BUILDING PRODUCTS M&A VOLUME SURGES

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BUILDING PRODUCTS M&A VOLUME SURGESBUILDING PRODUCTS INDUSTRY UPDATE | JUNE 2021

TABLE OF CONTENTS

Key Industry TakeawaysIndustry OutlookM&A Overview & Valuation DriversNotable TransactionsSelect TransactionsConstruction Input PricingSegment Highlight: Tools, Hardware & FastenersSegment Highlight: HardscapesConstruction Backlog Improves in AprilConstruction IndicesPublic Company DataFirm Track RecordReport ContributorsEndnotes

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Crista [email protected]

Darin Good Managing Director [email protected]

Contact Our Building Products & Construction Services Experts

Brian Krehbiel [email protected]

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KEY INDUSTRY TAKEAWAYS

Capstone Partners’ Building Products & Construction Services Group is pleased to share its Building Productsreport. Merger and acquisition (M&A) activity has returned at a rapid pace as buyers are operating on greaterfinancial footing and business owners are capitalizing on favorable valuations and the current tax environment.Several key report takeaways are outlined below.

1. M&A volume has increased nearly 50% year-over-year (YOY) driven by consolidation among strategicbuyers and private equity’s attraction to building products providers with strong growth profiles.

2. Construction input prices have continued to rise which has caused delays and disruptions to supplychains and project completions.

3. Industry optimism is buoyed by healthy backlog levels, evidenced by YOY gains in the Commercial &Institutional segment.

4. Leading public companies with favorable end market exposure have recorded strong revenue gainsthrough year-to-date (YTD).

5. A shortage of labor, at all levels, is further restricting a high rate of growth and will result in a prolongedcycle of moderate growth and prosperity.

Capstone Partners has developed a full suite of corporate finance solutions, including M&A advisory, debtadvisory, financial advisory, and equity capital financing to help privately owned businesses and private equityfirms through each stage of the company’s lifecycle, ranging from growth to an ultimate exit transaction.

To learn more about Capstone’s wide range of advisory services and Building Products & ConstructionServices industry expertise, please contact Capstone Managing Director Darin Good.

Building Products IndustryMerger and Acquisition Volume Surges

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https://www.capstonepartners.com/advisors/darin-good/

INDUSTRY OUTLOOK

Robust demand in the Building Products industryhas been fueled by healthy backlogs ofconstruction projects, elevated housing starts, anda recovery of commercial & institutionalconstruction. However, the pandemic has driveninput prices upwards and increased the scarcity ofselect construction materials, causing delays anddisruptions to many project timelines. ThroughApril, construction input prices have increased19.7% YOY led by outsized gains in softwoodlumber, crude petroleum, and natural gas,according to the U.S. Bureau of Labor Statistics.1 Inaddition, approximately 37% of architecture firmshave reported that elevated costs of basicconstruction materials have been a seriouschallenge to operations, according to TheAmerican Institute of Architects.2

While pricing remains a key concern forcontractors, industry optimism has beensupported by healthy levels of nonresidentialconstruction projects entering the planning stage.Notably, the Dodge Momentum Index, which hasshown to lead construction spending fornonresidential buildings by 12 months, recorded an8.6% increase in April, according to Dodge Data &Analytics.3 The increase has largely beenattributed to the growth of institutional buildingconstruction, which had been severely hamperedthroughout the pandemic. The segment’s recoveryhas been evidenced by the 77% increase inprojects entering the planning stage over the lastthree months, according to Dodge.

Producer Price Index:Inputs to Construction Industries

Building Products | June 2021

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15%

20%

25%

Apr-17 Apr-18 Apr-19 Apr-20 Apr-21

One Month % Change 12 Month % Change

Perc

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Select public building products providers haveexperienced significant growth through YTD,particularly those catering to Residential endmarkets. With consumers increasingly focused onhome renovation, remodeling building productsproviders have experienced strong demand.Notably, Masonite International (NYSE:DOOR), aleading manufacturer of doors to the Constructionindustry, experienced a 17.3% increase in net salesin the three months ending on April 4, 2021, drivenby gains in average unit price and growth in itsresidential business, according to its most recentearnings release.4

Lumber products providers have experiencedunprecedented revenue increases fueled byfavorable pricing and the strength of theResidential Construction and Remodeling markets.Notably, Boise Cascade (NYSE:BCC), andLouisiana-Pacific (NYSE:LPX) recorded revenueincreases of 56% and 74%, respectively, accordingto their earnings releases.5,6 “While there continuesto be a heightened level of economic uncertainty,low mortgage rates, continuation of work-from-home practices by many in the economy, thedemographics in the U.S., have created a favorabledemand environment for new residentialconstruction, particularly single-family housingstarts, which we expect to continue in 2021 andinto next year,” Nate Jorgenson, Boise CascadeCEO & Director commented in the company’searnings call. 7

March 2020: COVID-19 declared a pandemic

Source: U.S. Bureau of Labor Statistics

M&A OVERVIEW & VALUATION DRIVERS

M&A volume has surged in the Building Productsindustry in 2021 YTD, with 143 transactionsannounced or completed, an increase of 49% YOY.Impending capital gains tax increases imposedunder the Biden administration have encouragedmany business owners to reevaluate their exittimeline. Building products providers that hadenvisioned a liquidity event in the next two tothree years, have increasingly pursued a saleprocess prior to year end to avoid a substantial taxliability. In addition, low interest rates, heightenedbuyer competition, and healthy constructionbacklogs bode well for elevated transactionvaluations for industry participants with stronggrowth profiles.

Public companies have actively pursuedacquisition targets through YTD, accounting for29% of total transactions. Notably, PatrickIndustries (Nasdaq:PATK) has continued to bolsterits building products and distribution portfolio andrecently acquired Alpha Systems (May,undisclosed), a leading manufacturer anddistributor of component products andaccessories. Private strategics have also remainedactive acquirers through YTD, accounting for 39%of total volume, seeking product diversification,cost synergies, and margin improvement.

Private equity buyers have continued to target thesector, comprising approximately 32% of M&Avolume. Sponsor attraction to the industry hasbeen supported by premium valuations upon exitof portfolio holding companies. Notably, from 2017to YTD 2021, the average transaction EBITDAmultiple for a private-equity sold company stoodat 13.8x, far outpacing the overall average of 11.1xover the same time period. Sponsors havedemonstrated robust appetite for building productproviders with diversified end markets, broadgeographies, and a strong management team thathas a low degree of key person risk. Private equityfirms have sought to drive value for platforminvestments through add-on acquisitions,evidenced by Angeles Equity Partners andClearlake Capital’s nine acquisitions through itsAmerican Construction Source (ACS) platform.Notably, ACS was recently acquired by Bain CapitalPrivate Equity-backed US LBM in May for anundisclosed sum (see more details on next page).

Transaction Volume

Num

ber o

f Tra

nsac

tions

6

Private Strategic Buyers Remain Active

214243

316

233

96143

0

50

100

150

200

250

300

350

400

2017 2018 2019 2020 YTD2020

YTD2021

29.4%

39.2%

11.8%

19.6%STRATEGIC

PublicPrivate

FINANCIAL

PlatformAdd-on

Year-to-date (YTD) ended May 25Source: Capital IQ, FactSet, PitchBook, and Capstone Research

M&A activity has proliferated through the year-to-date as tax implications, favorable valuations, and a low interest rate

environment have provided a healthy backdrop.

Strategics have increasingly consolidated, with private buyers leading M&A activity, while private equity firms have

sought add-ons to portfolio holdings

Darin GoodManaging Director

“M&A activity is at record levels as BabyBoomers choose between liquidity andownership under an environment of higherregulation and income taxes.”


NOTABLE TRANSACTIONS

To Acquire

Leading building material and service provider Builders FirstSource (Nasdaq:BLDR) hasagreed to acquire Cornerstone Building Alliance SW for an enterprise value of $400 million,equivalent to 1.2x revenue. Cornerstone is the largest independently operated supplier ofbuilding materials in Arizona with sales of approximately $330 million as of April 2021,according to a press release.9 The acquisition adds to Builder FirstSource’s purchase ofJohn’s Lumber in May (undisclosed) as it continues to bolster its lumber and buildingmaterials offerings.

The addition of Cornerstone also expands Builders FirstSource’s geographic footprint andsignificantly enhances its product offerings. “This acquisition is aligned with our strategy ofinvesting organically and through M&A, to shift our portfolio toward high-value and faster-growth categories. Alliance’s service area represents the third largest single-family marketand includes the fastest growing county, Maricopa, in the country,” said Dave Flitman,President and CEO of Builders FirstSource in a press release.

To Acquire

Gypsum Management & Supply (NYSE:GMS) has agreed to acquire Westside BuildingMaterial for an enterprise value of $135 million. Westside Building Material is a leadingindependent supplier of steel framing, wallboard, acoustical ceilings, insulation, and relatedbuilding products. It services the Commercial and Residential markets, with its distributionnetwork comprising 10 locations, with nine concentrated in California. Westside recordedapproximately $200 million in net revenues for the 12-month period ending on December31, 2020, according to a press release.10

GMS provides wallboard, suspended ceiling systems, and complementary constructionproducts, operating through a network of over 265 distribution centers across the U.S. andCanada. The addition of Westside bolsters its presence in the California metro and allowsGMS to penetrate the Las Vegas market. “Westside’s differentiated platform provides aunique opportunity for GMS to expand our reach and capture significant growthopportunities in strategically important west coast markets,” commented John Turner,president and CEO of GMS in a press release.

To Acquire

Bain Capital Private Equity-backed U.S. LBM has agreed to acquire leading national buildingmaterials distribution platform, American Construction Source (ACS) for an undisclosedsum. ACS provides lumber and building materials through its expansive portfolio of brands,operating in over 70 locations. It serves homebuilders, repair and remodel contractors, anddo-it-yourself consumers. The transaction marks U.S. LBM’s fourth acquisition since beingacquired by Bain Capital Private Equity and follows its purchase of Higginbotham Bros. &Co. in May for an undisclosed sum.

"With the addition of the ACS portfolio, U.S. LBM will strengthen our position in the Midwestand California, and expand our reach to Colorado and Washington, two quickly growingConstruction markets. We look forward to working with the ACS team and their localoperators to continue leveraging their strong relationships, experience and teams to growin their respective markets,“ said U.S. LBM President & CEO L.T. Gibson in a press release.8

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SELECT TRANSACTIONS

Enterprise EV / LTMDate Target Acquirer Target Business Description Value (mm) Revenue EBITDA

05/24/21 Cornerstone Building Alliance

Builders FirstSource(Nasdaq:BLDR)

Supplies building materials in Arizona. $400.0 1.2x -

05/13/21 Spartan Surfaces Floor and Decor Outlets

Manufactures, designs, and provides commercial flooring solutions. $90.0 1.1x -

05/11/21 Westside Building GMS (NYSE:GMS) Provides building materials. $135.0 - -

05/10/21 Palm City Millwork Glenn Rieder Manufactures custom doors, windows, molding, trims, and shutters for the Residential market. - - -

05/10/21 Rock & Block Hardware SiteOne (NYSE:SITE) Distributes hardscapes, masonry, and

landscape supplies. - - -

05/06/21 John’s Lumber & Hardware

Builders FirstSource(Nasdaq:BLDR)

Offers lumber, molding and trim, decking, windows, doors and siding products. $24.9 0.5x -

05/06/21 Highway Materials

Simplex Supplies

Manufactures and distributes materials for the Concrete Construction industry. - - -

05/03/21 Alpha Systems

Patrick Industries (Nasdaq:PATK)

Provides adhesives, sealants, cleaners, injection molding, roofing, and flooring products. - - -

05/03/21 Flagg Wilsonart Distributes products and services for the Building and Remodeling industry. - - -

05/03/21 ABC Builders Supply Foundation Building Materials

Provides drywall and accessories, steel framing, insulation, tools and fasteners. - - -

04/30/21 Hempt Bros New Enterprise Stone & Lime

Manufactures and sells stone, sand asphalt, and concrete. - - -

04/26/21 Columbia Millworks Sunpro Supplies door and millwork products. - - -

04/19/21 Hullco West Shore Home Manufactures vinyl windows and doors. - - -

04/02/21 Foley Lumber American Construction Provides building materials for contractors. - - -

03/30/21 SSI Opportunities Marwin Manufactures building products including spiral stairs, straight stairs, and barn doors. - - -

03/26/21 DriTac Flooring Sika (SWX:SIKA) Provides wood and resilient flooring adhesives. - - -

03/25/21 J&S Designer Flooring Stark Carpet Offers hardwood flooring and fabrics. - - -

03/16/21 Nova Wildcat Amerock

Ferguson (LSE:FERG)

Designs and manufactures decorative and functional hardware for kitchens, baths, and bedrooms. - - -

03/08/21 James Doorcheck Cook & Boardman Manufactures and supplies doors, frames, and hardware. - - -

03/04/21 Rock Mountain Construction

Specialty Products & Insulation

Distributes insulation and building materials. - - -

03/01/21 Danbury Plumbing & HVAC Supply F.W. Webb Provides plumbing and heating products. - - -

02/26/21 Louis T. Ollesheimer& Son SRS Distribution Distributes roofing materials and equipment. - - -

02/23/21 Industrial business of Gilbraltar

Pacific Avenue Capital

Comprises the building products manufacturing and distribution business. $38.0 - -

Source: Capital IQ, PitchBook, FactSet, and Capstone Research

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CONSTRUCTION INPUT PRICING – UPSTREAM SUPPLY

Copper Base Scrap

Copper scrap prices have increased substantially,rising over 79% year-over-year, according to theU.S. Census Bureau.11 Pandemic-inducedproduction constraints have contributed to priceincreases in addition to heightened consumer andmanufacturing use. Notably, copper’s extensiveusage in electric vehicle batteries andsemiconductor wiring has contributed to depletinginventories, lending to forecasts of further priceincreases in the near term.

9

Producer Price Index – Commodities Construction(Index Base Year 1982 = 100, Not Seasonally Adjusted)

Source: U.S. Bureau of Labor Statistics

April 2021 April 2020 March 2021 1 Month % Change

12 Month % Change

Asphalt Felts and Coatings 262.6 246.4 259 1.4% 6.6%

Concrete Products 287.3 279.9 283.3 1.4% 2.6%

Copper Base Scrap 620.1 345.6 600.5 3.3% 79.4%

Fabricated Structural Metal Products 268.7 238.5 261.3 2.8% 12.7%

Glass 144.3 138.8 143.5 0.6% 4.0%

Hardware 233.5 227.5 232.2 0.6% 2.6%

Hardwood Lumber 268.3 203.9 259.2 3.5% 31.6%

Iron and Steel 322.8 204.7 289.6 11.5% 57.7%

Nonferrous Wire and Cable 300.9 238.5 287.1 4.8% 26.2%

Plumbing Fixture Fittings and Trim 346.5 339.9 346.3 0.1% 1.9%

Plywood 344.3 202 312.9 10.0% 70.4%

Softwood Lumber 469.4 212.3 441 6.4% 121.1%

Softwood Lumber

Softwood lumber prices have soared over the pastyear, rising approximately 121% according to theU.S. Census Bureau. At the onset of the pandemic,initial price increases were induced by lockdownand social distancing measures which constrainedproduction. As the Housing market surged, lumbermills struggled to meet demand, causing asignificant supply imbalance. This disparity hasresulted in an average price increase of nearly$36,000 for new single-family homes, according toNAHB.12 Lumber price volatility has also been fueledby tariffs on Canadian lumber imports into the U.S.

0

100

200

300

400

500

600

700

Jan-20 Jun-20 Nov-20 Apr-21

Copper Base Scrap Producer Price Index

Inde

x 19

82 =

100

0

100

200

300

400

500

600

700

Jan-20 Jun-20 Nov-20 Apr-21

Softwood Lumber Producer Price Index

Inde

x 19

82 =

100


Source: U.S. Census Bureau and Capstone Research

SEGMENT HIGHLIGHT: TOOLS, HARDWARE & FASTENERS

The Tools, Hardware & Fasteners segment hasbenefited from the rising value of construction andthe surge in housing starts, which have increased67% YOY in April, according to the U.S. CensusBureau.13 In addition, DIY (do-it-yourself)construction projects have also bolstered demand,as many homeowners have undertaken renovationprojects which is forecast to continue in the nearterm. Low levels of housing inventory and strongdemand has driven an increase in repair andremodel construction as older homes, which oftenrequire improvements, are being purchased.

Leading public companies have capturedheightened revenues through Q1, capitalizing onrobust activity in Residential and Commercialmarkets. Fortune Brands Home & Security(NYSE:FBHS), a leading home and securityproducts provider, recorded a 26% increase insales YOY, with its Outdoors & Security salessegment rising 47%, according to its earningsrelease.14 In addition, global provider of fasteningsolutions, Illinois Tool Works (NYSE:ITW)experienced a 10% increase in revenue, led by itsConstruction Products segment, according to itsearnings release.15

The segment also benefits from the diversity ofserviced end markets, with Construction, Framing,Plumbing, Automotive, and Aerospace extensivelyusing tools and fastener products throughout theproduction process. Notably, the highlycompetitive Fastener market is projected to reach$110.2 billion by 2025, growing at a compoundannual

10

$90.3 $94.0 $97.8 $101.8 $105.9 $110.2

$0

$50

$100

$150

$200

2020 2021 2022 2023 2024 2025

Industrial Fastener Market Poised to Grow

annual rate of 4.1%, according to Grand View Research.16 Tools, hardware & fastener providers are expected toremain in high demand as construction backlogs remain healthy. Industry participants with a diverse clientbase, strong supplier relationships, and effective cost controls are forecast to attract elevated buyer interest.

Notable industry transactions include:

American Securities acquires ABC Builders Supply – American Securities, through its portfolio companyFoundation Building Materials, has acquired ABC Builders Supply in May for an undisclosed sum. ABC is apremier distributor of tools, fasteners, drywall, steel framing, and accessories. The acquisition bolstersAmerican Securities building products portfolio and expands Foundation Building Materials presence in theResidential and Commercial markets in Virginia. The transaction highlights private equity’s appetite forenhancing sector portfolio construction through a buy-and-build strategy.

Würth Industry of North America acquires Atlantic Fasteners – Würth Industry North America has acquiredAtlantic Fasteners, a leading manufacturer of structural bolts and distributor of standard and specialtyfasteners. Terms of the transaction were undisclosed (February). Würth Industry North America is a divisionwithin the Würth Group, a global fastener distribution provider. The addition of Atlantic Fasteners improvesWürth’s geographic footprint in the mid-Atlantic region, bolsters its distribution and manufacturingcapabilities, and adds the capability to manufacture anchor bolts to further support its customer base.


U.S

. Dol

lars

in B

illio

ns

Source: Grand View Research

Brian KrehbielDirector

“New construction and existing orrenovation markets have been strongthrough COVID and are expected tocontinue into the future. The trends inpower tools are better efficiency, highercapacity batteries, and improvedergonomics and functionality.”

SEGMENT HIGHLIGHT: HARDSCAPES

Hardscape demand has remained robust through2020 and into YTD 2021 as homeowners haveincreasingly pursued home remodeling andrenovation projects amid the pandemic. NotablyNAHB’s Remodeling Market Index (RMI) reached ahistoric high in Q1 2021, with strongest currentmarket conditions experienced in small remodelingprojects under $20,000, according to NAHB.17 Asconsumers place greater emphasis on homeimprovement and outdoor living space, hardscapedemand is poised to continue in the near term.

Consolidation in the Hardscape segment hasexperienced healthy volume through YTD, withstrategic buyers seeking geographic expansion,additional product offerings, and marginimprovement. Leading hardscape and landscapesupplies provider SiteOne (NYSE:SITE) has been anactive buyer, rapidly adding hardscape businessesto its platform to bolster its product portfolio.Select acquisitions by SiteOne are included in thetable below.

11

Crista GilmoreDirector

“COVID accelerated trends within the Outdoor Living and Hardscapes industries whichcontinue to have momentum as consumers look to expand the square footage of theirhomes by creating outdoor living spaces.”

Date Target Description

05/10/21 Rock & Block Hardscape Supply Supplies hardscapes, masonry, and landscape products.

04/01/21 Arizona Stone & Architectural/Solstice Stone Distributes hardscapes, natural stone, and landscape supplies.

01/06/21 Stone Center of Virginia Offers hardscapes, natural stone, and landscape supplies.

01/04/21 Dirt and Rock Supplies natural and cultured stone, dirt, rock, and landscape materials.

Select SiteOne (NYSE:SITE) Acquisitions


CONSTRUCTION BACKLOG IMPROVES IN APRIL

Construction Backlog

The Associated Builders and Contractors (ABC)Construction Backlog Indicator (CBI) is a forward-looking national economic indicator that reflectsthe amount of work that will be performed bycommercial and industrial contractors in thecoming months. The CBI registered 7.9 months inApril, a slight increase from March’s reading of 7.8months, according to ABC.18

The Commercial & Institutional segment hasdemonstrated an expanding backlog of projects,with levels increasing to 8.0 months in April from7.7 months in March. The western U.S. has achievedthe highest YOY increase with backlog levels rising0.8 months. Construction input availability andsupply chain disruptions will continue to be keyfocuses for industry participants in forecastingrevenues and project pipelines for the remainderof the year.

The chart below displays the national annualaverage, broken down by quarter. While projectbacklogs have demonstrated a strong recovery,overall quarterly levels remain lower YOY.

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CBI Map of Regions and Backlog Month

South

April 2021: 8.2 months


Source: Associated Builders & Contractors

Midwest



Northeast



+0.8

MONTHS

West



-0.1

MONTHS

+0.1

MONTHS

-0.5

MONTHS

Source: Associated Builders & Contractors

CBI - National Backlog Average2010 – Q1 2021

5.8 7.1 7.8 8.0 8.3 8.7 8.7 8.3 9.7 8.6 8.5 7.9

6.17.3 7.4 7.9 8.1 8.4 8.6 9.0 8.8 9.0 7.9

7.28.1 7.7 8.2 8.5 8.5 8.5 8.6 9.9 8.8 7.7

7.08.1 8.0 8.2 8.8 8.5 8.7 9.5

9.08.9

7.4

0

5

10

15

20

25

30

35

40

45

50

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Q1 Q2 Q3 Q4

Num

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ths


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60

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2001 2006 2011 2016 2021

Current Market ConditionsFuture Market Indicators

CONSTRUCTION INDICES


13

Remodeling Market Index Remodeling Market Index (RMI)

The Remodeling Market Index (RMI) is based on aquarterly survey of NAHB remodeler members thatprovides insight on current market conditions aswell as future indicators for the remodeling market.

The RMI survey asks remodelers to rate fiveaspects of the remodeling market as "good," "fair,"or "poor." Each question is measured on a scalefrom 0 to 100, where an index number of 50indicates a higher share of remodelers viewconditions as good rather than poor.

The RMI posted a reading of 86 in Q1 2021, animprovement from the previous quarter’s level of79. Current conditions have garnered heightenedoptimism, with the index reaching a reading of 89.Notably, the current market for small remodelingprojects has captured the strongest activity levels,with an index level of 92.

Source: NAHB Remodeling Market Index

Architecture Billings Index

AIA’s monthly Architecture Billings Index (ABI) is aleading economic indicator for nonresidentialconstruction activity, with a lead time ofapproximately 9–12 months. The index is derivedfrom AIA’s Work-on-the-Boards survey, which hasgathered data on shifts in billings fromarchitectural firm leaders for over 20 years.Market conditions for architecture firms haveimproved significantly, with the index rising to 57.9in April, marking the highest ABI score since beforethe Great Recession.

Source: The American Institute of Architects

April

61.7

April

57.9

March

55.6

March

55.7

Design ContractsBillings

Architecture Billings Index

Commercial/

Industrial:

59.1

Institutional:

56.7

Residential:

56.9

Billings by Sector

Qua

rter

ly, S

easo

nally

Adj

uste

d

PUBLIC COMPANY DATA

Source: FactSet

14

One Year Total Returns as of May 27, 2021

S&P 500Dow Jones Industrial Average

Plumbing / HVAC

Decking / Siding / Drywall

Building Systems

Window / Door

Lumber / Wood

Products

Building Product

Distribution

40.6% 37.7% 41.3% 47.9% 83.0% 72.2% 119.5% 95.3%

Price % 52 Wk Market Enterprise LTM EV / LTMCompany 05/27/21 High Cap Value Revenue EBITDA Margin Revenue EBITDAPlumbing / HVACAAON, Inc. $65.96 81.2% $3,458.6 $3,361.6 $492.9 $115.0 23.3% NM NMA. O. Smith Corporation $71.10 97.3% $11,408.4 $10,897.4 $3,027.4 $596.6 19.7% 3.6x 18.3xLennox International Inc. $346.77 97.3% $13,099.8 $14,426.1 $3,840.8 $741.5 19.3% 3.8x 19.5xMasco Corporation $60.47 88.2% $15,346.4 $17,885.4 $7,577.0 $1,599.8 21.1% 2.4x 11.2xAverage: 91.0% $10,828.3 $11,642.6 $3,734.5 $763.2 20.9% 3.2x 16.3x

Decking / Siding / Drywall

Eagle Materials Inc. $148.13 96.6% $6,277.8 $7,063.7 $1,622.6 $534.5 32.9% 4.4x 13.2xJames Hardie Industries plc $32.83 95.2% $14,586.1 $15,312.3 $2,908.7 $783.9 27.0% 5.3x 19.5xTrex Company, Inc. $97.10 87.4% $11,201.6 $11,364.0 $926.0 $277.5 30.0% 12.3x 41.0xAverage: 93.1% $10,688.5 $11,246.6 $1,819.1 $532.0 $0.3 7.3x 24.6x

Building Systems

Apogee Enterprises, Inc. $38.08 89.2% $977.4 $1,156.8 $1,230.8 $144.8 11.8% 0.9x 8.0xArmstrong World Industries, Inc. $105.13 97.5% $5,034.4 $5,686.8 $940.1 $316.6 33.7% 4.9x 18.0xCornerstone Building Brands, Inc. $16.95 95.7% $2,130.8 $5,376.6 $4,770.6 $804.7 16.9% 1.1x 6.7xOwens Corning $106.62 97.0% $11,137.7 $13,884.7 $7,369.0 $1,601.5 21.7% 1.9x 8.7xAverage: 94.8% $4,820.1 $6,526.2 $3,577.6 $716.9 21.0% 2.2x 10.3x

Window / Door

Masonite International Corporation $119.41 90.3% $2,925.6 $3,570.3 $2,352.2 $404.1 17.2% 1.5x 8.8xQuanex Building Products $26.56 91.5% $887.7 $1,010.9 $885.1 $121.2 13.7% 1.1x 8.3xAverage: 90.9% $1,906.7 $2,290.6 $1,618.7 $262.7 15.4% 1.3x 8.6x

Lumber / Wood Products

Boise Cascade Company $67.03 85.6% $2,636.3 $2,719.9 $6,125.6 $607.4 9.9% 0.4x 4.5xLouisiana-Pacific Corporation $68.05 89.1% $6,958.3 $6,698.3 $3,220.0 $1,167.3 36.3% 2.1x 5.7xUFP Industries, Inc. $79.92 88.8% $4,942.1 $5,459.6 $5,946.9 $538.9 9.1% 0.9x 10.1xAverage 87.8% $4,845.6 $4,959.3 $5,097.5 $771.2 18.4% 1.1x 6.8x

Building Product Distribution

Beacon Roofing Supply, Inc. $56.41 92.6% $3,941.0 $6,189.1 $7,225.9 $702.1 9.7% 0.9x 8.8xBuilders FirstSource, Inc. $45.15 83.6% $9,352.1 $11,456.1 $10,945.6 $1,086.5 9.9% 1.0x 10.5xGMS Inc. $45.86 97.3% $1,964.9 $2,958.0 $3,137.5 $328.8 10.5% 0.9x 9.0xWatsco, Inc. $288.82 93.8% $10,227.0 $10,698.8 $5,182.9 $556.1 10.7% 2.1x 19.2xAverage 91.8% $6,371.3 $7,825.5 $6,623.0 $668.4 10.2% 1.2x 11.9x

EV = enterprise value; LTM = last twelve months$ in millions, except per share dataNM = Not Meaningful Source: Capital IQ as of May 27, 2021


15

FIRM TRACK RECORD

HAS BEEN ACQUIRED BY

a portfolio company of

HAS RECAPITALIZED WITH

HAS PARTNERED WITHMANAGEMENT BUYOUT

SUPPORTED BY




HAS BEEN ACQUIRED BY HAS RECAPITALIZED WITH

HAS BEEN RECAPITALIZED BY HAS BEEN ACQUIRED BY



Capstone Partners’ Building Products & Construction team has represented clients across variousconstruction specialties. Our deep industry focus allows us to provide our clients with real-time transactionfeedback and immediate access to key decision makers among the most active acquirers and investors inthe construction industry. A sampling of closed transactions are shown below.

HAS BEEN ACQUIRED BYHAS BEEN ACQUIRED BY


BUILDING PRODUCTS REPORT CONTRIBUTORS

16

Darin is an advocate for his clients, guiding them through the complex process of raisingdebt, equity or selling their company. During the past 24 years, Darin has led businessowners and their board of directors through this process over 70 times. Courts, tradegroups and national publications recognize Darin’s expertise where he providestestimony as an expert witness and speaks about topics involving mergers andacquisitions. Prior to joining Capstone, Darin started, operated, made acquisitions andsold three successful companies in construction, import and distribution, andcommercial real estate management. Three sell side transactions that Darin performedare published and taught in business schools around the globe. Darin teaches thesecases at the University of Denver, where he received his Bachelor of Science in Finance.

Darin GoodManaging Director [email protected] | 303-549-5674

Crista [email protected] | 303-531-5013

Crista started her career at KPMG LLP then accepted a Senior Associate role with a $12billion multi-strategy hedge fund managing the monthly PnL close process for severalfunds. She was promoted to Vice President, Valuations responsible for pricing theportfolio of over 8,000 securities monthly, as well as reporting to the ValuationCommittee on a bi-monthly basis. At Capstone, Crista works with clients to improvetheir financial metrics and reporting capabilities. Additionally, she performs research,valuation analysis, prepares marketing documentation, manages client data rooms andresponds to due diligence inquiries. Crista graduated summa cum laude from DrakeUniversity with a degree in Finance and Accounting. She also earned a Master’s ofAccounting degree from Drake University and is a CFA Charterholder.

Connor McLeodResearch [email protected] | 617-619-3319

Connor is a Research Associate at Capstone Partners primarily specializing in BuildingProducts & Construction Services, Consumer & Retail, and Healthcare. Prior to joiningCapstone Partners, Connor was a specialist with the Investor Services team atBlackRock. Connor holds a BA in Economics from Bates College and is a Series 7Registered Securities Representative.

Prior to joining Capstone Partners in 2011, Brian spent five years with a boutiqueinvestment bank performing sell-side transactions, financial modeling and value-addclient services. At Capstone, Brian is a member of the Building Products & ConstructionServices team assisting clients with sell-side, buy-side and debt and equity raisetransactions. Prior to his career in Investment Banking, Brian developed constructionindustry and operations experience owning and managing a successful family-ownedresidential construction company. His education and industry expertise are resourcesused in all aspects of the transaction process. Brian graduated from the University ofNorthern Colorado with a BS degree in Finance and he is a CFA Charterholder.

Brian [email protected] | 970-215-9572


ENDNOTES

1. U.S. Bureau of Labor Statistics, “Producer Price Indexes,” https://www.bls.gov/ppi/, accessed May 25, 2021.2. The American Institute of Architects, “ABI April 2021: Architecture firm billings continue to rebound at a brisk pace,”

https://www.aia.org/pages/6401805-abi-april-2021-architecture-firm-billings-, accessed May 26, 2021.3. Dodge Data & Analytics, “Dodge Momentum Index Increases In April,” https://www.construction.com/news/Dodge-Momentum-Index-Increases-In-

April-2021, accessed May 27, 2021.4. Masonite International, “Masonite International Corporation Reports 2021 First Quarter Financial Results and Raises Annual Outlook,”

https://investor.masonite.com/Investors/Overview/default.aspx, accessed May 27, 2021.5. Boise Cascade, “Q1 2021 Earnings Release Slides,” https://www.bc.com/portal/investor-relations/presentations/, accessed May 25, 2021.6. Louisiana-Pacific, “LP Building Solutions Reports First Quarter 2021 Results, Provides Second Quarter Outlook, and Announces an Additional $1 Billion

Share Repurchase Authorization,” https://investor.lpcorp.com/news-releases/news-release-details/lp-building-solutions-reports-first-quarter-2021-results, accessed May 26, 2021.

7. Seeking Alpha, “Boise Cascade Company (BCC) CEO Nate Jorgensen on Q1 2021 Results - Earnings Call Transcript,” https://seekingalpha.com/article/4425871-boise-cascade-company-bcc-ceo-nate-jorgensen-on-q1-2021-results-earnings-call-transcript, accessed May 27, 2021.

8. Cision, “US LBM To Acquire ACS American Construction Source,” https://www.prnewswire.com/news-releases/us-lbm-to-acquire-acs-american-construction-source-301298367.html, accessed May 26, 2021.

9. Modern Distribution Management, “Builders FirstSource to Buy Cornerstone Building Alliance for $400 million,” https://www.mdm.com/news/operations/mergers-acquisitions/builders-firstsource-buys-cornerstone-alliance/, accessed May 27, 2021.

10. Pro Sales, “GMS Acquires Westside Building Material,” https://www.prosalesmagazine.com/news/deals/gms-acquires-westside-building-material_o, accessed May 26, 2021.

11. U.S. Bureau of Labor Statistics, “Producer Price Index – Logging,” https://www.bls.gov/regions/mid-atlantic/data/producerpriceindexlogging_us_tables.htm, accessed May 25, 2021.

12. NAHB, “Skyrocketing Lumber Prices Add Nearly $36,000 to the Price of a New Home,” https://nahbnow.com/2021/04/skyrocketing-lumber-prices-add-nearly-36000-to-the-price-of-a-new-home/, accessed May 25, 2021.

13. U.S. Census Bureau, “MONTHLY NEW RESIDENTIAL CONSTRUCTION, APRIL 2021,” https://www.census.gov/construction/nrc/pdf/newresconst.pdf, accessed May 29, 2021.

14. Fortune Brands Home & Security, “FORTUNE BRANDS REPORTS EXCEPTIONAL SALES AND PROFIT GROWTH IN 1Q 2021; INCREASES 2021 ANNUALOUTLOOK BASED ON CONTINUED EXPECTED OUTPERFORMANCE IN A STRONG HOUSING MARKET,” https://ir.fbhs.com/news-releases/news-release-details/fortune-brands-reports-exceptional-sales-and-profit-growth-1q, accessed May 27, 2021.

15. Illinois Tool Works, “ITW Reports Record First Quarter 2021 Results,” https://s25.q4cdn.com/220651370/files/doc_financials/2021/q1/ITW-Reports-First-Quarter-2021-Results.pdf, accessed June 1, 2021.

16. Grand View Research, “Industrial Fastener Market Worth $110.24 Billion By 2025 | CAGR: 4.1%,” https://www.grandviewresearch.com/press-release/global-industrial-fasteners-market, accessed May 25, 2021.

17. NAHB, “Remodeling Market Index (RMI),” https://www.nahb.org/news-and-economics/housing-economics/indices/remodeling-market-index, accessed May 25, 2021.

18. Associated Builders and Contractors, “ABC’s Construction Backlog Inches Up in April; Contractor Optimism Slips,” https://www.abc.org/News-Media/News-Releases/entryid/18751/abc-s-construction-backlog-inches-up-in-april-contractor-optimism-slips, accessed May 25, 2021.

C o m mon G o a ls . U n c ommon R e s u l t s .

DisclosureThis report is a periodic compilation of certain economic and corporate information, as well as completed and announced merger andacquisition activity. Information contained in this report should not be construed as a recommendation to sell or buy any security. Anyreference to or omission of any reference to any company in this report should not be construed as a recommendation to buy, sell ortake any other action with respect to any security of any such company. We are not soliciting any action with respect to any securityor company based on this report. The report is published solely for the general information of clients and friends of CapstonePartners. It does not take into account the particular investment objectives, financial situation or needs of individual recipients.Certain transactions, including those involving early-stage companies, give rise to substantial risk and are not suitable for all investors.This report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should notbe relied upon as such. Prediction of future events is inherently subject to both known and unknown risks and other factors that maycause actual results to vary materially. We are under no obligation to update the information contained in this report. Opinionsexpressed are our present opinions only and are subject to change without notice. Additional information is available upon request.The companies mentioned in this report may be clients of Capstone Partners. The decisions to include any company in this report isunrelated in all respects to any service that Capstone Partners may provide to such company. This report may not be copied orreproduced in any form or redistributed without the prior written consent of Capstone Partners. The information contained herein shouldnot be construed as legal advice.

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Market PresenceWith a long-established U.S. footprint, together with an international partnerplatform, we provide clients with broad expertise and access to key marketrelationships on a global basis. Our presence is backed by ~200 professionals in theU.S. with 450+ professionals across 43 countries.

$65.1Maverage

transaction value

51deals involving foreign

private equity firms

65%completed with a European partner

218M&A transactions

completed in 2020

30%of our deals are cross-

border

$12.5Baggregate

transaction value

6thglobally ranked for

deals under $500m

International

170+ professionals12 offices

Boston · Chicago · Dallas ·Denver Detroit · Los Angeles ·New York Orange County ·Philadelphia Richmond · San Diego · Tampa

450+ professionals60+ offices in 43 countries

Asia: China · India · Japan · ThailandAfrica: Congo · Egypt · Ghana · Ivory Coast · Mauritius · Morocco · Nigeria · Senegal · South AfricaAmericas: Toronto · Vancouver · Argentina · Brazil · Chile · Colombia · Mexico · Panama & Central America · PeruEurope: Belgium · Bosnia & Herzegovina · Croatia · Czech Republic · Finland · France · Germany ·Hungary · IrelandItaly · Netherlands · Poland · Portugal · Russia · Serbia · Slovakia · Slovenia · Spain · Sweden ·United Kingdom

United States

capstonepartners.com

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