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These Maps Show How Fast LBM's Landscape Is Changing; Tax Talk Could Quicken the Pace

Deals (blue), BFS-BMC merger (brown), openings (green), closures (red) since 2018.

As early as this month, we could see the 2,000 LBM dealer facilities to be involved in a deal, a greenfield opening, or a closure since 2018--especially if the prospects of higher taxes spurs even more action this fall.

Webb Analytics' running count shows 1,957 facility locations have a different status now than they did at the start of 2018. Of that total, 1,508 locations were involved in deals, 322 were greenfield openings, and 127 sites. Some locations were affected more than once--indeed, one Maryland dealer had three new owners in less than six weeks--but for the most part, the vast majority were involved in just one change of status.

Deals (blue), openings (green) and closures (red) of LBM facilities YTD 2021. Missing: One deal and one opening in Hawaii. Source: Webb Analytics

This year is on track to top them all, even after you take the 162 yards involved in the Builders FirstSource-BMC deal and move them into 2020's count, as that's when the deal was announced. Through today, there have been 80 deals involving 333 facilities, plus 79 greenfield openings and 8 closures. (See map above.) Both the deals and greenfields counts are bigger than two of the previous three years, and we still have more than four months left in 2021 to add to the totals.

US LBM has been one of the most active buyers this year. It has purchased 157 locations, nearly half the total for all deals. Its most recent buys involved Mid-Cape Home Centers, which has five lumberyards and a standalone design center in Massachusetts, and Northern Building Supply, which has yards in Suttons Bay and Traverse City, MI.

Of the rest, 50 have been snapped up by SRS Acquisition, while R.P. Lumber took on 22.

M&A experts credit the frenzied pace to many factors, among them low borrowing costs and a housing market that looks to stay robust for years to come. What we're seeing in LBM is part of a wider trend. "In the first eight months of 2021, companies have announced mergers and acquisitions worth more than $1.8 trillion in the U.S. and more than $3.6 trillion globally, according to data provider Dealogic," The Wall Street Journal reported Sept. 8. "Both figures are the highest at this point in a year since at least 1995, when Dealogic started keeping records."

Another propellent is concerns that Congress will impose tax increases to help pay for Democrats' proposed $3.5 trillion, 10-year package of initiatives. Dealers are particularly worried about potential increases to capital gains taxes. Thus, in order to avoid higher tax bills, they're moving now before Congress does the same.

Some trends don't become noticeable until they're collected and put in context. For instance, Webb Analytics' map above shows roughly 130 construction supply operations in the Atlanta market. Since 2018, that area has seen 19 locations change hands in deals, 15 be affected by the merger of Builders FirstSource and BMC, and six greenfield operations take root. That's 40 out of 130 locations, or 31% of the total.

Likewise, in Charlotte, NC, and up the I-77 corridor, the market has seen 13 yards change hands in deals, nine affected by the BFS-BMC pact, and five greenfield openings. That compares with 47 locations that haven't changed since 2018. So in the Queen City market, 36% of all locations have been affected.

You can do the math with states, too. For instance, in Texas, the nation's biggest homebuilding state, 30% of all the LBM operations are brand new, part of the BFS-BMC merger, or were acquired since 2018. By contrast, Ohio has only a 7.2% churn rate.

Another trend highlights the role that distributors have come to play in M&A. The blue pins on the map at left represent locations owned by Central Network Retail Group. It's part of Orgill, the distributor of hardlines for dealers, home centers, and hardware stores.

The red pins show the locations owned by Nations Best Holdings. The Do it Best co-op announced last August it had taken a stake in Nations Best, whose acquisitions have virtually all been Do it Best members. For instance, this month Nations Best took over Hipp Modern Builders Supply of Mountain View, AR. (Also in August, Nations Best purchased Panhandle Lumber of Bonifay, FL, but it doesn't appear to be a Do it Best member.)

Here's a roundup of what else has happened since early August:

Builders FirstSource expanded its components business in Southern California by purchasing California TrusFrame, which has four plants and a central office.

Another truss and components maker, Florida Forest Products, was purchased by Tibbetts Lumber.

Hancock Lumber, which acquired Lapointe Lumber of Maine earlier this year, grew again on Sept. 7 with its announcement that it'll purchase Winnipesaukee Lumber in New Hampshire.

Friend Lumber, which has branches in Burlington, MA, and Hudson, NH, was acquired by Massachusetts' Arlington Coal & Lumber.

Riverhead Building Supply bought Mozzone Lumber of Taunton, MA.

We've been remiss in not noticing what has happened with Ware-Butler Lumber & Building Supplies since it was acquired last November. It's now up to eight branches, the most recent opening Aug. 31 in Greenville, ME.

SRS Distribution purchased Aloha Roofing Supply in Kapa'a on Hawaii's Kauai island. The move came not long after ABC Supply opened a branch on Kauai.

In Minnesota, Shaw/Stewart Lumber purchased Kruse Lumber.

Texas' Ennis Door & Trim now has two operations in the city, having bought Main Street Hardware.

Central Network Retail Group opened a new Outdoor Supply Hardware branch in Sunnyvale, CA.

GMS purchased Architectural Coatings Distributors of Cleveland. The drywall specialist also announced Aug. 9 the greenfield openings of three facilities: a Pioneer Materials branch in Denver, a new Capitol Building Supply branch in Wilmington, DE; and a Cherokee Building Materials shop in Jackson, MS.

Floor & Decor opened new branches in Columbia, SC, and Austin, TX.

Heritage Landscape Supply Group, a unit of SRS Distribution, has continued growing, this time buying Apex, NC-based Atlantic Mulch & Erosion Control. It also opened a branch of Silver Creek Supply in Middleton, ID.

ABC Supply's L&W Supply division closed branches in Englewood and Punta Gorda, FL, consolidating them into a new branch for the Port Charlotte area. The branch is located in Arcadia, FL.

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