Insight

Building Products Distribution Update

Read more about the M&A activity in the building products distribution market

Robert White

Robert White

Managing Director, KPMG Corporate Finance LLC

+1 202-491-5303

Residential Building Product Distribution

Sector Highlights

  • The residential building products distribution industry is segmented into several subsectors. For this report, we will focus on exterior products, interior products, lumber and building materials (“LBM”), and hardscape/landscape suppliers.
  • In aggregate, the sector represents more than $220 billion a year in revenue and is expected to grow 4-5% annually.
  • Primarily serving pro dealer contractors in the new construction and remodeling markets, these distributors provide a critical link between suppliers and a highly fragmented customer base.
  • The majority of independent distributors are one or two branch, local operators.
  • Over the past two decades, there has been consolidation leading to several, well-capitalized super-regional and national players in each subsector and creating substantial shareholder value.
  • After the initial COVID surge in Q2 2020, home buying and new construction both increased rapidly, signaling strong sector dynamics. In 2021, Mortgage lenders issued $1.61 trillion in purchase loans, eclipsing the previous high set in 2005 of $1.51 trillion.
  • These tailwinds are driving growth, fueling private equity interest and portfolio shaping among the majors, which has resulted in significant M&A activity that we expect to continue in 2022 and beyond.

Key Themes

Favorable Housing Ownership trends

Strong Construction Dynamics

Highly Fragmented Market


Well-Capitalized, Active Consolidators

Robust M&A Activity


Exterior

  • Roofing
  • Siding and Trim
  • Windows & Doors
  • Misc
LBM
  • Lumber & Engineered Wood
  • Trusses, Beams and Framing
  • Windows & Doors
  • Misc

Interior

  • Wallboard
  • Steel Studs & Insulation
  • Ceiling & Acoustical Tile
  • Misc

Hardscape/Landscape

  • Outdoor Living
  • Patio, Pavers, Driveway
  • Irrigation & Lighting
  • Misc


Robust M&A Activity

  • The tailwinds that lifted many M&A markets from the summer of 2020 through the end of 2021 were also very much present within the building products distribution space.
  • Sparked by a flurry of larger, year-end 2020 deals, 2021 activity jumped appreciably across all four sub-sectors.
  • Transaction volume was heaviest within the LBM sector, which accounted for nearly 40% of the deal flow over the last three years.
  • Not surprisingly, the platforms in all four sub-sectors were quite active, accounting for the lion’s share of the deals since 2019.
  • We expect this pace to continue throughout 2022.

Transaction Count and Mix by Subsector (2019-2021)

Deal Count by Year


We hope you find this information valuable, and as always, feel free to reach out if you would like to discuss in further detail. To read the full report, download the PDF below


Subscribe

Get the latest updates to KPMG Corporate Finance LLC industry insights


Related content

Business services

KPMG Corporate Finance LLC’s Business Services team provides investment banking and financial advisory services to a broad range of outsourcing service providers.