Builders FirstSource (BFS) and BMC officially tied the knot on their merger in January, propelling the combined company into uncharted territory. The terms “mega-merger” and “blockbuster deal” had already been used to describe earlier BFS and BMC deals that brought ProBuild Holdings and Stock Building Supply into the consolidated picture.
So what do you call the creation of a $12 billion player in the building supply business? Two words come to mind: “Game changer.”
“I think that’s a proper name for it,” President and CEO Dave Flitman told HBSDealer. “Back when we announced the deal, I began using the word ‘transformative.’ What we’ve brought together here with the number one and number two industry players — it’s never been done before.”
More impressive than the size of the merger is the speed with which the two companies have effectively joined forces. The company says it is a year ahead of schedule in achieving its synergies. During its recent second quarter earnings call, BFS reported $36 million in cost savings, so far. The company also raised the goal posts — and is now looking to achieve between $140 million and $160 million in total synergies by the end of 2022.
“When we’re in a market where, let’s say, Builders FirstSource had two truss plants and BMC had one, we were able to take those three plants and look at their workload and move things around to be able to optimize the process,” Farmer said. “If we were at 100 board feet (BFT) per labor hour before the merger, we combined up to 120 BFT. So we were able to help builders very quickly from that perspective. And we have seen a lot of outpaced growth in our truss business.”
Culture eats strategy for lunch, according to the modern leadership gurus. And that’s an idea that flourishes at BFS.
“I think there are some manufacturers who are still wondering how this merger is going to work out,” he said. “Because we are a pretty big piece of their business today. But I think the way we’ve gone to market with them and will continue to work to be strategic partners will help them grow. There’s a lot of runway It’s still a very fragmented industry. And one that we think we’re well-positioned to help in a lot of different ways.”
• April 2015
Builders FirstSource plans to acquire ProBuild Holdings. The move was billed as the creation of a $6 billion pro dealer with enhanced scale and an improved geographic footprint.
• December 2015
BMC and Stock Holdings complete merger. With $2.6 billion in combined revenues, the new company announced plans to capitalize on expansion opportunities.
• January 2021
Builders FirstSource officially combines with BMC. The move created a company with combined sales of $11.7 billion. Said BFS President and CEO Dave Flitman: “This merger represents a transformational milestone for our customers and an exceptional platform to accelerate the growth of our value-added solutions.”
Speaking to analysts and speaking to HBSDealer, BFS executives are well versed at pointing to the growth potential of the home construction business.
The numbers shared with investors are worth repeating, and point to a long runway of growth, according to Flitman:
• 20% of adults are considering buying a home next year;
• 82 million millennials are coming into the housing market;
• Average inventory of 1.1 million units is way down: 20% below the five-year average and well below the 3.5 million units in 2007.
On top of organic growth, BFS’s cash-flow generation and strong balance sheet positions it to pursue accretive tuck-in acquisitions. The goal is simple: be the number one or number two player in all of its markets.
Even post merger, BFS enjoys a market share that’s somewhere in the mid teens. That highly fragmented environment allows BFS to operate as a “disciplined consolidator in this industry for a long time to come,” Flitman said.
After taking stock of strengths and opportunities, the brain trust at Builders FirstSource hit on a forward-looking slogan: “Outperform today. Transform tomorrow.”
“I think that’s perfect for the company,” said Farmer. “We’re using innovation to move the industry forward.”