Philadelphia Insider - BGL · PGT Innovations (NYSE: PGTI) is reporting strong growth, with sales up 24 percent in the first half of 2018. The company achieved a 20 percent adjusted

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serving middle market companies throughout the U.S. and internationally.

Insider

Residential Building Products

Residential Gains

Suppliers of residential building products project optimism,

supported by a growing economy and positive momentum

in the housing market. Strategic M&A remains high and is

broad-based, with buyers aggressively pursuing acquisitive

growth to increase scale, market position, and profitability.

September 2018Brown Gibbons Lang & Company

Chicago One Magnificent Mile 980 N. Michigan Avenue Suite 1880 Chicago, IL 60611

Cleveland One Cleveland Center 1375 East 9th Street Suite 2500 Cleveland, OH 44114

Philadelphia One Liberty Place 1650 Market Street Suite 3600 Philadelphia, PA 19103

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Building Products Insider

Market Update

2

Favorable Macro Indicators Point to Continued Growth

Economic Growth

Real GDP in the United States is predicted to grow

2.8 percent in 2018, according to the Third Quarter 2018

Survey of Professional Forecasters released this August by

the Federal Reserve Bank of Philadelphia. Forecasters are

predicting 2.8 percent growth in 2019, 1.8 percent growth in

2020, and 1.5 percent growth in 2021. The unemployment

rate is predicted to average 3.9 percent in 2018, 3.6 percent

in 2019, 3.7 percent in 2020, and 4.0 percent in 2021.

Housing Starts

Total housing starts are forecasted to reach 1,279,000

in 2018 and 1,301,000 in 2019 according to August

estimates from the National Association of Home Builders,

representing 5.8 percent and 1.7 percent increases,

respectively, over a 2017 level of 1,208,000. Single-family

starts are forecasted to grow roughly 5 percent annually to

approach 1 million units by 2020.

Repair & Remodeling

The Joint Center for Housing Studies of Harvard University

forecasts robust demand for residential remodeling, according

to the Leading Indicator of Remodeling Activity released this

July, which predicts homeowner spending on improvements

and repairs will reach nearly $350 billion by mid-year 2019.

Annual growth is projected to remain near 7 percent.

“A growing economy and stronger job market are boosting

owners’ willingness to invest in home improvements,” says

Chris Herbert, Managing Director of the Joint Center for

Housing Studies. “Rising home values and increased home

equity levels are also encouraging more owners to do larger

upgrade and replacement projects.”

Builder Confidence

Home builder confidence remains healthy, holding steady at 67

in September and August on the National Association of Home

Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

The HMI index registered above 70 for four months in 2018,

according to the NAHB, with a high reading of 72 in January.

“A growing economy and rising incomes combined with

increasing household formations should boost demand for

new single-family homes moving forward,” said NAHB Chief

Economist Robert Dietz.

Rising Home Values

Home prices continue to rise, supported by a 6.2 percent

rise over the past 12 months in the S&P CoreLogic Case–

Shiller National Composite Home Price Index. The June

increase marks 29 consecutive months of expansion.

Millennials Active Home Buyers

Generational shifts are influencing home purchases and

spending on residential building products. According to

findings from the 2018 Home Buyer and Seller Generational

Trends Report released by the National Association of

REALTORS® (NAR), millennials (37 years and younger)

account for the largest share of home buyers (36 percent),

of which 65 percent represent first-time home buyers—

making them the most active generation of buyers for the

fifth consecutive year. Despite reaching an all-time survey

high in 2018, the overall share of millennial buyers remains

at an underperforming level as low housing supply has

reduced affordability, according to NAR chief economist

Lawrence Yun.


Market Update

3

Market IndicatorsNew Housing Starts - Single and Multifamily 30-Year Mortgage Rate

New Home Sales

Source: U.S. Census Bureau Source: Freddie Mac

Source: U.S. Census Bureau Source: National Association of Realtors

Source: S&P Global Market Intelligence Source: Joint Center for Housing Studies of Harvard University

Existing Home Sales and Months Supply

National S&P CoreLogic / Case-Shiller Index Repair & Remodeling

$2

52

.5

$2

56

.6

$2

60

.9

$2

64

.4

$2

67

.0

$2

70

.8

$2

74

.7

$2

78

.0

$2

79

.1

$2

84

.5

$2

90

.3

$2

95

.2

$2

97

.2

$3

02

.5

$3

08

.3

$3

13

.9

$3

17

.2

$3

24

.1

$3

31

.0

$3

36

.7

$3

39

.0

$3

46

.8

6.2% 6.1% 6.0% 5.9%5.7%

5.5%5.3%

5.1%

4.5%

5.1%

5.7%

6.2%6.5% 6.4%

6.2% 6.3%

6.8%7.1%

7.4% 7.3%6.9% 7.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

$225

$250

$275

$300

$325

$350

$375

$400

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

2014 2015 2016 2017P 2018 2019P

Rate of Change(in B

illio

ns)

Homeowner Improvement & Repairs Four-Quarter Moving Rate of Change

1,282

876

392

0

500

1,000

1,500

2,000

2,500

Jan

-05

De

c-0

6

No

v-0

8

No

v-1

0

Oct

-12

Se

p-1

4

Au

g-1

6

Au

g-1

8

(In

Th

ou

san

ds)

Total In Structures with 1 Unit In Structures with 5 Units or More

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Jan

-10

Sep-

11

Jun

-13

Feb-

15

Nov

-16

Jul-

18

Months of Supply

Exis

ting

Hom

e Sa

les

(In T

hous

ands

)

100

120

140

160

180

200

220

Jan

-07

No

v-0

8

Oct

-10

Se

p-1

2

Au

g-1

4

Jul-

16

Jun

-18

0

200

400

600

800

1,000

1,200

1,400

1,600

Jan

-05

Jul-

06

Jan

-08

Jul-

09

Jan

-11

Jul-

12

Jan

-14

Jul-

15

Jan

-17

Jul-

18

New

Hom

e Sa

les

(in T

hous

ands

)

4.55%

0%

2%

4%

6%

8%

10%

Jan

-05

Dec

-06

Nov

-08

Nov

-10

Oct

-12

Sep-

14

Aug

-16

Aug

-18


Market Update

Sentiment Remains Positive

In Masco Corporations’s (NYSE: MAS) May presentation

to investors at the J.P. Morgan 11th Annual Homebuilding

and Building Products Conference, CFO John Sznewajs

highlighted solid industry fundamentals to support

continued future growth, citing appreciating home values,

strong housing turnover, and household formation, where

millennials represent an important buying group. “The

big one that we think is going to drive our business over

the next decade or so is household formations. With the

millennial group coming out of college and reaching those

household formation years, we look at about 12.5 million

households being formed over the course of the next 10

years. That’s up about 50 percent from the last 10 years.

So, we think that’s going to be a huge driver. Whether it’s

multi-family housing or single-family housing, we see nice

tailwinds across our products over the course of the next

decade.” Rising interest rates are not expected to soften

product demand.

Speaking to a “robust acquisition pipeline”, Sznewajs

anticipates an active but selective approach to acquisitions,

supported by a “…a fair amount of cash to deploy to

acquisitions if we so choose.” He added, “As we think about

how the industry stacks up, how our businesses line up

right now, we think it’s a great time to be in the building

products area. We’ve got great macro fundamentals…in

terms of housing starts, home price appreciation, housing

turnover. All that, we think, leads to a very strong growth in

the next several years.”

PGT Innovations (NYSE: PGTI) is reporting strong growth,

with sales up 24 percent in the first half of 2018. The company

achieved a 20 percent adjusted EBITDA margin in 2Q 2018—

the first time in its history. “Demand continued to be strong in

both new construction and repair and remodeling channels of

our business, with sales growing in both channels compared

to last year,” said CEO Jeffrey Jackson in the company’s

second quarter earnings call. PGT reported 30 percent growth

in repair and remodel sales year-over-year in the quarter and

12 percent growth in new construction.

Craig Menear, CEO of The Home Depot (NYSE:HD),

underscored a favorable macro environment during

the company’s FQ2 2019 earnings call, saying: “The U.S.

economy and drivers for home improvement spending are

strong.” Menear reported record sales and net earnings

during the quarter, with the company outperforming plan

during the first half, and raised sales and earnings guidance

for fiscal 2018. CFO Carol Tomé echoed positive industry

growth prospects in her comments, “As we look to the back

half of the year, we continue to expect strong economic

growth, with the backdrop of a healthy home improvement

environment. Homeowners continue to enjoy home price

appreciation, and rising wages and low unemployment have

driven consumer confidence to record-high levels. These

trends are all supportive of our business.”

M&A Underscores Optimism

M&A activity involving suppliers of residential building

products has been robust, indicative of a bullish outlook

on the sector’s fundamentals and future growth prospects.

Strategic and financial buyers have been aggressive with

participants speaking to active acquisition pipelines, while

headline deals suggest continued consolidation in the

coming quarters. Notable bellwether deals include Sherwin-

Williams’ (NYSE:SHW) $11.0 billion acquisition of Valspar

(17.2x EBITDA multiple); the $3.6 billion purchase (pending)

of Ply Gem Industries by NCI Building Systems (NYSE: NCS)

(10.2x EBITDA); and Leonard Green & Partners’ acquisition

of SRS Distribution, valued at more than $3.0 billion.

Valuations remain strong with premium multiples assigned

to assets that bring portfolio diversification, margin

expansion, and access to new markets. Industry analysts

characterize valuations as “frothy”, with highly strategic

acquisitions commonly trading for more than 10x EBITDA

pre-synergies. Purchase price multiples for middle market

leveraged buyouts reached a new record high of 10.7x in

2Q 2018, reported Thomson Reuters LPC.

4Sources: S&P Capital IQ, PitchBook, Equity Research, Company Filings, public data.


Market Update

Selected Recent M&A Activity in Residential Building Products

In August 2018, PGT Innovations (NYSE: PGTI) completed

the acquisition of Western Window Systems from PWP

Growth Equity, calling the buy “compelling” and creating a

“national leader in the premium window and door space”.

The platform expands PGT’s product portfolio and footprint

outside of Florida into new markets with access to growing

geographies throughout the western U.S., including

California, Texas, Arizona, Nevada, Colorado, Oregon,

Washington, and Hawaii, the company said. The $360 million

cash buy represents a premium valuation at 19.2x 2017

EBITDA (11.3x 2018E EBITDA).

Jeff Jackson, CEO of PGT Innovations, commented on the

acquisition: “Western Window Systems delivers growth

by disrupting industry norms and adopting non-traditional

approaches to contemporary windows and doors systems.

With a developed footprint across the South and West, we

believe the combined company will be well positioned to

drive profitable, sustained growth, including opportunities

to introduce our respective products to each other’s

customer base. We believe this transaction will accelerate

our ability to enhance value creation for our shareholders.”

In August 2018, Ply Gem Industries announced it was

acquiring the Silver Line and American Craftsman brands

and related operating assets from Andersen Corporation—a

move expected to bolster its leadership position in vinyl

windows and patio doors for the new construction and

home improvement markets. The $190 million purchase

price values the business at a 10.0x multiple of TTM EBITDA

through 2Q 2018.

Ply Gem CEO Gary Robinette commented on the

acquisition, saying: “This transaction is in full alignment with

our strategic growth plan. The addition of the Silver Line

business will better balance the mix of end markets that

we serve, strengthen our core capabilities, and contribute

significantly to revenues and earnings. We are confident

this will help us achieve synergies and competitive

advantages that drive top line sales and enhanced customer

value.”

In July 2018, NCI Building Systems (NYSE: NCS) signed a

definitive agreement to acquire Ply Gem Industries from

Clayton Dubilier & Rice (CD&R) in a stock-for-stock merger

valued at $3.6 billion.

Ply Gem is a leading supplier of exterior residential building

products, holding the number one market position in vinyl

siding and vinyl windows in North America, reported NCI

in an investor presentation outlining the transaction. The

company manufactures and markets a comprehensive

offering of building products including windows and patio

doors, vinyl and aluminum siding and accessories, designer

accents, cellular PVC trim and mouldings, vinyl fencing and

railing, stone veneer, roofing, and gutterware products for

the new construction and home repair and remodeling

markets.

The combination significantly diversifies NCI’s portfolio,

creating a leading North American exterior building products

platform serving both the commercial and residential new

construction and remodeling markets. Combined revenue

and adjusted EBITDA in 2018 for the two companies is

projected to be $4.5 billion and $540 million, respectively.

Pre-synergies, Ply Gem is valued at ~10.2x 2018 EBITDA and

~8.2x including full run-rate synergies.

NCI Chairman James Metcalf, who will lead the combined

company as CEO, commented on the transaction: “This

transformational combination creates the leading exterior

building products company with multiple avenues for

further growth. Both companies are experiencing sustained

momentum driven by meaningful cost savings, and the

greater scale and diversification of the combined company

support organic growth, margin expansion, and longer-term

M&A opportunities.”

CD&R took Ply Gem private this April for an enterprise

value of $2.26 billion, valuing the business at a 9.9x multiple

of EBITDA. Concurrent with the Ply Gem acquisition, CD&R

also purchased Atrium Corporation, a national supplier of

vinyl and aluminum windows and doors serving the new

construction and repair and remodel markets. The company

had $350 million of revenue in 2017.

At the time of CD&R’s announcement, Carolyn Zulandt, an

Analyst with market research firm The Freedonia Group,

spoke to Plastics News about the significance of the

transaction to the U.S. window market, saying: “Ply Gem

and Atrium are complementary businesses with broad

window and door product offerings…This new combined

company will benefit from improved production and

distribution efficiencies, as well as advantages like shared

technological expertise in a very competitive industry.



Market Update

Together, Ply Gem and Atrium should capture a share of the

U.S. window market that comes closer to that of industry

giant Andersen than any other supplier.”

Nate Sleeper, Partner at CD&R, spoke to the merits of the

combination: “This is a transformational milestone for two

highly complementary businesses. Together, Ply Gem and

Atrium have a well-positioned platform across North America,

a deep set of capabilities to serve customers, and a strong

foundation for long-term growth and value creation.”

Other recent M&A activity in the window and door market

includes buys by JELD-WEN (NYSE:JELD) in 2018 (American

Building Supply, A&L Windows, and Domoferm); Masonite

(NYSE:DOOR) (DW3 Products Group (1.6x Revenue) in 2018

and A&F Wood Products in 2017); Slocomb Windows and

Doors (Residential Division of Lockheed Window) in 2018;

Andersen Corporation (Heritage Windows and Doors) in

2018; and Pella Corporation (Bonelli Enterprises) in 2017.

Private equity sponsors have also been executing on buy-and-

build strategies in the space:

• In August 2018, Tower Arch Capital recapitalized

Panoramic Doors in partnership with senior management,

including founder and CEO Alan Rees. Panoramic

manufactures patio door and window systems for

residential and commercial applications. The company

stated plans to expand its manufacturing footprint and

distribution with support from Tower Arch.

• Harvey Building Products, a portfolio company of

Dunes Point Capital, acquired Thermo-Tech Windows

in March 2018, its second add-on acquisition following

the purchase of Soft-Lite Windows in December 2016.

Dunes Point Capital acquired Harvey in 2015. Thermo-

Tech manufactures vinyl windows and sliding doors for

residential and light commercial applications, expanding

Harvey’s footprint into the Midwest.

• Sunrise Windows & Doors, backed by The Riverside

Company, acquired Paragon Windows & Doors in

July 2017. The buy marks the second add-on for the

portfolio company, following New North Trim in 2013.

Riverside acquired Sunrise in 2010. Paragon manufactures

residential repair and replacement doors and windows,

expanding Sunrise’s product portfolio.

In May 2018, Leonard Green & Partners acquired SRS

Distribution for a reported purchase price in excess of

$3.0 billion. The residential roofing distributor has had an

acquisitive history under private equity ownership, having

completed 53 tuck-in acquisitions since the platform was

launched in 2008. Exiting sponsor Berkshire Partners

acquired the company in 2013 from AEA Investors.

Acquisitions in 2018 include, in April, Contractors Siding,

Windows & Roofing Supply, adding locations in Nebraska and

South Dakota and marking the entry into its 42nd state (South

Dakota); and in March, Top-Notch Roofing Supply serving

East Texas with two locations; and American Roofing Supply,

a Colorado-based distributor of residential and commercial

roofing products and accessories. With these acquisitions,

SRS operates 217 locations in 42 states.

In January 2018, Cortec Group recapitalized Window Nation,

a value-added distributor of replacement windows, doors,

roofing, and siding products. The company serves the

residential and repair and remodeling markets in the Mid-

Atlantic and Midwest, with a leading presence in Maryland,

Virginia, Ohio, and Pennsylvania. “The company’s rapid

expansion, current momentum, and future prospects are

incredibly exciting. We look forward to building on Window

Nation’s success and expanding into new markets,” said

Michael Najjar, a Managing Partner at Cortec. Jeffrey Lipsitz,

also a Managing Partner at Cortec, added, “We are enthusiastic

about partnering with Harley and Aaron to expand the

organization and support Window Nation’s growth.”



Market Update


Summary of Selected Building Products M&A Activity (YTD 2018)

($ in millions) EnterpriseDate Acquirer Target Business Description Revenues EBITDA Value Revenues EBITDA

Pending Ply Gem Holdings, Inc Silver Line Division of Andersen Corporation Manufactures windows and patio doors $440.0 $44.0 $190.0 0.43x 10.0x

Pending NCI Building Systems, Inc. (NYSE:NCS) Ply Gem Holdings, Inc Manufactures exterior building products used in residential construction - $353.58 $3,606.5 - 10.2x

Pending ASSA ABLOY AB (publ) (OM:ASSA B) Pioneer Industries, Inc. Manufactures metal doors, window frames, and wind resistant assemblies - - - - -

Pending Gebr. Knauf KG. USG Corporation (NYSE:USG)Manufactures building materials including gypsum and related products, construction plaster products, and interior system products such as ceiling tiles and grids

$3,223.0 $528.0 $6,937.3 2.15x 13.1x

Sep-18 Wynnchurch Capital, LLC North American Business of Uponor Infra Oy Manufactures polyethylene pipe and fittings $90.9 - $47.4 0.52x -

Sep-18 Gulfside Supply, Inc. Kimal Lumber Company Supplies lumber and building materials $47.4 - - - -

Aug-18 Garaga Inc. Mid-America Door Company Manufactures steel sectional overhead-type doors - - - - -

Aug-18 Armstrong World Industries, Inc. (NYSE:AWI) Steel Ceilings, Inc. Manufactures and installs architectural metal ceilings and specialty systems for commercial buildings $10.0 - - - -

Aug-18 Majestic Marble And Glass Company Carolina Counter's, Inc. Manufactures and installs countertops and laminate solutions for commercial and residential kitchens - - - - -

Aug-18 Ferguson Enterprises, Inc. Jones Stephens Corporation (World and Main) Manufactures specialty plumbing products - - - - -

Aug-18 PGT Innovations, Inc. (NYSE:PGTI) Western Window Systems Manufactures aluminum windows and door products - $18.8 $360.0 - 19.2x

Aug-18 Tower Arch Capital Panoramic Doors LLC Manufactures independent panel folding patio door systems - - - - -

Aug-18 The Detering Company of Houston, LP Weatherford Door & Window Co., Inc. Manufactures customized windows and doors - - - - -

Aug-18 CertainTeed Corporation North American Ceilings Business of Hunter Douglas N.V. Manufactures architectural ceilings and soffit systems $36.0 - - - -

Jul-18 Amada Holdings Co., Ltd. (TSE:6113) Amada Marvel, Inc. Manufactures industrial grade metal cutting saws $23.4 - - - -

Jul-18 Celulosa Arauco y Constitución S.A. Assets of Panolam Industries International, Inc. Integrated surface solutions business - - - - -

Jul-18 Wilsonart LLC Laminate Works Dallas, LLC Manufactures high pressure laminate panels - - - - -

Jul-18 JICI, LLC Integrity Controls Inc. Manufactures valves, strainers/filtration, piping products/hoses, process, and instrumentation products - - - - -

Jul-18 MultiPure Inc. Rainshow'r Manufacturing, Inc. Manufactures shower, bath, and garden filters - - - - -

Jul-18 Artisan Design Group, Inc. Décor Flooring, LLC/Kermans Flooring, LLC Designs and installs flooring products - - - - -

Jul-18 Mueller Industries, Inc. (NYSE:MLI) ATCO Rubber Products, Inc. Manufactures flexible duct systems for residential and commercial heating, ventilation, and air conditioning (HVAC) applications $166.0 - $162.8 0.98x -

Jul-18 Barrette Outdoor Living, Inc. Integrity Composites LLC Manufactures durable decking, railing, and dock planks - - - - -

Jul-18 Air Hydro Power, Inc. Alabama Bolt & Supply, Inc. Manufactures hydraulics, pneumatics, hose and fittings, and industrial fasteners - - - - -

Jun-18 Summit Materials, Inc. (NYSE:SUM) Buckingham Slate Company Provides roofing and building products including flooring, custom/structural, and flagging products; and wall and crushed stones - - - - -

Jun-18 Continuus Material Recovery, LLC Manufacturing Assets of The ReWall Company, LLC Manufactures roofing products - - - - -

Jun-18 The AZEK Company LLC VERSATEX Building Products, LLC Manufactures PVC trim boards and other products for remodeling, new construction, and fabrication applications - - - - -

Jun-18 Masonite International Corporation (NYSE:DOOR) The Maiman Company/Graham Manufacturing Corporation

Manufactures architectural flush wood doors for used in commercial construction $70.0 - - - -

Jun-18 Clopay Building Products Company, Inc. CornellCookson, Inc. Manufacture rolling doors and grilles - - $180.0 - -

May-18 Vaughan & Bushnell Manufacturing Company All Assets of Dasco Pro, Inc. Manufactures chisels and punches - - - - -

May-18 Kohlberg & Company, L.L.C. Senneca Holdings, Inc. Manufactures doors, including traffic, corrosion resistant, strip, cold storage, fire, and sliding doors - - - - -

May-18 Arcadia Incorporated Assets of Metal Window Corp. Manufactures aluminum window and door products for residential use - - - - -

Apr-18 Oldcastle BuildingEnvelope, Inc. (CRH plc) Coral Industries, Inc. Manufactures architectural aluminum framing systems used in commercial construction - - - - -

Apr-18 BASE Equity Partners, L.P.; The Frederic H. Mayerson Group Fortis Security Products, LLC Manufactures physical security products such as bullet resistant

windows, transaction drawers, and vault doors - - - - -

Apr-18 VELUX America Inc. Wasco Products, Inc. Manufactures standard and custom skylights for commercial and residential markets - - - - -

Apr-18 Clayton, Dubilier & Rice, Inc. Atrium Corporation Manufactures aluminum and vinyl windows and doors for the residential and light commercial construction markets $350.0 - - - -

Apr-18 Clayton, Dubilier & Rice, Inc. Ply Gem Holdings, Inc Manufactures residential and commercial building products $2,056.3 $227.5 $2,260.6 1.10x 9.9x

Apr-18 JELD-WEN Holding, Inc. (NYSE:JELD) American Building Supply, Inc. Manufactures door, millwork, and hardware products for residential and commercial applications - - - - -

Mar-18 Life Safety Consortium, LLC Fire Door Solutions, LLC Manufactures fire door safety products - - - - -

Mar-18 River Associates Investments, LLC Quikserv Corp. Manufactures pass-through and security transaction products such as drive-thru windows, transaction drawers, and bullet resistant products

Mar-18 Harvey Industries, Inc. Thermo-Tech Windows and Doors LLC Manufactures vinyl windows and doors - - - - -

Mar-18 Harbour Group Nationwide Industries Inc. Manufactures hardware products for the fence and gate, cable railing, and patio market - - - - -

Mar-18 Undisclosed Carolina Precision Fibers IncManufactures construction materials and building products from recycled materials such as cellulose insulation products, industrial fiber, and bonded fiber matrix (BFM)

- - - - -

Mar-18 Amesbury Group Inc. Ashland Products Inc. Manufactures residential window and door hardware $67.2 $11.2 $101.0 1.50x 9.0x

Mar-18 Andersen Corporation Tashco Industries, Inc. Manufactures aluminum windows and doors - - - - -

Mar-18 United Subcontractors, Inc. Glasshouse Fabricates and installs architectural glass products for residential and commercial projects - - - - -

Mar-18 Allegion plc (NYSE:ALLE) Aurora Systems Inc. Manufactures sliding doors and interior storefront assemblies $18.0 - - - -

Feb-18 Foundation Investment Partners, LLC Discount Drainage Supplies Distributes concrete drainage products, corrugated steel pipes, sanitary sewers, geotextiles, PVC pipes, and other municipal supplies - - - - -

Feb-18 Wind Point Partners Ox Engineered Products, LLC Manufactures structural sheathing and thermal insulation building products - - - - -

Feb-18 Rankin Industries Inc.; Broco, Inc Chamberlain Security Manufactures security components to protect the contents of safes, filing cabinets, and ATMs - - - - -

Feb-18 Clearlake Capital Group, L.P. Janus International Group, LLC Manufactures and installs steel roll-up doors and building components for self-storage, industrial, and commercial door dealer markets - - - - -

Feb-18 Foley Products Company Certain Drainage Assets in Alabama, Georgia and Tennessee of Forterra, Inc. Drainage pipe and products manufacturing operations - - - - -

Jan-18 The Delaney Co. Bravura Brass Manufactures forged brass door hardware - - - - -

Jan-18 Slocomb Windows and Doors, Inc. Residential Division of Lockheed Window Corp. Manfactures windows and doors for the residential market - - - - -

Jan-18 ICP Construction, Inc. Arizona Polymer Flooring, Inc. Manufactures flooring products and concrete coating systems - - - - -

Jan-18 Vertiv Group Corporation Energy Labs Inc.Manufactures air handling units, air cooled units, evaporative cooled roof top DX units, and indirect and direct evaporative cooling and energy recovery systems

- - - - -

Jan-18 Bohle America, Inc. The Group Legacy, L.C. Manufactures kitchen and bath hardware and accessories - - - - -

Jan-18 GAL Manufacturing Company, LLC Courion Industries, Inc. Manufactures freight door systems, cartlift systems, and replacement parts - - - - -

Jan-18 Construction Supply Holdings, LLC Brock-White Co. of Wisc., Inc. Manufactures building products - - - - -

Jan-18 Allegion plc (NYSE:ALLE) Technical Glass Products, Inc. Manufactures advanced fire-rated entrance, aluminum fire flames, and wall systems for commercial applications $80.0 - - - -

Jan-18 Ohio Awning & Manufacturing Co., Inc. The Canvas Exchange Inc. Manufactures awnings - - - - -

Jan-18 Capital Partners, Inc. The Fletcher-Terry Company Manufactures substrate cutters for the picture framing, retail hardware, sign and graphics, and industrial glass markets - - - - -

Jan-18 Henry Company LLC Fortifiber, LLC Manufactures building papers, house wraps, concrete products, and window and door flashing products - - - - -

Target Enterprise Value/


Industry Valuations

Sector Performance

BGL Building Products indices de�ned on Pages 9 and 10.SOURCE: S&P Capital IQ.

Building Products Distributors Lumber and Wood Manufacturers

Aggregates and Cement Producers

Commercial-Focused Building Products ManufacturersResidential-Focused Building Products Manufacturers

Homebuilders

Q113

Q213

Q313

Q413

Q114

Q214

Q314

Q414

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Q416

Q117

Q217

Q317

Q417

Q118

Q218

EV/EBITDA 15.3x 14.6x 14.5x 13.9x 12.2x 11.6x 10.5x 11.1x 12.7x 11.6x 11.4x 11.9x 11.3x 11.2x 11.1x 10.8x 10.9x 11.5x 11.5x 13.7x 11.6x 12.0x

EV/Revenue 1.3x 1.3x 1.3x 1.3x 1.3x 1.3x 1.2x 1.3x 1.3x 1.4x 1.3x 1.4x 1.4x 1.4x 1.4x 1.3x 1.6x 1.7x 1.9x 2.1x 1.9x 1.8x

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8


Industry Valuations

Relative Valuation Trends

NOTE: Figures in bold and italic type were excluded from median and mean calculation.(1) As of 9/21/2018.(2) Market Capitalization is the aggregate value of a �rm's outstanding common stock.(3) Enterprise Value is the total value of a �rm (including all debt and equity).SOURCE: S&P Capital IQ.

($ in millions, except per share data) Current % of Market Enterprise Total Debt/ TTMCompany Name Country Ticker Stock Price (1) 52W High Capitalization (2) Value (3) Revenue EBITDA EBITDA Revenue Gross EBITDARESIDENTIAL FOCUSED BUILDING PRODUCTS MANUFACTURERSThe Sherwin-Williams Company United States NYSE:SHW $469.96 98.0% $43,654.9 $53,874.8 3.1x 19.4x 3.7x $17,225.4 43.4% 16.1%Compagnie de Saint-Gobain S.A. France ENXTPA:SGO 45.29 75.0% 24,711.6 36,081.6 0.7x 7.4x 2.8x 48,055.1 25.3% 10.0%Masco Corporation United States NYSE:MAS 38.54 83.0% 11,850.2 14,598.2 1.8x 11.4x 2.3x 8,017.0 32.8% 16.0%Fortune Brands Home & Security, Inc. United States NYSE:FBHS 55.22 75.0% 7,864.4 9,663.8 1.8x 11.4x 2.5x 5,414.7 36.5% 15.7%James Hardie Industries plc Ireland ASX:JHX 15.15 86.0% 6,729.4 7,779.6 3.6x 14.9x 2.4x 2,197.8 36.0% 24.1%Owens Corning United States NYSE:OC 58.24 60.3% 6,459.6 9,992.6 1.5x 9.4x 3.4x 6,824.0 23.9% 15.5%Trex Company, Inc. United States NYSE:TREX 79.65 87.8% 4,677.2 4,682.8 7.3x 26.0x 0.0x 640.3 42.8% 28.1%Armstrong World Industries, Inc. United States NYSE:AWI 69.70 94.9% 3,601.0 4,307.0 4.7x 13.1x 3.2x 924.1 35.6% 27.9%Simpson Manufacturing Co., Inc. United States NYSE:SSD 73.57 93.9% 3,408.1 3,256.3 3.1x 16.1x 0.0x 1,046.9 45.1% 19.3%JELD-WEN Holding, Inc. United States NYSE:JELD 25.59 60.5% 2,685.1 4,089.4 1.0x 11.2x 4.3x 4,086.0 21.8% 8.9%Masonite International Corporation United States NYSE:DOOR 66.55 87.6% 1,836.2 2,443.7 1.2x 9.6x 2.5x 2,110.6 20.5% 12.0%Gibraltar Industries, Inc. United States NasdaqGS:ROCK 46.40 94.5% 1,472.9 1,472.2 1.5x 11.5x 1.6x 1,014.1 24.2% 12.6%American Woodmark Corporation United States NasdaqGS:AMWD 83.00 55.9% 1,460.3 2,154.5 1.5x 10.9x 3.8x 1,402.4 21.3% 14.1%PGT Innovations, Inc. United States NYSE:PGTI 21.65 82.0% 1,253.9 1,405.3 2.5x 14.6x 2.2x 570.5 33.3% 16.9%Gri�on Corporation United States NYSE:GFF 17.05 69.6% 723.2 1,791.7 1.0x 12.5x 7.9x 1,863.2 26.7% 7.7%Quanex Building Products Corporation United States NYSE:NX 18.50 75.2% 650.1 847.5 1.0x 9.0x 2.2x 877.8 21.8% 10.7%Median $50.81 82.5% $3,504.5 $4,198.2 1.7x 11.5x 2.5x $1,986.9 29.7% 15.6%Mean $74.00 80.0% $7,689.9 $9,902.6 2.3x 13.0x 2.8x $6,391.9 30.7% 16.0%

COMMERCIAL FOCUSED BUILDING PRODUCTS MANUFACTURERSLennox International Inc. United States NYSE:LII $216.72 94.2% $8,724.1 $10,037.3 2.5x 16.7x 2.3x $3,954.2 29.3% 14.8%Kingspan Group plc Ireland ISE:KRX 49.00 94.9% 8,699.3 9,599.0 2.1x 17.5x 1.9x 4,583.7 28.2% 11.9%USG Corporation United States NYSE:USG 43.35 99.7% 6,058.1 6,832.1 2.1x 13.0x 2.3x 3,292.0 20.1% 14.3%Valmont Industries, Inc. United States NYSE:VMI 140.75 79.8% 3,154.0 3,458.7 1.2x 10.0x 2.9x 2,776.8 24.7% 12.4%AAON, Inc. United States NasdaqGS:AAON 39.85 92.0% 2,082.8 2,058.4 4.8x 26.8x 0.0x 426.5 25.7% 18.0%NCI Building Systems, Inc. United States NYSE:NCS 15.80 67.7% 1,046.0 1,411.7 0.7x 8.0x 2.3x 1,915.7 23.3% 9.2%Forterra, Inc. United States NasdaqGS:FRTA 7.97 64.8% 511.8 1,823.0 1.2x 11.9x 9.4x 1,511.5 16.6% 9.4%Median $43.35 92.0% $3,154.0 $3,458.7 2.1x 13.0x 2.3x $2,776.8 24.7% 12.4%Mean $73.35 84.7% $4,325.1 $5,031.5 2.1x 14.8x 2.0x $2,637.2 24.0% 12.9%

BUILDING PRODUCTS DISTRIBUTORSThe Home Depot, Inc. United States NYSE: HD $212.39 98.6% $243,003.5 $265,011.5 2.5x 15.4x 1.5x $104,319.0 34.2% 16.5%Lowe's Companies, Inc. United States NYSE:LOW 116.84 99.6% 94,757.2 108,320.2 1.5x 13.5x 2.0x 70,511.0 34.2% 11.4%Ferguson plc Switzerland LSE:FERG 84.86 99.4% 19,612.0 20,917.6 1.0x 13.2x 2.2x 22,268.1 29.1% 7.7%Watsco, Inc. United States NYSE:WSO 175.94 91.2% 6,064.9 6,410.0 1.4x 16.4x 0.4x 4,453.3 24.4% 8.6%Beacon Roo�ng Supply, Inc. United States NasdaqGS:BECN 39.36 59.2% 2,680.9 6,065.0 1.1x 14.8x 7.4x 5,772.4 24.7% 7.1%Builders FirstSource, Inc. United States NasdaqGS:BLDR 15.68 67.4% 1,798.9 3,753.9 0.5x 9.2x 4.8x 7,448.2 24.1% 5.5%Lumber Liquidators Holdings, Inc. United States NYSE:LL 17.74 45.2% 507.2 531.0 0.5x 18.9x 1.2x 1,062.3 35.6% 2.6%CanWel Building Materials Group Ltd. Canada TSX:CWX 4.41 76.0% 342.8 626.3 0.6x 10.6x 4.8x 965.7 14.9% 6.0%BlueLinx Holdings Inc. United States NYSE:BXC 34.93 75.3% 324.5 1,123.9 0.5x 23.3x 16.7x 2,243.4 12.7% 2.1%Huttig Building Products, Inc. United States NasdaqCM:HBP 5.01 64.6% 130.6 308.5 0.4x 71.7x 41.7x 800.2 20.2% 0.5%Median $37.15 75.6% $2,239.9 $4,909.5 0.8x 13.5x 2.1x $5,112.8 24.6% 6.5%Mean $70.72 77.6% $36,922.2 $41,306.8 1.0x 13.3x 3.0x $21,984.4 25.4% 6.8%

TTM Enterprise Value / TTM Margins

9


Industry Valuations

Relative Valuation Trends

NOTE: Figures in bold and italic type were excluded from median and mean calculation.(1) As of 9/21/2018.(2) Market Capitalization is the aggregate value of a �rm's outstanding common stock.(3) Enterprise Value is the total value of a �rm (including all debt and equity).SOURCE: S&P Capital IQ.

($ in millions, except per share data) Current % of Market Enterprise Total Debt/ TTMCompany Name Country Ticker Stock Price (1) 52W High Capitalization (2) Value (3) Revenue EBITDA EBITDA Revenue Gross EBITDALUMBER AND WOOD MANUFACTURERSWeyerhaeuser Company United States NYSE:WY $33.01 86.0% $25,011.0 $30,545.0 4.0x 14.1x 3.0x $7,626.0 28.1% 28.5%West Fraser Timber Co. Ltd. Canada TSX:WFT 60.21 79.4% 4,365.6 4,648.9 1.0x 4.2x 0.5x 4,425.6 42.6% 24.5%Louisiana-Paci�c Corporation United States NYSE:LPX 28.25 87.8% 4,031.7 3,406.5 1.2x 4.3x 0.5x 2,931.0 33.4% 27.1%Norbord Inc. Canada TSX:OSB 35.08 76.9% 3,040.2 3,295.7 1.3x 3.8x 0.7x 2,457.0 34.8% 34.3%Canfor Corporation Canada TSX:CFP 20.34 77.2% 2,616.6 2,735.2 0.7x 3.4x 0.4x 3,867.6 37.9% 20.7%Universal Forest Products, Inc. United States NasdaqGS:UFPI 35.52 89.7% 2,189.2 2,472.8 0.6x 9.9x 1.2x 4,311.0 13.2% 5.8%Median $34.05 82.7% $3,535.9 $3,351.1 1.1x 4.3x 0.6x $4,089.3 34.1% 25.8%Mean $35.40 82.8% $6,875.7 $7,850.7 1.5x 6.6x 1.0x $4,269.7 31.7% 23.5%

AGGREGATES AND CONCRETE PRODUCERSLafargeHolcim Ltd Switzerland SWX:LHN $47.58 76.1% $28,417.3 $48,517.1 1.8x 27.3x 14.7x $26,655.5 29.7% 4.8%CRH plc Ireland ISE:CRG 33.15 85.3% 27,399.1 37,516.6 1.3x 10.0x 3.2x 29,534.5 32.6% 12.4%HeidelbergCement AG Germany DB:HEI 81.49 72.3% 16,169.9 29,469.2 1.4x 8.4x 4.2x 20,201.8 60.1% 15.8%Vulcan Materials Company United States NYSE:VMC 115.55 81.8% 15,283.6 18,365.5 4.5x 18.3x 3.1x 4,126.8 25.1% 24.3%Martin Marietta Materials, Inc. United States NYSE:MLM 192.18 79.6% 12,109.6 15,306.8 4.0x 14.7x 3.1x 3,814.4 25.9% 27.3%CEMEX, S.A.B. de C.V. Mexico NYSE:CX 7.06 75.8% 10,638.3 22,682.2 1.6x 8.7x 4.3x 13,567.5 34.3% 18.3%Boral Limited Australia ASX: BLD 4.99 83.5% 5,949.1 7,726.6 1.9x 10.9x 2.9x 4,239.0 33.2% 15.5%Eagle Materials Inc. United States NYSE:EXP 87.25 71.2% 4,169.4 4,806.1 3.4x 10.4x 1.6x 1,414.2 24.3% 29.7%Buzzi Unicem SpA Italy BIT:BZU 22.29 77.0% 4,159.9 5,136.4 1.6x 7.1x 3.0x 3,258.0 38.4% 18.9%Wienerberger AG Austria WBAG:WIE 25.07 87.7% 2,761.6 3,677.0 1.0x 8.0x 2.9x 3,731.1 33.9% 12.1%Grupo Cementos de Chihuahua, S.A.B. de C.V. Mexico BMV:GCC * 6.60 92.2% 2,195.3 2,689.7 2.8x 10.2x 2.6x 923.2 28.2% 27.1%Summit Materials, Inc. United States NYSE:SUM 19.05 55.9% 2,126.5 3,918.6 1.9x 9.7x 4.5x 2,039.5 32.0% 19.8%Titan Cement Company S.A. Greece ATSE:TITK 25.26 84.8% 1,934.8 2,891.0 1.7x 9.8x 3.7x 1,685.3 28.1% 17.7%U.S. Concrete, Inc. United States NasdaqCM:USCR 51.85 60.0% 871.6 1,622.2 1.1x 9.9x 4.6x 1,428.0 20.0% 11.4%Median $29.20 78.3% $5,059.3 $6,431.5 1.7x 9.9x 3.1x $3,772.7 30.9% 18.0%Mean $51.38 77.4% $9,584.7 $14,594.7 2.1x 10.5x 3.4x $8,329.9 31.8% 18.2%

HOME BUILDERSLennar Corporation United States NYSE:LEN $50.13 69.5% $16,155.1 $26,572.0 1.7x 16.7x 7.3x $15,486.9 19.3% 10.0%D.R. Horton, Inc. United States NYSE:DHI 42.41 79.5% 15,963.0 18,094.1 1.2x 9.0x 1.5x 15,722.0 21.0% 12.8%NVR, Inc. United States NYSE:NVR 2,583.92 69.8% 9,372.0 9,550.9 1.4x 9.7x 0.6x 6,818.7 20.1% 14.4%PulteGroup, Inc. United States NYSE:PHM 26.26 74.6% 7,458.3 10,349.7 1.1x 7.3x 2.3x 9,461.3 24.1% 15.0%Toll Brothers, Inc. United States NYSE:TOL 35.85 68.0% 5,283.0 8,407.0 1.3x 9.9x 4.6x 6,715.9 21.3% 11.7%Cavco Industries, Inc. United States NasdaqGS:CVCO 247.85 94.7% 2,247.5 2,115.0 2.3x 26.4x 0.7x 910.8 18.6% 8.8%KB Home United States NYSE:KBH 25.37 65.4% 2,224.7 3,908.7 0.9x 11.0x 6.6x 4,520.2 17.8% 7.9%Taylor Morrison Home Corporation United States NYSE:TMHC 19.19 67.5% 2,137.6 3,263.2 0.8x 8.6x 3.9x 3,940.9 19.0% 9.3%Meritage Homes Corporation United States NYSE:MTH 43.15 77.7% 1,754.0 2,895.9 0.9x 10.1x 4.6x 3,386.6 18.5% 8.4%M.D.C. Holdings, Inc. United States NYSE:MDC 30.94 87.9% 1,746.2 2,451.0 0.9x 10.6x 4.7x 2,725.6 19.1% 8.5%Century Communities, Inc. United States NYSE:CCS 27.40 76.1% 825.3 1,781.5 1.0x 10.6x 6.7x 1,837.4 19.9% 7.9%M/I Homes, Inc. United States NYSE:MHO 25.26 67.5% 721.7 1,482.1 0.7x 8.8x 4.9x 2,094.1 20.2% 8.0%William Lyon Homes United States NYSE:WLH 17.59 53.4% 668.0 2,249.8 1.1x 13.7x 9.0x 2,007.8 18.2% 8.0%Beazer Homes USA, Inc. United States NYSE:BZH 11.20 48.2% 360.4 1,550.6 0.8x 16.8x 14.4x 2,012.2 16.6% 4.6%Hovnanian Enterprises, Inc. United States NYSE:HOV 1.68 49.3% $251.2 $1,821.7 0.9x 38.3x 43.9x 2,098.1 13.1% 1.8%Median $42.41 69.8% $7,458.3 $9,550.9 1.3x 10.1x 4.6x $6,818.7 20.1% 11.7%Mean $430.26 74.5% $8,386.2 $11,285.3 1.4x 11.0x 4.4x $8,519.4 20.3% 11.5%

TTM Enterprise Value / TTM Margins

10


Industry Valuations

Sector Performance

By Sector

Overall Market

Source: S&P Capital IQ.As of 9/21/2018.

-6.1%

3.2%

14.9%

-4.3%

-15.1%

4.4%

21.5%

35.1%

-0.2%

-14.3%

3.5%

39.8%

61.4%

72.3%

38.9%

5.2%

26.6%

60.4%

93.9%

148.9%

23.4%

12.4%

62.1%

-20%

20%

60%

100%

140%

180%

Residential-Focused BuildingProducts

Commercial-Focused BuildingProducts

Building Products Distributors Lumber and Wood Manufacturers Aggregates and Cement Producers Home Builders

Retu

rns

YTD 1 Year 3 Year 5Y

8.7% 7.7%

17.2%19.6%

48.9%

62.0%

71.3%73.1%

0%

20%

40%

60%

80%

S&P 500 DJIA

Retu

rns

YTD 1 Year 3 Year 5Y

11

For questions about content and circulation, please contact editor, Rebecca Dickenscheidt, at [email protected] or 312-513-7476.

The information contained in this publication was derived from proprietary research conducted by a division or owned or affiliated entity of Brown Gibbons Lang & Company LLC. Any projections, estimates or other forward-looking statements contained in this publication involve numerous and significant subjective assumptions and are subject to risks, contingencies, and uncertainties that are outside of our control, which could and likely will cause actual results to differ materially. We do not expect to, and assume no obligation to update or otherwise revise this publication or any information contained herein. Neither Brown Gibbons Lang & Company LLC, nor any of its officers, directors, employees, affiliates, agents or representatives makes any representation or warranty, expressed or implied, as to the accuracy, completeness or fitness of any information contained in this publication, and no legal liability is assumed or is to be implied against any of the aforementioned with respect thereto. This publication does not constitute the giving of investment advice, nor a part of any advice on investment decisions and nothing in this publica-tion is intended to be a recommendation of a specific security or company, nor is any of the information contained herein intended to constitute an analysis of any company or security reasonably sufficient to form the basis for any investment decision. Brown Gibbons Lang & Company LLC, its affiliates and their officers, direc-tors, employees or affiliates, or members of their families, may have a beneficial interest in the securities of a specific company mentioned in this publication and may purchase or sell such securities in the open market or otherwise. Nothing contained in this publication constitutes an offer to buy or sell or the solicitation of an offer to buy or sell any security.

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Capital GoodsPrecision Manufacturing Engineered Materials & Inputs

• Aerospace and Defense

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• Automotive and Heavy Truck

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• Gears and Gearing Systems

• Industrial Equipment

• Machine Tools

• Material Handling,

Cranes, and Other

• Power Generation

and Management

• Specialty Vehicles

• Lighting and

Lighting Fixtures

• Adhesives

• Coatings

• Sealants

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• Ceramics

• Aggregates and Minerals

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• Plastic Injection, Blow, and Compression Molding

• Distribution

• Testing, Measuring, and Sensing Equipment

Representative Building Products Transactions

Global Industrials

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merged with

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BGL Contacts

bglco.com globalma.com

Andrew K. PetrykIndustrials Group [email protected]

Kevin H. SargentDirector & [email protected]


FinancialRestructuring

acquired

acquired by

Lumber & Building Supplies, Inc.acquired by

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a subsidiary of

Castle HarlanPartners IV L.P.

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a subsidiary of

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Pyramid LLC

RestructuringAdvisory

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Admission to AIM£135 million market capitalization

£94 million raise

acquired by

L. Oberholzer AGacquired acquired acquired by

MinorityShareholders

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Consumables Businessof

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Philadelphia Insider - BGL · PGT Innovations (NYSE: PGTI) is reporting strong growth, with sales up 24 percent in the first half of 2018. The company achieved a 20 percent adjusted