The partnership with Cornerstone, an investment company led by Steve Short and Fenton Hord, includes J.P. Hart Lumber, Hart Components, and Hart Building Solutions.
Hart, a 75-year-old family-run operation, has five facilities in San Antonio, Austin, Houston, Dallas, and the Rio Grande Valley of Texas. Greg Wright is president and managing partner.
Short and Hord are former Stock Building Supply executives who founded Cornerstone in 2012.
“Warren [Hart] and Greg have built a great, multi-generational business that has survived the test of time,” says Cornerstone president and CEO Steve Short. “They are a leading supplier of building materials in four of the top 20 markets in the United States and offer a diversified portfolio with the addition of their commercial group.”
While Short declined to talk about Hart’s revenue, he indicated the company was among the largest in Texas and would fall within the top half of the ProSales 100 ranking.
In September 2012, Cornerstone invested in Phoenix-based LBM distributor ALC Holding, Arizona’s largest building materials distributor. ALC operates Alliance Lumber, Alliance Truss, Arizona Structural Laminators, Core Materials Distribution, and ALC Transportation.
The investment firm takes a majority position in its portfolio companies. “We very much look at our members as partners,” Short told PROSALES. “Our partners own equity in the business—that’s a requirement for us. We don’t want to buy 100% of anything.”
“We want someone that is going to stand next to us and carry the business forward,” he says.
The Jian Group, a Northern Virginia mergers and acquisition firm, initiated the courtship between Cornerstone and Hart. Short says companies like Hart have a lot of reasons to give up majority interests in their business. “It may be that some folks are looking to take some chips off the table,” he says. “Some folks are looking for a cash infusion so they have the drive power to grow the business.”
That latter reason appears to be the motivation behind Hart’s decision to consummate the deal with Cornerstone. Wright, of J.P. Hart, says Cornerstone’s long-term investment “matches our commitment to the business and its people.”
Many family-owned dealers have sat on the sidelines during the recession waiting for an opportunity to sell their companies. With the economy improving and the housing market on the rebound, they are once again considering selling.
But the decision is an emotional one, especially where the owner’s personality is intricately linked to the company culture. Plus, many feel a family responsibility to their long-term employees and look for a suitor who will carry on the previous owner’s legacy, as well as protect employee jobs.
According to Wright, Hart’s third generation owner, Cornerstone is “committed to acting with integrity, and they view people as the most important asset like we do. The investment from Cornerstone will allow us to take advantage of growth opportunities in our markets. “
Short says Cornerstone is open to additional LBM channel investments in the Washington, D.C., area, the Carolinas, Salt Lake City, and Southern California. The acquisitions are established as stand-alone LLCs with local management having an ownership interest in the LBM company, but no reciprocal stake in Cornerstone.