Lessons Learned During a Merger

In August 2014, I purchased the assets of a fourth-generation, 133-year-old roofing contracting company with which I had been competing locally for a few years. As a relatively new contractor in the area (I had been in business just under nine years), I wanted a larger share of the commercial roofing market. The clients I hoped to inherit with this acquisition would help me to accomplish that goal.

I had no formal business training, nor knowledge of how to make such a merger work. I started my company with very little industry experience back in 2005; I had a working knowledge of roofing and a desire to be my own boss. Things had gone well, so I trusted that my instincts would guide me through the merger. I was operating on nothing more than a gut feeling that this merger would be a good thing and a blind assumption that I would be able to handle whatever challenges might come my way.

I began the dialogue with the company’s owner in early 2013 and it took until August 2014 to close the deal. There were plenty of challenges created by this process—definitely some things I handled well and some I did not.

The primary goal of this acquisition was to retain the company’s customer base, thus growing my own. Relationships were in place that went back years, even generations, and maintaining those relationships was of utmost importance. I had a plan in place to personally visit with or reach out to all of these customers within the first two weeks. I thought this would be one of the main challenges—certainly the most important thing to get right—but, surprisingly, it was one of the easiest things to achieve. The previous owner assured these customers I would continue to take care of them well and I think these customers’ trust and loyalty already was so solid that the accounts transferred over to me almost without question. As planned, I personally met most of my new customers within the first couple weeks, continued to serve their needs with the same people and took care of them with the same high level of service to which they had become accustomed. I am proud to say, after six months, we have retained 100 percent of these customers.

I am fond of saying, “I don’t know much, but I know exactly what I don’t know.” It’s the tenet to which I attribute what modicum of success I have had. I knew that I did not know how to manage a process like this! It was definitely a good move on my part to work with a consultant. It did not answer all the questions, nor did it eliminate all mistakes, but the insight and advice of someone who had been through similar processes was invaluable.

Before we closed on the deal, I told myself that despite what problems, issues or frustrations might arise, I would treat the first five months as an observational period rather than a time to implement changes. I was patient and held true to that timeframe. Trust takes a while to establish and people take a while to know. I am glad I waited to learn what I needed to know before making any significant changes.

The biggest challenge the merger created was in dealing with the significant increase in my employee count and all the associated human-resource issues that resulted. I had kept my business pretty light on hourly employees in the field, whereas the company I purchased had close to 30 full-time roofers. I had written an employee handbook prior to the merger but many of the policies had not yet been questioned or tested. Of course, in the first few days after the merger, I had a wave of guys coming at me with issues and problems with the new systems to which they would be subjected. I modified a few policies based on legitimate concerns and to ease the transition while I held firm on others. I should have had clearly defined and time-tested policies in place, so I would have been better prepared for the questions I was asked.

In hindsight, I think the biggest mistake I made was to agree to keep this sale completely confidential until the deal was confirmed and I had officially taken over. This meant the first time I met any of the employees they were already on my payroll. There had been no opportunity to meet existing employees, interview the office staff, or gain any insight into systems and processes prior to the day of the merger. I basically had to jump right in! That could have been avoided and would have prevented a lot of stress and at least one early layoff I had to make.

I should definitely have hired, if only temporarily, an additional office person to assist with the mountain of paperwork that was created. We used a Small Business Administration loan to finance the purchase, which added significantly to an already overwhelming workload. A backlog of paperwork was created that took a few months to sort out.

Although I do not consider the merger process completed, we are definitely over the hump and, despite a few challenges, it has turned out as I hoped it would. Our commercial revenues have increased as forecast and I feel good about the fact that, had I not purchased this business, the employees I gained would be unemployed right now. Instead, they are part of a growing company that aims to provide long-term security for them and their families.

Twice in the same day earlier this month I was asked, “What one thing have you learned from the process of buying another business?” I did not have a clue how to answer that question. Certainly I have learned a great many individual lessons and become the wiser for it, but I’m not sure how to boil it down to one thing. I guess it can be summed up with my favorite cliché:
“That which does not kill you makes you stronger.” Mistakes are inevitable, and they are good. If you are afraid to make them, you will accomplish nothing. You will learn way more from one mistake than you will from 10 good decisions. People will not notice your mistakes nearly as much as you think. So don’t hesitate; make the call; learn from it if you can; and move on.

On a personal note, I owe a very heartfelt and big thank you to Horace Thompson King III (Tommy) for being such a pleasure to work with and for making a difficult process much easier than it could have been.

RCMA Merges with the Reflective Roof Coatings Institute

The Roof Coatings Manufacturers Association (RCMA), Washington, D.C., and Reflective Roof Coatings Institute (RRCI), Kansas City, Mo., have merged together into one industry association that will continue to advance, promote, and expand the national and international market for roof coatings through education, outreach, technical advancement and advocacy.

“RCMA is thrilled to merge with the Reflective Roof Coatings Institute,” says John Ferraro, RCMA executive director. “RRCI has been a leader on reflective roof coatings issues and we look forward to their members’ expertise within RCMA. This merger will go a long way to increase RCMA’s growth in both its membership and its recognition within the larger roofing industry.”

Bringing the two associations together will better position the roof coatings industry in the various legislative, regulatory and building code development arenas that affect the two associations’ consolidated membership. The merger between RCMA and RRCI will result in a stronger, more unified voice for federal and state advocacy initiatives and a more robust communications and marketing program for roof coatings. In addition, the merger will result in a more detailed and comprehensive industry shipment report, which will be a huge benefit to members.

RCMA has made a number of changes to its committee and task force structure, including the creation of the new RCMA Reflective Roof Coatings Institute. Through the development of technical bulletins, case studies, white papers and research, this institute will allow RCMA to be a technical and educational resource to the industry. A strong emphasis will be placed on outreach to the end-user of coatings products, so RCMA can ensure proper and accurate information is available for their benefit.

The RCMA Annual Meeting will be held in New Orleans, Feb. 22-23, 2015, in conjunction with the International Roofing Expo. The programming, speakers and topics featured at the RCMA Annual Meeting represent broad segments of the science, technology and professional expertise on roof coatings. Registration for the meeting is open.

The association will continue to be called the Roof Coatings Manufacturers Association with the existing logo and website.

NCI Building Systems Acquires CENTRIA

NCI Building Systems Inc. (NCS), one of North America’s largest integrated manufacturers of metal products for the nonresidential building industry, has closed its previously announced acquisition of CENTRIA, a provider of architectural insulated metal panel (IMP) wall and roof systems and coil coating services, for a net cash price of $245 million. NCI intends to immediately begin cross-company integration.

Norman C. Chambers, NCI’s Chairman, President and Chief Executive Officer, commented, “We are pleased and proud to welcome CENTRIA into the NCI family, and expect significant opportunities for growth and margin-expansion as insulated metal panels continue to gain share in the underpenetrated North American nonresidential construction market. The acquisition of CENTRIA underscores NCI’s long-standing commitment to strengthen its position as a leading manufacturer of insulated metal panel products for the cold storage, commercial and industrial and architectural metal panel markets. We see significant opportunities to leverage CENTRIA’s position in the architectural IMP segment of the nonresidential market for the benefit of our loyal customer base and all of our stakeholders.”

As previously disclosed CENTRIA is expected to be accretive to NCI’s earnings beginning in the fourth quarter of fiscal 2015, excluding transaction related charges and amortization of short-lived intangibles, and is expected to yield annualized run-rate synergies of approximately $7 million within 18 to 24 months of closing. In addition, as a result of the CENTRIA acquisition, NCI expects to receive incremental tax basis in the assets of CENTRIA estimated to be $200 million, expected to result in reductions to NCI’s cash payments for income taxes over the next several years. After adjusting for targeted annualized synergies and the tax cash flow benefit, the adjusted purchase price is approximately 7 times CENTRIA’s trailing twelve month EBITDA as of September 30, 2014.

ABC Supply Expands through Acquisitions

Building products distributor ABC Supply Co. Inc. has acquired the assets of Siding World, a distributor of siding and other exterior building products, including roofing, windows, doors, decking and gutters. The 40-year old company has locations in 17 markets in Michigan, Indiana and Ohio.

With the conclusion of the transaction, the Siding World stores have become the newest ABC Supply locations. The former Siding World stores join 15 existing ABC Supply branches in Michigan, 13 in Ohio and eight in Indiana.

“We are very happy to welcome the members of the Siding World team to our ABC family,” said Keith Rozolis, president and chief executive officer of ABC Supply. “Siding World’s strong position in the siding market complements the ABC Supply product offering and expands our ability to serve contractors in these markets.”

All of the Siding World branch associates are remaining with the organization. That means Siding World customers will continue to work with the people they have come to know and rely on.

Siding World’s Michigan stores are in Battle Creek, Chesterfield, Clio, Detroit, Fenton, Inkster, Jackson, Kalamazoo, Livonia, Madison Heights, Saginaw, Sanford, Waterford and Wyandotte. There are two locations in Indiana – South Bend and Goshen – and one in Toledo, Ohio.

In addition, ABC Supply Co. has acquired the assets of Wameling Drywall Corp. (doing business as Gilbert Supply Company), a single-location distributor of exterior building products, wallboard and insulation, in Marcy, N.Y.
The branch, located at 9206 River Road, becomes the newest ABC Supply store and is the company’s first in the Utica/Marcy, New York market.

“The Utica/Marcy area is poised for growth,” said Tom Kuchan, vice president of ABC Supply’s Northeast Region, citing the Nano Utica initiative, a public-private partnership that is expected to bring more than 1,000 high-tech jobs to the area and help create New York’s second major hub of nanotechnology research and development. “We look forward to being part of that growth by serving the area’s residential and commercial contractors.”

ABC Supply had been serving Utica/Marcy-area contractors from its branches in Syracuse, New York and Schenectady, New York. “With the addition of a branch in Marcy, we will be able to meet their needs more effectively and efficiently,” Kuchan said.

Customers will continue to work with the Gilbert Supply team they have come to know and rely on, he added. Anthony Wameling, president and co-owner of the former Gilbert Supply is joining ABC Supply. Vincent Conley, vice president and co-owner of the former Gilbert Supply, has retired.

ABC Supply Acquires New Jersey Distributor of Roofing Materials

Building products distributor ABC Supply Co. Inc. has acquired Standard Roofings Inc., dba The Standard Group, New Jersey’s largest independent distributor of roofing materials and other exterior building products. The distributor has stores in Trenton, Morristown, Toms River, Tinton Falls and Manahawkin.

The Standard Group, which was founded by Robert Higginson in 1933, has its roots in a company founded by Robert’s grandfather in the late 1800s in Long Branch, N.J. – Robert Higginson & Son Coal, Lumber and Building Materials.

“The Standard Group is a long-established and highly regarded distributor of building products in the New Jersey market,” said Keith Rozolis, president and chief executive officer of ABC Supply. “We are very excited to have this team, with their ‘Yes is our Standard answer’ attitude, join ABC Supply.”

The addition of The Standard Group locations enhances ABC Supply’s presence in New Jersey, where the company already operates 15 branches.

ABC Supply is the largest wholesale distributor of roofing in the United States and one of the nation’s largest distributors of siding, windows and other select exterior building products. Since its founding by Ken and Diane Hendricks in 1982, ABC Supply’s sole focus has been serving professional contractors – taking care of them better than any other distributor and offering the products, services and support they need to build their businesses. It accomplishes this by being an “employee-first” company that treats its associates with respect and gives them the tools they need to succeed.

Headquartered in Beloit, Wis., ABC Supply has more than 460 branches nationwide. It is an eight-time winner of the Gallup Great Workplace Award.

Quest Specialty Chemicals Implements ‘Buy and Build’ Strategy

If you own a coatings company with a recognizable brand, a leading market position and an entrepreneurial management team with a growth culture, Quest Specialty Chemicals’ CEO Doug Mattscheck wants to talk to you.

Quest has acquired 10 companies in the last 10 years—three since Mattscheck became CEO in 2012—and he wants to acquire more.

“Acquisitions are the catalyst of our growth and operating improvements augment our growth,” Mattscheck says. “The top 10 coatings companies control the lion’s share of the market, and another thousand companies battle for the balance of it. We want to acquire the best of those small- to medium-sized coatings companies.

“We have a buy-and-build strategy. We buy companies with solid management teams, strong brands and high-value products that have a high touch component in sales and technical support. Then we work hard at efficiently managing our brands, increasing market penetration, developing new products and making operational improvements.“

Quest is the 12th largest coatings company in the United States and one of the largest privately held coatings companies in the world. Last year’s sales were $239 million and are on the rise again in 2014.

The company operates three complementary divisions: Quest Automotive, Quest Industrial and Quest Construction. Each manufactures and markets some of the leading brands in the automotive aftermarket, industrial, transportation and construction industries.

“We serve large, multi-billion global markets that are fragmented. They are not economical for high-volume coatings companies and often too technical for smaller competitors. However, they offer significant growth opportunities for Quest and have allowed us to financially outpace, as a percentage of growth, the world’s largest coatings manufacturers,” Mattscheck adds.

“Our goal is to become a major global coatings company. We can do that by further diversifying our products, end markets, customers and geographies. We want leading positions in niche markets where we can obtain the highest margins and fastest growth.”

Louisville Ladder Acquires Lite Products

Louisville Ladder has acquired 100 percent of the assets of Lite Products Inc., a unit of Supplierpipeline. This acquisition wraps up the Strategic Alliance formed between the companies at the end of 2013.

Lite Products, located in Mississauga, Ontario, Canada, has been a manufacturer and marketer of climbing products in Canada with strong brand recognition in the consumer channel. The Lite Products operations will boost Louisville’s resources in Canada and will compound benefits for both their customers.

Customers will benefit from a strong portfolio of products and brands targeting specific needs and segments. Louisville, a widely renowned brand in the Professional Channel, is an innovator of Climbing Products promoting Safety and Productivity for all ladder users.

Full incorporation of both companies will materialize over a period of three months, during which Louisville Ladder will continuously communicate with customers, suppliers and employees, as needed, to facilitate a smooth transition.

Louisville and Lite employees are excited and looking forward to the possibilities this operation will generate and sure that it will certainly yield advantages for the Canadian Ladder Market and for their loyal customers.

Headwaters Inc. Acquires Metals USA’s Stone-coated Metal Roofing Products Business

Headwaters Inc., a building products company dedicated to improving lives through innovative advancements in construction materials, has acquired the assets of Metals USA’s roofing products business (“Gerard”). Founded in 1981, Gerard is the second largest manufacturer of stone coated metal roofing materials in the United States. Gerard sells seven primary metal profiles, including classic tile, barrel vault, and canyon shake. This niche roofing product combines aesthetically pleasing profiles resembling tile, shake, or slate with a fire proof material and a low lifetime installed cost.

“One element of our business strategy is to increase the number of products that we provide to our core customers,” said Kirk A. Benson, Headwaters’ Chairman and Chief Executive Officer. “The $2.6 billion specialty niche roofing market is of interest to our core customers and is an area of focus for Headwaters. With the addition of Gerard, we now have three product categories in niche roofing, including composite, concrete, and metal which we believe will open up opportunities for cross selling as well as bundling a complete roofing system, including our Tag & Stick underlayment product.”

Gerard fits Headwaters’ strategy to pursue building product opportunities where we can enjoy strong market share and top quartile industry margins. “We are excited about the combination of our metal roofing products with Headwaters’ composite product,” said Ron Anderson, President of Gerard. “We strongly believe in the sales synergy associated with marketing both products with Gerard’s national sales force, creating opportunities for roofing contractors to pull more product through distribution. There is an upside opportunity to expand our sales internationally, as our metal products are well received throughout the world.”

“The $28 million transaction will be immediately accretive to earnings. We are funding the transaction with existing balance sheet cash, and of course, will benefit from financial leverage as the operating returns significantly exceed the cost of our debt,” said Don P. Newman, Chief Financial Officer. “Our net debt to adjusted EBITDA ratio will increase slightly with the use of cash, but we remain on track to achieve our desired leverage ratio in 2015.”

Georgia-Pacific Completes Integration of Temple-Inland Building Products

Thanks to Georgia-Pacific LLC‘s acquisition of Temple-Inland Building Products, its Georgia-Pacific Gypsum division is bigger—but more importantly, better.

With integration of two of the industry’s most experienced building materials manufacturers now complete, a larger and even more experienced team of employees is offering customers a broader range of products, more convenient distribution and—soon—new systems designed to improve customer service.

Among the highlights of the “new” Georgia-Pacific Gypsum are:

  • More Products: The company’s enhanced portfolio of products offers customers more UL approved fire-rated assemblies; a growing family of lightweight products; the addition of paper-faced sheathing, shaftliner and soffit boards to the ToughRock family; and wider availability of the trusted Dens line of fiberglass mat gypsum panels.
  • More Convenient Distribution: With the addition of high-quality assets, we’ve added 40 percent more capacity and a wider geographic footprint, giving customers added peace of mind when placing an order for any of the numerous products in the Dens and ToughRock product families.
  • Improved Customer Service: By adding 350 talented employees, Georgia-Pacific Gypsum now has an experienced and trusted 2,000-person workforce determined to make doing business with the company easier than ever.

“Georgia-Pacific Gypsum is now bigger and better than ever, offering customers products, distribution and service unparalleled in the industry,” says Mike McCoy, vice president of marketing for Georgia-Pacific Gypsum. “We are delighted with the swift integration of Temple-Inland Building Products’ talented people, high-quality plants and products, allowing us to further optimize the customer experience.”

Georgia-Pacific completed its $710 million acquisition of Temple-Inland Building Products assets from International Paper Co. in July 2013. The purchase included facilities that manufacture the following building materials: fiberboard, gypsum products, lumber, medium density fiberboard (MDF) and particleboard.

EagleView Technologies Issues Patents, Makes Acquisition

Bothell, Wash.-based EagleView Technologies Inc., a provider of aerial imagery, measurements, analytics and GIS solutions, has announced the U.S. Patent Office recently awarded two patents for inventions surrounding the improved capture of aerial imagery and the use of that imagery for the creation of roof reports. “System for Detecting Image Abnormalities,” which describes a method for automatically detecting image abnormalities caused by excessive sun glare, bears U.S. Patent Number 8,515,198. “System and Process for Roof Measurement Using Aerial Imagery,” which describes a method for the creation of roof reports directly from aerial imagery, bears U.S. Patent Number 8,515,125.

“EagleView is committed to ongoing research and development initiatives in support of its customers and markets,” states EagleView President and CEO Chris Barrow. “We will continue to leverage our vast engineering resources resulting in an ever-broadening intellectual property portfolio.”

In other news, EagleView Technologies has acquired all of the assets of Mobise Inc., a software company focused on bringing desktop workflow to mobile applications. The asset acquisition highlights EagleView’s ongoing mission of providing progressive, technologically innovative solutions.

Mobise, a Redmond, Wash.-based company, is known for Mobise Appraiser, a mobile application that extends the power of desktop appraisal to mobile devices for easy field review and workflow. The app provides the ability for users to consult and modify data while in the field. The added capacity to capture and edit floor plans, photos and notes directly from the field while integrating them into a relational database, such as Pictometry CONNECT, has made Mobise Appraiser of great interest to assessment offices throughout the nation.

“The Mobise acquisition allows us to continue to incorporate mobility technology with our current, web-based solutions and imagery. Not only will this incrementally expand our mobile assessment solutions, but this team will also be key in developing additional mobile applications for the many markets we serve, including insurance and construction,” Barrow notes.