signaling at

least two more rate hikes in 2017.

Mortgage interest rates have been rising steadily, with

the 30-year fixed rate reaching an average 4.20 percent

in March 2017—which is up from 3.69 percent a year ago.

The NAHB is forecasting fixed mortgage rates to increase

to 4.36 percent and 5.09 percent in 2017 and 2018,

respectively, according to estimates released in February

2017.

While rising interest rates are not expected to have an

immediate impact on the construction industry, rate

increases will create “more of a dampening element by

2018, which will lead to a slowdown in overall economic

activity in 2018 or 2019,” predicts Robert Murray, chief

economist at Dodge Data & Analytics.

Capital Markets

The capital markets environment remains robust evidenced

by rising public equity valuations, plentiful debt and equity

capital, and valuation multiple expansion. Building products

stocks have rallied on strengthening industry fundamentals

with composite indices outperforming the broader market.

The sector has seen a number of IPOs launch, including

JELD-WEN (NYSE:JELD) which raised $575 million through

an IPO in January 2017, pricing 25 million shares at $23

per share—the high end of the offering range. JELD-

WEN has seen its stock price gain 22.0 percent since the

offering. JELD-WEN has been backed by Onex since 2011.

Foundation Building Materials, Forterra, and GMS are

among other IPOs announced over the last 18 months.

The overall tone of the lending markets can be viewed

as cautiously optimistic, with themes of lower taxes, less

regulation, and more infrastructure spending expected to

boost the economy, which is raising confidence. Lender

appetite in the sector remains healthy; however, leverage

levels are discounted to the broader market reflecting

perceived risk for industry cyclicality.

M&A Activity

The pace of M&A activity is accelerating with 2016

transaction volume besting 2015 levels and nearly

matching the 2007 peak. Transaction activity reflects

active participation from strategic and financial buyers and

investor appetite that is broad-based with interest across

all building products subsectors.

In its 4Q16 earnings call, JELD-WEN (NYSE:JELD)

highlighted acquisitions as a key driver of revenue growth,

citing six buys completed in the past 18 months and a

healthy acquisition pipeline, according to SVP of Corporate

Development John Linker, speaking to the company’s

future plans, “We’d like to continue executing on more

of what we’ve been doing, which is filling in gaps in our

product or service offering, with some of these smaller

bolt-on companies that are growing faster than we are in

certain segments or have a specialty offering that we can

fill in and really accelerate our core growth.” JELD-WEN’s

recent acquisitions include Breezway, Trend Windows

and Doors, LaCantina Doors, Karona, Dooria, and Aneeta

Historical Building Products M&A Activity

Source: S&P Capital IQ.

0

50

100

150

200

250

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q2016

1Q2017

Num

ber o

f Tra

nsac

tion

s

8Sources: S&P Capital IQ, PitchBook, Equity Research, Company Filings, public data.


Market Update

9

Window Systems. The company remains optimistic about

broader market fundamentals, pointing to improvement in

housing starts in the U.S., and views “the underlying market

in North America to be remaining quite constructive,” said

CEO Mark Beck.

Headwaters (NYSE:HW) has been aggressively growing

its manufacturing footprint in windows, announcing

the acquisitions of Magnolia Window in January 2017

and Krestmark Industries in August 2016. Magnolia’s

Southeastern territory spans seven states, broadening

Headwaters footprint in the region. Vinyl window

manufacturer Krestmark provided an entry to the growing

Texas residential market, commanding $240 million in the

sale at a full 9.2x adjusted EBITDA (1.9x revenue), according

to analyst estimates.

Quikrete is deepening its capabilities in the infrastructure

market, completing the $540 million purchase of Cemex’s

U.S. Reinforced Concrete Pipe Manufacturing business

this January to solidify its leadership position in concrete

drainage products, which followed the $950 million

purchase of Contech Engineered Solutions last November,

a provider of solutions for stormwater management, bridge

structure, and drainage applications.

ABC Supply grew its footprint substantially with the

$670 million purchase of L&W Supply from USG

Corporation (NYSE:USG) last October, identifying the

deal as one of the largest in the company’s history. ABC

added 136 distribution branches and $1.4 billion in revenues,

expanding its footprint to over 700 locations with revenues

of $8 billion.

Recent activity evidences strong interest in U.S. assets

to tap faster growth and anticipated increases in

infrastructure spending.

International building products companies have been active

acquirers. Among the notable recent buys is the pending

acquisition of Headwaters (NYSE:HW) by Australia’s largest

building materials supplier Boral Limited (ASX:BLD), a

move that will more than double its U.S. business, furthering

the company’s stated strategy to increase its building

products exposure while increasing its fly ash business

fivefold, “which will play favorably into the infrastructure

spend underway in the U.S.,” the company said. “While the

acquisition of Headwaters significantly transforms Boral

USA, it is also highly transformative for Boral as a Group,”

commented Boral CEO Mike Kane, underscoring that the

combination solidifies Boral’s positioning as a global player

in the building products and construction materials market.

The transaction is expected to close by mid-2017.

Germany’s aluplast announced in March it acquired Chelsea

Building Products, a transformational buy that will expand

its U.S. presence and provide a foundation for accelerated

growth in North America. “We see Chelsea as a cornerstone

of our global strategy,” said aluplast CEO Dirk Seitz,

commenting on the new partnership. The manufacturer

of vinyl window and patio door lineal systems plans to

leverage Chelsea’s market knowledge and experience “to

build a strong platform for substantial growth in the United

States,” Seitz said.

dormakaba’s (SWX:DOKA) acquisitions of Mesker

Openings in December 2016 and the Mechanical Security

Businesses of Stanley Black & Decker (NYSE:SWK)

this February are viewed by industry analysts as “game

changing” in the access control market, with the moves

positioning dormakaba as a top three player in North

America. These highly synergistic deals garnered premium

valuations, with the Stanley assets fetching 13.8x EBITDA

and a healthy 9.0x after estimated synergies, and 8.9x

EBITDA for Mesker.

The acquisitions follow the merger of DORMA and Kaba

in September 2015 to form a top three player in the global

market for security and access solutions. dormakaba CEO

Riet Cadonau, commented on the acquisitions, saying,

“…the recently completed Mesker acquisition…will expand

our North America offering to cover all essential door

components including manual doors. With…Stanley

Commercial Hardware, we will add substantial scale,

becoming a top-three provider in the attractive North

American market that can offer the full portfolio of door

hardware and access control solutions to our customers.”

Sources: S&P Capital IQ, PitchBook, Equity Research, Company Filings, public data.


Market Update

Private Equity

Investor confidence has strengthened on improving secular

trends, with building products companies continuing to

attract private equity interest.

The buyout market is facing dueling forces of growing

capital stores and pent up demand resulting from a

competitive deal market. Private equity capital ballooned

to a record $754 billion in 2016, of which a growing supply

($142 billion) is earmarked for the middle market. Investment

activity will continue to be fueled by a sense of urgency for

funds to deploy capital, with acquisition growth a primary

strategy in value creation.

• Private equity remains heavily invested in the Building

Products sector. The growing inventory of portfolio

companies has steadily risen to top 150 in 2017. Just

under one-third of building products businesses have

been held in portfolios six years or longer. Sponsors are

beginning to monetize aging portfolio investments with

current favorable market conditions likely to drive more

sale activity. Sponsor-to-sponsor trades dominated exits

in 2016, and the trend appears to be continuing into

2017.

• Add-on acquisitions are central to private equity’s

investment thesis, consistently accounting for nearly

two-thirds of all buyout activity with the share growing

in recent years.

• Time to exit reached a high of 7.8 years in 2014,

reflective of the challenging operating environment and

a construction market that has been slower to rebound

in the economic recovery.

A number of new platform investments have been

announced in recent months, indicative of a positive growth

outlook and risk appetite that spans diverse building

products subsectors.

In April 2017, Graycliff Partners expanded its building

products portfolio with the acquisition of Oberfields

Holdings, a regional manufacturer of concrete hardscape

and masonry products serving Ohio and surrounding states.

Graycliff intends to invest in Oberfields’ manufacturing

capabilities to expand its product lines while building out

its geographic footprint. Graycliff’s related holdings include

Stone Source, a distributor of natural stone and other

decorative surface products, and Wood Pro, a manufacturer

of wood flooring products for the residential construction

market, both 2015 investments, and Fairway Building

Products, a manufacturer of vinyl, aluminum, and composite

railing systems, a 2014 investment.

Madison Dearborn Partners (MDP) is partnering with

U.S. LUMBER, a distributor of specialty building products

in the Eastern United States. In March 2017, the sponsor

financed a growth equity investment to fund geographic

and product expansion. U.S. LUMBER currently operates

nine distribution centers in 23 states and generates sales

in excess of $500 million, according to ProSales. “We

look forward to utilizing our expertise in growing and

scaling businesses in order to support the various growth

opportunities before U.S. LUMBER,” said Richard Copans, a

Managing Director at MDP, commenting on the investment.

U.S. LUMBER acquired Boston Cedar in April 2016.

0%

20%

40%

60%

80%

100%

Company Inventory Portfolio Add-on Activity

Private Equity Investing in Building Products

Add-

ons

as P

erce

ntag

e of

Tot

al B

uyou

ts

Source: PitchBook.

*As of March 31, 2017.

Year ofInvestment

2011-2016

2006-2010

2000-2005

71%

21%

8%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*

Company Inventory 112 116 120 116 118 128 135 143 142 152 155 152

Median Time to Exit 3.26 4.46 2.24 3.06 7.00 6.73 6.04 7.12 7.78 7.22 5.85 5.23

0.0

2.0

4.0

6.0

8.0

10.0

0

30

60

90

120

150

180

Median Tim

e to Exit (in years)

Num

ber o

f Com

pani

es

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*

Add-Ons 43.7% 46.2% 55.0% 42.3% 65.2% 52.6% 61.0% 56.4% 63.0% 61.3% 58.5% 70.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

10 Sources: S&P Capital IQ, PitchBook, Equity Research, Company Filings, public data.


Market Update

11

Industrial Opportunity Partners (IOP) purchased Union

Corrugating in January 2017, a maker of metal roofing

systems and parts for residential, commercial, and agricultural

building applications. The company’s manufacturing footprint

comprises facilities in the Southeast, Mid-Atlantic, and

Midwest regions. IOP’s other building products holdings

include Alexandria Moulding, acquired in 2016, and Coldwater

Veneer, a 2015 investment.

Sun Capital Partners picked up Arrow Tru-Line in January

2017, a manufacturer of garage door hardware and fittings

for residential and commercial markets. The sponsor “sees

considerable potential to grow the business” through

maximizing operational efficiencies, reducing procurement

costs, and expanding market share. Sun Capital Partners owns

Demilec, a player in the North American spray polyurethane

foam insulation market.

Blue Wolf Capital Partners formed Novo Building Products

in December 2016 with the purchase of the North American

Building Products business of Tenon Holdings, a millwork

operation that manufactures stair parts, moldings, doors, and

other building products. The sponsor stated the goal to “make

Novo the industry leading manufacturer and distributor of

millwork and specialty building products in North America,”

said Partner Charlie Miller. Building products distributor

American Builders Supply is a Blue Wolf portfolio company.

In September 2016, American Securities acquired Henry

Company, a North American manufacturer of roofing and

building envelope products for the residential and commercial

building products markets, in a $600 million transaction.

Graham Partners exited its five-year investment in the sale

and is credited with more than doubling Henry’s EBITDA

during its ownership. The sponsor completed a number of

strategic initiatives including new product launches and

strategic acquisitions while expanding the senior management

team.

Platinum Equity acquired Fabcon in September 2016, a

maker of concrete wall panels for nonresidential construction

applications with manufacturing facilities in Kansas,

Minnesota, Ohio, and Pennsylvania. Platinum “will bring its

financial, operational, and M&A resources to bear in support of

the company’s continued growth,” the sponsor said. Platinum

Equity recently closed its fourth fund raising $6.5 billion.

Consumer facing businesses Kith Kitchens and Top Knobs

were targets for new platforms in 2016. Pfingsten Partners

acquired Kith Kitchens in June, a manufacturer of branded

kitchen and bath cabinetry in the Southeastern U.S., a region

that has benefited from a vibrant housing market. Pfingsten

will leverage its previous experience in the cabinet industry as

a former owner of Norcraft Companies. The Jordan Company

acquired Top Knobs in March, a supplier of decorative kitchen

and bath hardware.

Industry fragmentation remains a draw as sponsors pursue

accretive add-ons to execute buy-and-build strategies.

Arsenal Capital Partners is building a leader in the spray

polyurethane foam (SPF) market, announcing in February

2017 it was acquiring the North American SPF business of

Covestro, which manufactures products for insulation and

roofing in residential and commercial applications. Accella

completed add-ons in March 2016, picking up Quadrant

Urethane Technologies, and in September 2015, Burtin

Polymer Laboratories and Coating and Foam Solutions,

further solidifying its presence in the SPF market. Accella

has been backed by Arsenal Capital Partners since 2012.

The company has attracted more than $250 million in

development capital to date, adding Maranon Capital as

a new investor in September 2015, to fund an acquisition

growth strategy.

Audax Group portfolio company, Innovative Chemical

Products (ICP), acquired Fomo Products in April 2016, a

maker of foam sealants and adhesives used in construction

applications—its third add-on for the platform following the

2017 acquisitions of MinusNine Technologies and

Rock-Tred.

Distribution platforms are leveraging acquisitions to build

scale and geographic footprint. US LBM Holdings, backed by

Kelso & Company since 2015, acquired Ridout Companies

in January 2017, its fourth acquisition in the last 12 months.

Ridout extends its footprint in Arkansas with 12 locations. To

date, US LBM has completed 14 acquisitions under Kelso’s

ownership.

Construction Supply Holdings (CSH), a newly-formed

platform of The Sterling Group, added on with Stetson

Building Products this January, expanding its Midwest

footprint with nine branches. CSH was formed through

the acquisitions of Brock White Company and Border

Construction Specialties in November 2016, creating a

platform for national expansion with 39 branches in the

Midwest, Southwest, and western Canada.



Market Update

TARGET ACQUIRER DEAL STATS TARGET ACQUIRER DEAL STATS

GRAHAM PARTNERS

Mar-16

Jun-16

Pending

Apr-17

Apr-17

Feb-17

Feb-17

Jan-17

Jan-17

Mar-17

Enterprise Value: $467.5M

Dec-16

Feb-17

Enterprise Value: $240MEV/Revenue: 1.9xEV/EBITDA: 9.2x

Enterprise Value: $950MEV/Revenue: 1.4x

Enterprise Value: $450MEV/Revenue: 2.8x

Enterprise Value: $2.54BEV/Revenue: 2.5xEV/EBITDA: 14.8x

Enterprise Value: $142.5MEV/Revenue: 2.1xEV/EBITDA: 8.9x


Enterprise Value: $670MEV/Revenue: .5xEV/EBITDA: 12.9x


Door and Mechanical Security Division

Select assets in OH

North AmericanSpray Foam

Business

Enterprise Value: $2.73BEV/Revenue: 1.1xEV/EBITDA: 9.9x

Enterprise Value: $306M


Enterprise Value: $600M

Aug-16

Oct-16

Mar-17

Feb-17

Nov-16

Jan-17

Novo Building Products

Select assets in TX and NM

Dec-16

Nov-16

Jan-17

Apr-16

Apr-16

Jan-17

Sep-16

Dec-16

Sep-16

Sep-16May-16

Feb-16

Dec-16

GRAHAM PARTNERS

Concrete PipeManufacturing Business

SELECTED M&A ACTIVITY IN BUILDING PRODUCTS

12



11

Overall M&A Activity

Middle Market M&A Activity Private Equity Transaction Activity*

Mergers & Acquisitions Activity

Trends in Valuation

Acquisition Financing Trends

Total Leverage Equity Contribution

SOURCE: Standard & Poors LCD.

*NA: Data not reported due to limited number of observations for period. *NA: Data not reported due to limited number of observations for period.SOURCE: Standard & Poors LCD.

SOURCE: Standard & Poors LCD.

Transactions with Strategic Buyers Transactions with Financial Buyers

Transaction Count by Deal Size

Middle market enterprise values between $25 million and $500 million. Middle market enterprise values between $25 million and $500 million.

EBIT

DA

Mul

tiple

Tota

l Deb

t to

EBIT

DA

EBIT

DA

Mul

tiple

Equi

ty C

ontr

ibut

ion

(%)

Middle Market M&A Activity

SOURCE: PitchBook.SOURCE: S&P Capital IQ.Based on announced deals, where the primary location of the target is in the United States.Middle market enterprise values between $25 million and $500 million. *Buyout activity only

7.2x

8.3x

6.5x 6.6x

6.3x

8.2x

8.1x 8.

5x

8.2x

8.0x 8.0x

7.4x 7.

7x

7.7x

9.1x

8.7x

6.4x

8.5x

9.9x

9.4x

7.5x

8.5x

9.1x

8.7x

8.7x

9.9x

10.1

x

9.9x

9.8x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Mar-17

<$250 million $250-$499 million $500 million+

4.8x

5.4x

4.1x

3.6x

4.1x4.3x

4.5x4.7x 4.7x 4.8x 4.7x 4.7x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Mar-17

38%

35%

46%

51%

47%

43%

41% 40%

37%

44%42%

39%

25%

30%

35%

40%

45%

50%

55%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Mar-17

8.2x

6.8x 7.

1x

9.8x

8.0x

7.6x 7.7x

8.6x 8.7x 9.

2x

7.4x

7.0x

8.7x

9.4x

8.4x

7.6x

9.2x 9.

5x

8.9x

8.7x

10.1

x

11.4

x

9.1x

10.0

x

9.1x

10.2

x

8.2x

9.5x 9.

7x

9.7x

8.5x

9.1x

9.8x 10

.3x

8.3x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Mar-17

<$250 million $250-$499 million $500 million+

119

148

125

151

106 14

115

614

510

713

214

811

458 97 96 13

110

012

214

113

412

0 166

163

154

137

160

164 23

514

716

119

219

916

1 217

231

250

232

227

240

228

183

199

210

228

176

207 21

921

4 240

207 22

221

1 268

191 20

7 233

113

9112

011

119

714

5 161 23

420

416

823

022

621

417

6 211

188

307

208 22

7 248 28

623

325

5 328 35

528

327

0 305

334

261 27

125

8 310

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6566

5963

6267 63

6336

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1919

26 3540

3242

5861

5563 68

5342

54 5069

3946

6079

4982

7370

60 5377 68

5477 51

6144

$0

$10

$20

$30

$40

$50

$60

$70

$80

0

100

200

300

400

500

600

700

800

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ‘17

Transaction Value ($ in billions)

Num

ber o

f Tra

nsac

tions

$25M-$50M $50M-$250M $250M-$500M Trans Value

NA

*

NA

*

NA

*

NA

*

NA

*

NA

*N

A*

NA

*

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q12016

Q12017

Under $25M $25M-$100M $100M-$500M $500M-$1B $1B-$2.5B $2.5B+

13


14

Building Products M&A ActivityMergers & Acquisitions

BUILDING PRODUCTS

In May 2017, Apogee Enterprises, Inc. (NasdaqGS:APOG)

announced it is acquiring EFCO Corporation from Pella

Corporation in a transaction valued at $195 million. The Des

Moines, Iowa-based company manufactures architectural

aluminum window, curtainwall, storefront, and entrance

systems for commercial construction projects. EFCO

operates facilities in Iowa, Missouri, Illinois, and Virginia and

generates annual revenue in excess of $250 million. The

transaction is expected to close in the first half of fiscal

2018.

Apogee CEO Joseph Puishy commented on the acquisition:

“EFCO will accelerate our growth strategies, and expand

our presence in mid-size commercial buildings, broaden our

product offerings, and increase our geographic presence

across the United States.” Puishy highlighted EFCO’s

focus on mid-size and small commercial projects, which he

identified as less cyclical and a target growth sector for the

company. Transaction Multiple: .8x Revenue

In April 2017, Graycliff Partners completed the

recapitalization of Oberfields Holdings, with participation

from management. MB Business Capital provided the

senior credit facility as part of the acquisition. Delaware,

Ohio-based Oberfields manufactures concrete hardscape

and masonry products for the residential and commercial

construction markets. Products include segmental retaining

walls, pavers, architectural block, gray block, precast

products, and hardscape and masonry accessories. The

company holds a leading market position in Ohio and a

growing presence in surrounding states, with a distribution

footprint that includes Ohio, Indiana, Kentucky, Pennsylvania,

and West Virginia.

Commenting on the acquisition, Will Henderson, a Managing

Director at Graycliff Partners, said: “The Oberfields team has

built an impressive business—known for innovative, quality

products, and its commitment to customers. We look forward

to working with Bruce and his team to position the company

for future growth while retaining the reputation of excellent

service built over the past 50+ years.” The Anderson Group

exited its six-year investment in the sale. During its ownership,

Anderson invested in product line and facility expansion,

as well as strategic acquisitions, enabling the company to

capture a leading market position in central Ohio and establish

a foundation for regional expansion.

In April 2017, Accella Performance Materials completed the

acquisition of the North American Spray Polyurethane Foam

(SPF) Business of Covestro LLC. The business manufactures

spray polyurethane foam for insulation and roofing in

residential and commercial applications. Commercial and

production operations are conducted in a facility located in

Spring, Texas which employs approximately 40 people. The

transaction is expected to close in April 2017. Accella has been

backed by Arsenal Capital Partners since 2012.

John Televantos, Partner at Arsenal Capital, said: “This

combination further strengthens Accella’s position as the

leading independent Polyurethane systems house in North

America, and will enhance the value Accella brings to market

with expanded technology, leading brands, and great

people. We are committed to support the ongoing growth of

Accella and invest in strategies that will further transform the

business.”

In March 2017, Wingate Partners completed the acquisition

of Binswanger Glass, a provider of architectural glass

and aluminum products for commercial, residential, and

automotive aftermarket applications. Binswanger operates

64 locations in 15 states. Binswanger received developmental

capital from Grey Mountain Partners in March 2016. Yukon

Partners provided mezzanine funding for the transaction.

dormakaba Holding AG (SWX:DOKA) announced the

completion of two acquisitions to strengthen its position in

the North American market. In February 2017, dormakaba

completed the purchase of the Door and Mechanical Security

Division from Stanley Black & Decker (NYSE:SWK) for $725

million. Included in the sale were commercial hardware brands

BEST Access, phi Precision, and GMT, which generated

revenues and EBITDA of approximately $270 million and $52

million, respectively. Transaction Multiples: 2.7x Revenue and

13.9x EBITDA (9.0x EBITDA post synergies)

In December 2016, dormakaba acquired Mesker Openings

Group for $142.5 million. Mesker’s broad product portfolio

includes hollow metal doors, hollow metal frames, hardware,

and wood doors sold under recognized brands Mesker Door,

Hollow Metal Xpress, Design Hardware, and Wood Door

Xpress. Products are sold to customers in the commercial,

industrial, and institutional markets. The Huntsville, Alabama-

based company operates five manufacturing and distribution

facilities. Transaction Multiples: 2.1x Revenue and 8.9x

EBITDASources: S&P Capital IQ, PitchBook, Equity Research, Company Filings, public data.


15


“With these two acquisitions, dormakaba has become one of

the top 3 providers in the attractive North American market,

and can now offer customers the full portfolio of door

hardware and access control solutions from a single source,”

the company said.

In February 2017, Paradigm Window Solutions acquired

Vista Window Company. The manufacturer of vinyl

replacement windows and doors operates locations in

Ohio and Georgia and sells to distributors and specialty

remodelers in the Midwest and Southeast. Vista represents

the first add-on for PWS, which was acquired by

CapitalWorks and Ironwood Capital in December 2015. With

the acquisition, PWS expands its “...geographic reach and

diversifies its channels to market” said John Corrigan, Vice

President at CapitalWorks. Industry veteran Mark Savan will

lead the combined organization as CEO.

In February 2017, High Road Capital acquired Midwest

Wholesale Hardware, a value-added distributor of hardware,

electronic access control, and security products to the

commercial and institutional door hardware market. Midwest

is based in Kansas City, Missouri and operates additional

distribution centers in California, Florida, Pennsylvania,

South Carolina, and Texas. The company was founded in

1987. Midwest CEO Chris Casazza commented on the new

partnership: “With High Road’s support, we will accelerate

our growth by expanding our distribution coverage and

investing in innovative technology solutions, particularly

in electronic access control systems, the industry’s fastest

growing segment. We also expect to pursue acquisitions.”

Ben Schnakenberg, a Partner at High Road Capital Partners,

said: “Midwest Wholesale Hardware has industry-leading

national fulfillment capabilities, offers best-in-class

customer service, and is a value-added partner to its

customers and suppliers. We look forward to supporting

Midwest’s efforts to expand its geographic presence and

capitalize on growth within the electronic access control

market.”

Midwest was previously backed by Olympus Partners,

which acquired the company in 2014.

In January 2017, Armstrong World Industries (NYSE:AWU)

acquired Tectum in a $31.4 million cash transaction. The

Newark, Ohio-based manufacturer of acoustical panels

has served the commercial building market for more

than 65 years. The company operates two facilities

in Newark and Columbus, Ohio. Tectum products will be

integrated within Armstrong’s Ceilings Solutions umbrella,

a leading growth engine for the company, according to

a press release announcing the transaction. Transaction

Multiple: 1.3x Revenue

In January 2017, Industrial Opportunity Partners (IOP)

purchased Union Corrugating, a maker of metal roofing

systems and roofing parts for residential, commercial,

and agricultural building applications. Headquartered in

Fayetteville, North Carolina, the company operates 10

additional manufacturing facilities across the Southeast,

Mid-Atlantic, and Midwest regions.

In January 2017, Headwaters (NYSE:HW) completed the

acquisition of Magnolia Window and Door. The Baldwin,

Georgia-based company manufactures vinyl windows

for the new construction and replacement markets. The

company’s geographic footprint spans seven states in

the Southeastern U.S. Magnolia was founded in 1997.

Magnolia General Manager Jimmy Sisco commented on

the new partnership: “Headwaters is a quality company,

and is aggressively expanding its sales and manufacturing

footprint in windows. We are pleased to be part of that

expansion and look forward to growing our business under

the Headwaters umbrella of building products companies.”

In January 2017, Ireland-based Allegion plc (NYSE:ALLE)

acquired Republic Doors and Frames. The Tennessee-

based company manufactures hollow metal doors and

frames for commercial applications. Republic’s footprint

also consists of regional services centers in Atlanta, Dallas,

Orlando, Houston, and Seattle. The company reported sales

of $20 million in 2015.

Republic will complement Allegion’s Steelcraft® brand in

the Americas region, according to a company statement.

Tim Eckersley, regional President, said: “By adding Republic

Doors & Frames to the Allegion family, we’re expanding

our product offering, improving our operating efficiency

and growing our distribution footprint. This will not only

drive growth for us in the U.S., but will enhance the overall

customer experience in this sector that’s core to our

business.”

Sources: S&P Capital IQ, PitchBook, Equity Research, Company Filings,public data.


16


In December 2016, M&M Manufacturing, a subsidiary of

MiTek Industries, which is owned by Berkshire Hathaway

(NYSE:BRK.A), acquired Snappy Co. (Snappy), a leading

branded manufacturer and supplier of galvanized pipe,

duct, and fittings for the residential HVAC market. Snappy

operates production facilities in Minnesota and New York.

Snappy was a portfolio company of Blue Wolf Capital

Partners, which it acquired in 2012.

In December 2016, The Cook & Boardman Group

completed the acquisition of Memphis, Tennessee-based

Delta Door, a move to expand its footprint into the

Tennessee, Arkansas and Mississippi markets, according

to a company statement. The distributor of commercial

doors, frames, and hardware serves architects, contractors,

and facility managers of nonresidential buildings. Delta

Door was founded in 1964. Delta Door is the second

add-on acquisition for Cook & Boardman, which has been

backed by Ridgemont Equity Partners since 2014. The

company purchased RDL Supply in April 2015, a Texas-

based distributor and the largest supplier of RediFrame

commercial steel door frames in the U.S., according to the

sponsor.

In December 2016, Harvey Industries, a portfolio company

of private equity sponsor Dunes Point Capital, acquired

Streetsboro, Ohio-based Soft-Lite, a maker of replacement

vinyl windows and sliding doors. Soft-Lite’s windows are

primarily sold direct to private label window dealers.

Harvey Building Products was attracted to Soft-Lite’s

product quality, reputation, and strong financial performance,

according to CEO Jim Barreira, who commented on

the strategic partnership, saying, “Our business models

complement one another, helping us to win in different market

segments. This expanded scale will make us even stronger

and better able to provide the best possible products and

service to our expanded customer base.” The acquisition will

accelerate Harvey’s plans to expand its commercial business.

Soft-Lite represents the first add-on acquisition for Harvey

Industries, which was acquired by Dunes Point Capital in

September 2015. In addition to manufacturing replacement

windows and doors, Harvey distributes siding, roofing,

and other building materials. The company employs about

1,500 people and operates two manufacturing facilities,

14 showrooms, and 35 warehouse distribution centers

throughout the Northeast.

In November 2016, Quikrete Holdings acquired Contech

Engineered Solutions for $950 million. Contech provides

solutions for stormwater management, bridge structure,

and drainage applications. Contech’s broad offering

spans concrete, steel, and HDPE products and related

services for civil engineering markets. The company

employs approximately 1,400 people from more than 60

facilities across North America. The acquisition is expected

to “significantly advance” Quikrete’s growth strategy,

according to COO Will Magill. In 2015, Contech had revenue

of $695 million.

Contech was acquired in 2012 by an investor consortium

comprised of Anchorage Capital Group, Littlejohn &

Company, Tennenbaum Capital Partners, and Farallon

Capital Management. Transaction Multiple: 1.4x Revenue

In November 2016, Pella Corporation purchased

Duratherm Windows Corporation, a Vassalboro, Maine-

based manufacturer of custom hardwood windows and

doors serving the luxury marketplace. “Duratherm rounds

out Pella’s collection of elite brands and expands our

geographic footprint on both the East and West coasts,”

said Pella CEO Tim Yaggi. With the acquisition, Pella’s

manufacturing footprint grows to 13 U.S. locations.

In November 2016, Australia-based Boral Limited

(BLD:ASX) announced it was acquiring Headwaters

(NYSE:HW) for $2.54 billion, a move to “increase its

exposure to the U.S. building and construction markets”,

Boral said. The addition will more than double the size of

Boral’s U.S. business to combined revenue of $1.8 billion,

adding scale to its fly ash business, which the company

stated plays favorably into “the infrastructure spend

underway in the U.S.” Headwaters’ broader residential

exterior building products portfolio includes specialty

siding, trim board, decking, architectural stone, roofing,

and block products. Transaction Multiples: ~10.6x EBITDA

(2017E) and 7.5x EBITDA (with synergies).

Headwaters acquired Krestmark Industries in August 2016.

The manufacturer of replacement and new construction

vinyl windows provided an entry to the growing Texas

residential market. The $240 million purchase price

valued Krestmark at 9.2x adjusted EBITDA (1.9x revenue),

according to analyst estimates.


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17


In September and May 2016, Fortune Brands Home &

Security (NYSE: FBHS) completed the acquisitions of

luxury kitchen and bath brands Riobel and ROHL, joining

the number-one positioned Moen brand. Products include

faucets, sinks, fixtures, and water filtration products. The

ROHL acquisition includes the luxury ROHL and Perrin &

Rowe brands, as well as the Michael Berman collection,

which generate approximately $70 million in annual sales.

Riobel is a Canadian premium showroom brand with annual

sales of approximately $40 million.

The acquisitions follow the formation of a new Global

Plumbing Group (GPG) which is aimed to “accelerate

growth opportunities and transform Fortune Brands’

plumbing business,” the company said. “The GPG platform,

strategic acquisitions, and joint ventures reflect our

continued focus on growing the business. We continue to

look at other growth opportunities for the GPG and hope

to execute additional transactions as part of our strategy to

drive incremental growth,” said Fortune Brands CEO Chris

Klein. Fortune Brands is looking to grow its plumbing sales

to $2.5 billion by 2020, Klein said.

In April 2016, Industrial Opportunity Partners acquired

Alexandria Moulding, in partnership with management.

Alexandria manufactures solid wood and wood composite

mouldings. Products include stock mouldings, stair parts,

wall coverings, boards, post covers, and columns, as well

as variety of hardwoods and softwoods, which are sold

to retailers, building products distributors, and industrial

customers. The company is based in Alexandria, Ontario,

and operates U.S. facilities in Washington and Pennsylvania.

MATERIALS

Cemex (BMV:CEMEX CPO) completed the sale of certain

U.S. assets to Eagle Materials (NYSE:EXP), Quikrete

Holdings, and Grupo Cementos de Chihuahua, S.A.B. de

C.V. (BMV: GCC *).

In February 2017, Eagle Materials (NYSE:EXP) purchased

Cemex’s Fairborn, Ohio cement plant and related assets

for $400 million —a move that increases its U.S. cement

capacity by roughly 20 percent, Eagle said. The acquisition

furthers the company’s strategy to grow its cement

business, said CEO Dave Powers, stating: “The Fairborn

plant extends our U.S. cement system and connects but

does not overlap with the market reach of our existing

plants. This high-quality cement plant is a compelling

fit with our strategic objectives and our criteria for new

investment. These assets will allow us to participate more

fully in the U.S. construction industry and further positions

the company in target U.S. heartland growth markets.”

Transaction Multiples: 5.0x Revenue and 12.1x EBITDA

In January 2017, Quikrete Holdings completed the purchase

of the U.S. Reinforced Concrete Pipe Manufacturing

Business (Rinker Materials) for $540 million, inclusive of a

$40 million earnout contingent on future performance. The

business operates more than 30 pipe and precast plants in

20 states, solidifying Quikrete’s market leadership position

in concrete drainage products, according to Concrete

Products. The acquisition also deepens its capabilities in

the infrastructure market, following the November 2016

purchase of Contech Engineered Solutions.

In November 2016, GCC acquired a cement plant located

in Odessa, Texas; two cement distribution terminals

located in Amarillo and El Paso, Texas; and the concrete,

aggregates, asphalt, and building materials businesses

in El Paso, Texas and Las Cruces, New Mexico. With the

acquisition, GCC adds 1 million metric tons of cement

capacity to its existing 4.6 million tons, and supports the

company’s U.S. expansion strategy with a 45 percent

increase in its cement capacity, reported the Wall Street

Journal. GCC CEO Enrique Escalante commented on the

transaction: “This acquisition represents a significant

advance in our strategy of sustainable cement growth in

the United States, in markets contiguous to those of GCC´s

geographic footprint. With these assets and colleagues

joining the company, we will enhance the competitive

advantage of our logistics system, expand our product

portfolio, and optimize our operations by sharing best

practices.” The purchase price was $306 million.

In February 2017, Summit Materials (NYSE:SUM) completed

the acquisitions of Everist Materials and Razorback

Concrete Company for a combined cash purchase price

of $110 million. Combined, the Everist and Razorback

aggregates operations bring more than 100 million tons of

permitted reserves in Colorado and Arkansas, Summit said.


http://www.themiddlemarket.com/news/building_products/industrial-opportunity-adds-to-building-products-deals-alexandria-moulding-260348-1.html

http://www.themiddlemarket.com/news/building_products/industrial-opportunity-adds-to-building-products-deals-alexandria-moulding-260348-1.html


18


Everist is a supplier of aggregates, ready-mixed concrete,

and asphalt in west-central Colorado, broadening Summit’s

footprint in the region to include markets bordering Denver,

said Summit CEO Tom Hill. “We view this region as an

exciting opportunity for Summit, where a combination

of transportation infrastructure projects along the I-70

corridor and robust private construction spending activity

stand to benefit our business in the years ahead,” Hill said.

Razorback is a supplier of aggregates and ready-mixed

concrete in central and northeastern Arkansas, establishing

a new market region for Summit, Hill said. “We believe the

Arkansas market is poised for higher construction activity

levels over the longer term, driven by positive employment

and population trends and increased public infrastructure

spending,” Hill added.

In May 2016, Summit Materials entered the Las Vegas

market with the purchase of aggregates and ready-mix

concrete supplier Sierra Ready Mix. The cash purchase

price was $40 million. Sierra operates a sand and gravel pit

and two ready-mix concrete facilities. Commenting on the

acquisition, Summit CEO Tom Hill said: “Sierra’s vertically

integrated operations are a good fit within our Utah-based

Kilgore platform and a very sound entry into Las Vegas,

the next large market south of the Wasatch Front in

Utah. Sierra has a solid position in a sizeable market at an

attractive point in the recovery cycle.”

LUMBER

In March 2017, Universal Forest Products (NASDAQ:UFPI)

completed the acquisition of Quality Hardwood Sales

(QHS), a manufacturer of hardwood products, including

components for cabinets used in homes and recreational

vehicles. QHS is based in Nappanee, Indiana and was

founded in 2001. The company reported net sales of

$30 million in 2016. The addition establishes UFP’s first

operation dedicated to hardwood products, the company

said.

The transaction follows the 2016 acquisitions of Robbins

Manufacturing in August and Idaho Western in June.

Tampa, Florida-based Robbins manufactures treated wood

products with facilities in Florida, Georgia, and North

Carolina. The company reported net sales of $86 million

in 2016. “Bringing [Robbins] into the Universal family of

companies allows us to be an even stronger powerhouse

in the preservative-treated market in the Southeast, and

solidifies our position as the leading manufacturer of

premier treated products in the United States,” said UFPI

CEO Matthew Missad, commenting on the transaction.

Idaho Western is an Idaho-based distributor serving

customers in the retail building materials, manufactured

housing, and recreational vehicle industries. Products

range from lumber and plywood to siding and doors. The

company generated net sales of approximately $21 million.

“This strategic acquisition will allow us to bolster our

foothold in the manufactured housing and retail markets by

expanding our product offering and our geographic reach,”

Missad said.

In December 2016, Blue Wolf Capital Partners acquired

the North American Building Products Business of

Tenon Holding, Nacs USA, which includes operating

divisions The Empire Company, Southwest Moulding

Company, Ornamental Mouldings, Ornamental Products,

and Creative Stair. The business, renamed Novo

Building Products, manufactures stair parts, moldings,

doors, and other building products. Customers include

lumberyards, door shops, retail home centers, and millwork

manufacturers.

DISTRIBUTORS

Beacon Roofing Supply (NasdaqGS:BECN) has completed

four acquisitions so far in 2017:

In April 2017, Lowry’s Specialty Distribution (Lowry’s),

a distributor of waterproofing, sealants, air barriers, and

related products with operations in California, Hawaii,

Utah, and Arizona. The acquisition strengthens Beacon’s

waterproofing business in the western United States and

marks its first entry into Hawaii.

In March 2017, Acme Building Materials, a distributor

of residential roofing and related building products in

Eastern Michigan with branches in Flint, Rochester Hills,

and Brighton. With the acquisition, Beacon brings its count

of Michigan locations to ten, strengthening its residential

business in the region.



19


In January 2017, Eco Insulation Supply (EIS), a Stamford-

based distributor of insulation and related accessories

serving Connecticut, Southern New England, and the

New York City metropolitan area. The acquisition furthers

Beacon’s stated strategy to grow its insulation footprint

though additional acquisitions, said CEO Paul Isabella, in a

press release announcing the transaction.

In January 2017, American Building & Roofing, a distributor

of primarily residential roofing and related building

products in the Pacific Northwest. The company operates

seven branches around Washington State, expanding

Beacon’s presence in the region, and particularly in . the

Seattle market.

Beacon completed five acquisitions in 2016.

US LBM Holdings, backed by Kelso & Company since

August 2015, has completed 14 tuck-in acquisitions to date

under its ownership, including in January 2017, Ridout

Companies, comprised of Ridout Lumber Companies

of Arkansas and Missouri, Ridout Door Manufacturing

Company, and Arkansas Wholesale Lumber Company.

Ridout is an Arkansas-based distributor of building

products and materials to the professional builder and

DIY markets. Products include lumber, windows, doors,

roofing, cabinets, decking, and flooring, as well as design

and installation services. Ridout is the largest distributor

in Arkansas, according to U.S. LBM, with a geographic

footprint that consists of 12 locations in Arkansas and 1

location in Missouri. U.S. LBM completed six acquisitions

in 2016, among the acquired companies: Keene Lumber

Company in Western Michigan; residential and commercial

door manufacturer American Lumber Corporation (ALCO

Doors) based in Baltimore; and R. G. Darby Company, a

supplier of doors, millwork, and other building products to

the multifamily construction industry.

In October 2016, ABC Supply completed the acquisition

of L&W Supply from USG Corporation (NYSE:USG) in

a transaction valued at $670 million. L&W Supply is a

leading specialty distributor of drywall, ceiling tiles, steel

framing and other building materials used by commercial

and residential contractors. The acquisition marks one

of the largest in ABC’s history, adding 136 distribution

branches and $1.43 billion in sales, expanding its footprint

to over 700 locations in 49 states. Sales of the combination

organization exceeds $8 billion. Transaction Multiples: .5x

Revenue and 12.9x EBITDA

In July 2016, Hardwoods Distribution (TSX: HWD)

acquired Rugby Architectural Building Products, a

distributor of non-structural architectural grade building

products to the commercial, industrial, retail, residential,

and institutional construction markets. The $120 million

purchase price consisted of a $13 million earnout contingent

on future performance. Headquartered in Concord, New

Hampshire,Rugby serves more than 22,000 customers from

31 facilities in 48 states. The company has accelerated its

growth through acquisitions, completing 12 tuck-ins since

2011 with financial backing from private equity sponsors

Leading Ridge Capital Partners and Building Industry

Partners. Rugby reported adjusted sales and EBTIDA of

$282 million and $12.5 million, respectively, for the LTM

period ended March 31, 2016. Transaction Multiples: .43x

Revenue and 9.6x EBITDA



Industry Valuations

Relative Valuation Trends

BGL Building Products indices de�ned on Pages 21 and 22.SOURCE: S&P Capital IQ.

Building Products Distributors Lumber and Wood Manufacturers

Aggregates and Cement Producers

Commercial-Focused Building Products ManufacturersResidential-Focused Building Products Manufacturers

Homebuilders

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17

EV/EBITDA 14.9x 14.7x 15.0x 15.1x 13.2x 11.9x 11.3x 11.6x 13.6x 13.1x 11.7x 11.5x 11.4x 11.1x 11.0x 10.9x 10.9x

EV/Revenue 1.3x 1.4x 1.4x 1.5x 1.3x 1.3x 1.3x 1.3x 1.4x 1.4x 1.3x 1.4x 1.4x 1.5x 1.5x 1.4x 1.6x

0.00x

0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x




0.00x

0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x




0.00x

0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

0.0x

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4.0x

6.0x

8.0x

10.0x

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14.0x

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18.0x




0.00x

0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

0.0x

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4.0x

6.0x

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10.0x

12.0x

14.0x

16.0x

18.0x




0.00x

0.25x

0.50x

0.75x

1.00x

1.25x

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1.75x

2.00x

2.25x

0.0x

2.0x

4.0x

6.0x

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10.0x

12.0x

14.0x

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0.00x

0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

0.0x

3.0x

6.0x

9.0x

12.0x

15.0x

18.0x

21.0x

24.0x

27.0x

30.0x

20


Industry Valuations


NOTE: Figures in bold and italic type were excluded from median and mean calculation.(1) As of 4/28/2017.(2) Market Capitalization is the aggregate value of a �rm's outstanding common stock.(3) Enterprise Value is the total value of a �rm (including all debt and equity).SOURCE: S&P Capital IQ.

($ in millions, except per share data) Current % of Market Enterprise Total Debt/ TTMCompany Name Country Ticker Stock Price (1) 52W High Capitalization (2) Value (3) Revenue EBITDA EBITDA Revenue Gross EBITDARESIDENTIAL FOCUSED BUILDING PRODUCTS MANUFACTURERSThe Sherwin-Williams Company United States NYSE:SHW $334.68 99.0% $31,168.2 $32,104.6 2.7x 15.8x 1.0x $12,043.0 49.9% 16.9%Compagnie de Saint-Gobain S.A. France ENXTPA:SGO 53.99 98.1% 29,928.8 36,486.9 0.9x 8.4x 2.4x 41,267.8 25.5% 10.1%Masco Corporation United States NYSE:MAS 37.02 98.5% 11,822.8 14,147.8 1.9x 11.7x 2.5x 7,414.0 33.7% 16.3%Fortune Brands Home & Security, Inc. United States NYSE:FBHS 63.74 96.6% 9,784.4 11,066.6 2.2x 13.9x 1.9x 5,065.2 36.5% 15.7%James Hardie Industries plc Ireland ASX:JHX 16.94 98.2% 7,469.0 7,920.8 4.1x 17.0x 1.2x 1,863.1 36.4% 24.2%Owens Corning United States NYSE:OC 60.85 96.9% 6,809.3 9,008.3 1.5x 8.0x 2.0x 5,924.0 25.1% 19.1%JELD-WEN Holding, inc. United States NYSE:JELD 33.03 96.0% 3,464.5 5,145.7 1.4x 16.4x 5.3x 3,666.8 21.8% 8.4%Armstrong World Industries, Inc. United States NYSE:AWI 46.75 97.4% 2,517.0 3,248.8 2.6x 10.7x 3.8x 1,234.5 30.5% 18.6%Masonite International Corporation United States NYSE:DOOR 83.20 97.5% 2,501.8 2,913.7 1.5x 12.8x 2.1x 1,974.0 20.8% 11.5%Trex Company, Inc. United States NYSE:TREX 73.19 93.6% 2,152.1 2,133.5 4.4x 18.0x 0.0x 479.6 39.0% 24.7%Simpson Manufacturing Co., Inc. United States NYSE:SSD 41.71 86.2% 1,987.7 1,821.1 2.1x 11.1x 0.0x 881.0 47.7% 18.7%Headwaters Incorporated United States NYSE:HW 23.76 99.0% 1,779.3 2,475.7 2.4x 14.4x 4.2x 1,068.9 29.0% 16.7%American Woodmark Corporation United States NasdaqGS:AMWD 91.90 98.7% 1,491.8 1,297.9 1.3x 10.9x 0.2x 1,012.4 21.3% 11.8%Ply Gem Holdings, Inc United States NYSE:PGEM 19.25 96.3% 1,316.8 2,105.6 1.1x 9.4x 3.7x 1,911.8 24.2% 11.8%Gibraltar Industries, Inc. United States NasdaqGS:ROCK 39.25 81.7% 1,239.3 1,278.7 1.3x 10.5x 1.7x 1,008.0 25.3% 12.0%Gri�on Corporation United States NYSE:GFF 24.00 88.4% 1,057.4 1,968.8 1.0x 10.8x 5.3x 1,930.1 24.5% 9.5%Quanex Building Products Corporation United States NYSE:NX 20.40 93.2% 702.3 960.7 1.0x 10.1x 2.9x 921.8 23.1% 10.4%PGT Innovations, Inc. United States NYSE:PGTI 10.90 87.3% 543.5 752.2 1.6x 10.2x 3.4x 458.6 30.9% 16.1%Median $40.48 96.7% $2,327.0 $2,694.7 1.6x 11.0x 2.2x $1,887.5 27.3% 15.9%Mean $59.70 94.6% $6,540.9 $7,602.1 1.9x 12.2x 2.4x $5,006.9 30.3% 15.1%

COMMERCIAL FOCUSED BUILDING PRODUCTS MANUFACTURERSLennox International Inc. United States NYSE:LII $165.39 95.6% $7,057.8 $8,112.5 2.2x 14.7x 2.1x $3,719.8 29.7% 14.3%Kingspan Group plc Ireland ISE:KRX 34.80 100.0% 6,220.6 6,757.7 2.0x 15.2x 1.7x 3,281.4 30.2% 13.1%USG Corporation United States NYSE:USG 30.30 87.4% 4,417.5 5,091.5 1.7x 8.9x 2.1x 3,037.0 22.7% 16.9%Valmont Industries, Inc. United States NYSE:VMI 152.35 92.2% 3,440.8 3,810.3 1.5x 11.4x 2.2x 2,562.5 26.0% 13.2%AAON, Inc. United States NasdaqGS:AAON 36.65 97.1% 1,928.9 1,885.1 4.9x 20.3x 0.0x 384.0 30.8% 24.2%NCI Building Systems, Inc. United States NYSE:NCS 17.50 96.7% 1,240.2 1,610.9 0.9x 11.1x 2.7x 1,706.6 24.7% 8.5%Forterra, Inc. United States NasdaqGS:FRTA 19.24 84.5% 1,234.7 2,294.4 1.7x 11.2x 5.7x 1,364.0 22.0% 14.1%Median $34.80 95.6% $3,440.8 $3,810.3 1.7x 11.4x 2.1x $2,562.5 26.0% 14.1%Mean $65.18 93.4% $3,648.6 $4,223.2 2.1x 13.3x 2.4x $2,293.6 26.6% 14.9%

BUILDING PRODUCTS DISTRIBUTORSThe Home Depot, Inc. United States NYSE: HD $156.10 99.9% $187,502.5 $208,565.5 2.2x 13.5x 1.5x $94,595.0 34.2% 16.3%Lowe's Companies, Inc. United States NYSE:LOW 84.88 99.0% 72,832.2 87,873.2 1.4x 11.7x 2.1x 65,017.0 34.6% 11.6%Wolseley plc United States NYSE:LPX 25.74 95.6% 3,714.7 3,432.4 1.5x 10.9x 1.2x 2,233.4 22.8% 13.8%Watsco, Inc. Switzerland LSE:WOS 63.46 92.8% 15,940.5 17,650.0 0.8x 11.8x 1.9x 20,227.7 28.4% 7.2%Beacon Roo�ng Supply, Inc. United States NYSE:WSO 138.80 87.0% 4,553.1 5,017.6 1.2x 13.8x 0.8x 4,241.4 24.5% 8.6%Builders FirstSource, Inc. United States NasdaqGS:BECN 49.57 95.1% 2,978.2 4,007.6 1.0x 11.0x 3.0x 4,152.8 24.8% 8.8%Lumber Liquidators Holdings, Inc. United States NasdaqGS:BLDR 16.01 98.7% 1,798.8 3,586.4 0.6x 10.3x 5.2x 6,367.3 25.1% 5.5%CanWel Building Materials Group Ltd. United States NYSE:LL 24.55 98.8% 696.8 726.5 0.8x NM NM 960.6 32.2% -5.5%Huttig Building Products, Inc. Canada TSX:CWX 4.33 83.5% 293.4 434.3 0.6x 11.9x 3.9x 728.3 12.6% 5.1%Bluelinx Holdings Inc. United States NasdaqCM:HBP 8.80 95.2% 228.0 283.2 0.4x 10.6x 2.1x 713.9 21.2% 3.7%Median $37.66 95.4% $3,346.4 $3,797.0 0.9x 11.7x 2.1x $4,197.1 25.0% 7.9%Mean $57.22 94.6% $29,053.8 $33,157.7 1.0x 11.7x 2.4x $19,923.7 26.0% 7.5%

TTM Enterprise Value / TTM Margins

21


Industry Valuations


NOTE: Figures in bold and italic type were excluded from median and mean calculation.(1) As of 4/28/2017.(2) Market Capitalization is the aggregate value of a �rm's outstanding common stock.(3) Enterprise Value is the total value of a �rm (including all debt and equity).SOURCE: S&P Capital IQ.

($ in millions, except per share data) Current % of Market Enterprise Total Debt/ TTMCompany Name Country Ticker Stock Price (1) 52W High Capitalization (2) Value (3) Revenue EBITDA EBITDA Revenue Gross EBITDALUMBER AND WOOD MANUFACTURERSWeyerhaeuser Co. United States NYSE:WY $33.87 98.5% $24,798.8 $31,244.8 4.9x 19.7x 4.5x $6,387.0 22.9% 24.8%Louisiana-Paci�c Corporation United States NYSE:LPX 25.74 95.6% 3,714.7 3,432.4 1.5x 10.9x 1.2x 2,233.4 22.8% 13.8%West Fraser Timber Co. Ltd. Canada TSX:WFT 44.86 98.5% 3,506.1 3,821.3 1.1x 6.9x 0.7x 3,423.3 34.7% 16.7%Norbord Inc. Canada TSX:OSB 30.90 99.5% 2,660.1 3,234.7 1.9x 8.9x 2.0x 1,766.0 21.9% 21.1%Universal Forest Products, Inc. United States NasdaqGS:UFPI 95.29 85.9% 1,955.0 2,194.8 0.6x 10.3x 1.3x 3,404.5 14.5% 6.2%Canfor Corporation Canada TSX:CFP 14.99 99.9% 1,990.8 2,404.0 0.8x 6.1x 0.8x 3,221.6 31.0% 13.6%Deltic Timber Corporation United States NYSE:DEL 77.37 90.5% 942.4 1,177.4 5.4x 26.1x 5.3x 219.4 31.5% 20.5%Median $33.87 98.5% $2,660.1 $3,234.7 1.5x 10.3x 1.3x $3,221.6 22.9% 16.7%Mean $46.15 95.5% $5,652.6 $6,787.1 2.3x 12.7x 2.3x $2,950.7 25.6% 16.7%

AGGREGATES AND CONCRETE PRODUCERSLafargeHolcim Ltd Switzerland SWX:LHN $56.71 92.8% $34,350.5 $53,174.4 2.0x 9.9x 3.8x $26,486.1 41.9% 19.1%CRH plc Ireland ISE:CRG 36.47 97.1% 30,483.3 36,933.5 1.3x 10.8x 2.5x 28,611.8 32.6% 11.4%HeidelbergCement AG Germany DB:HEI 92.64 90.0% 18,380.4 30,144.3 1.8x 9.6x 4.2x 16,023.3 61.2% 17.4%Vulcan Materials Company United States NYSE:VMC 120.88 87.5% 16,033.1 17,757.0 4.9x 18.7x 2.1x 3,592.7 27.9% 26.4%Martin Marietta Materials, Inc. United States NYSE:MLM 220.19 90.2% 13,790.8 15,429.6 4.3x 16.2x 1.8x 3,576.8 25.4% 26.7%CEMEX, S.A.B. de C.V. Mexico NYSE:CX 9.22 95.8% 12,852.6 24,438.9 1.8x 8.9x 3.6x 13,680.1 35.3% 21.4%Boral Limited Australia ASX: BLD 4.60 83.2% 5,396.9 4,478.9 1.4x 9.7x 2.6x 3,072.9 33.0% 12.1%Buzzi Unicem SpA Italy BIT:BZU 25.71 95.5% 4,840.4 5,896.8 2.0x 8.6x 2.8x 2,817.8 37.7% 20.5%Eagle Materials Inc. United States NYSE:EXP 95.97 86.7% 4,645.9 4,942.6 4.2x 12.1x 1.2x 1,184.7 26.6% 31.2%Wienerberger AG Austria WBAG:WIE 23.43 96.9% 2,739.8 3,474.6 1.1x 8.7x 2.5x 3,139.3 32.4% 12.1%Summit Materials, Inc. United States NYSE:SUM 25.66 97.0% 2,729.5 4,164.3 2.6x 13.0x 4.9x 1,626.1 34.1% 19.8%Titan Cement Company S.A. Greece ATSE:TITK 26.14 97.8% 2,059.7 2,863.0 1.7x 9.3x 3.0x 1,593.1 29.0% 18.6%Grupo Cementos de Chihuahua, S.A.B. de C.V. Mexico BMV:GCC * 4.72 92.9% 1,569.2 2,119.2 2.9x 11.7x 3.7x 796.2 26.4% 23.5%U.S. Concrete, Inc. United States NasdaqCM:USCR 62.00 86.9% 985.2 1,358.7 1.2x 9.3x 3.1x 1,168.2 21.0% 12.5%Median $31.31 92.8% $5,118.6 $5,419.7 1.9x 9.8x 2.9x $3,106.1 32.5% 19.4%Mean $57.45 92.2% $10,775.5 $14,798.3 2.4x 11.2x 3.0x $7,669.2 33.2% 19.5%

HOME BUILDERSD.R. Horton, Inc. United States NYSE:DHI $32.89 95.2% $12,352.7 $14,627.7 1.1x 9.3x 2.0x $13,128.6 20.4% 12.0%Lennar Corporation United States NYSE:LEN 50.50 93.9% 11,593.4 17,898.1 1.6x 12.8x 5.2x 11,293.8 21.5% 12.0%NVR, Inc. United States NYSE:NVR 2,111.25 96.3% 7,912.5 8,026.4 1.3x 10.9x 0.8x 5,966.3 18.4% 12.3%PulteGroup, Inc. United States NYSE:PHM 22.67 92.8% 7,152.5 10,013.1 1.3x 9.4x 3.1x 7,864.7 24.9% 13.4%Toll Brothers, Inc. United States NYSE:TOL 35.99 96.3% 5,852.1 9,117.0 1.8x 16.1x 7.5x 5,161.7 19.6% 9.4%CalAtlantic Group, Inc. United States NYSE:CAA 36.22 88.5% 4,149.9 7,586.2 1.1x 9.1x 4.3x 6,631.2 21.8% 12.5%KB Home United States NYSE:KBH 20.60 96.5% 1,756.6 3,909.2 1.0x 17.5x 11.2x 3,734.9 16.4% 6.0%M.D.C. Holdings, Inc. United States NYSE:MDC 31.01 97.1% 1,600.6 2,252.8 1.0x 13.7x 5.9x 2,326.8 17.6% 7.1%Meritage Homes Corporation United States NYSE:MTH 38.95 94.5% 1,570.2 2,656.0 0.9x 10.8x 4.9x 3,117.2 18.1% 7.7%Cavco Industries, Inc. United States NasdaqGS:CVCO 118.75 97.6% 1,068.0 993.8 1.3x 19.7x 1.1x 753.1 17.6% 6.7%Taylor Morrison Home Corporation United States NYSE:TMHC 23.10 99.6% 1,203.7 3,612.0 1.0x 10.5x 4.3x 3,673.8 19.2% 9.2%William Lyon Homes United States NYSE:WLH 22.00 97.1% 702.6 1,807.0 1.3x 17.8x 11.3x 1,406.0 17.1% 6.8%M/I Homes, Inc. United States NYSE:MHO 27.16 95.6% 673.4 1,298.2 0.7x 9.7x 5.0x 1,773.9 19.9% 7.5%Century Communities, Inc. United States NYSE:CCS 27.30 97.5% 608.5 1,033.2 1.0x 13.2x 5.8x 994.4 19.6% 7.8%Beazer Homes USA, Inc. United States NYSE:BZH 12.41 78.5% 396.7 1,574.6 0.9x 45.8x 39.0x 1,816.9 14.2% 1.9%Hovnanian Enterprises, Inc. United States NYSE:HOV 2.34 79.1% $347.3 $1,993.9 0.7x 15.0x 12.4x 2,728.7 14.2% 5.0%Median $34.44 95.7% $6,502.3 $8,571.7 1.2x 12.8x 4.3x $6,298.7 20.0% 12.0%Mean $292.64 94.6% $6,546.3 $9,178.8 1.3x 13.0x 3.9x $7,013.5 20.1% 10.6%

TTM Enterprise Value / TTM Margins

22


Industry Valuations

Sector Performance

Source: S&P Capital IQ.As of 4/28/2017.

By Sector

Overall Market

5.6% 5.3%

14.9%17.4%

27.5% 27.3%

69.9%

58.3%

0%

20%

40%

60%

80%

S&P 500 DJIA

Retu

rns

YTD 1 Year 3 Year 5Y

15.7%9.8%

16.0% 14.5%5.9%

18.2%18.8% 20.9%15.9% 16.7% 17.2% 19.4%

33.8%

47.4%

80.8%

13.6%9.0%

29.5%

97.4%

139.6%

174.4%

77.6%

64.1%

90.3%

0%

40%

80%

120%

160%

200%

Residential-Focused BuildingProducts

Commercial-Focused BuildingProducts

Building Products Distributors Lumber and Wood Manufacturers Aggregates and Cement Producers Home Builders

Retu

rns

YTD 1 Year 3 Year 5Y

23

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recapitalized by

ZS Fund L.P.

E C S R E F I N I N G

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GRAHAM PARTNERS


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