With blockbuster deals, wither pricing?

As two blockbuster lumberyard merges move closer toward fruition, the architects of the Builders FirstSource-ProBuild combination and the BMC-Stock Building Supply merger have frequently used the word synergy to describe their respective deals.

But based on the early public comments, the ability to leverage pricing  through bigger buying power is not one of the areas where one plus one equals three.

In Builders FirstSource presentation to analysts and investors shortly after its proposed acquisition of ProBuild was announced, executives had nothing in their array of slides related to customer pricing. The value, growth and $110 million in synergies over the next couple of years would come from other areas, such as sharing complementary strengths and best practices.

The Builders FirstSource ProBuild deal will create a pro dealer with about $6 billion in annual sales.

CEO Floyd Sherman downplayed the possibility of improved pricing power. “In this business, it’s so highly fragmented and there is such a large number of competitors available to the builders in every market, [that] the market in itself is what sets the pricing.”

He added: “We’re going to be able to react better to it, [but] I really don’t see much in the way of pricing power.” Rather, it is better service and better-combined personnel that will lead to growth, he said.

 That concept was echoed by executives at Stock and BMC, which according to Jim Major, Stock’s executive VP and CFO, has not projected any kind of price–related revenue increases. Synergies will come from enhanced network density, he said.

The combined BMC and Stock will create a $2.7 billion company.

“We currently believe half of the synergy will come from sourcing and supply chain initiatives,” he said, in addition to leveraging SG& A costs, combining best practices and utilizing “best in class technology.”

Stock Building Supply’s CEO Jeff Rea, who will remain on the board of the combined company, described the synergy in terms of improved service. “This opportunity to come together is about the ability to serve our customers better combined than we can independently,” he said to investors when announcing the deal. “ We see this very accretive from a service and solution standpoint.”