Predictions are something you expect to see on ESPN’s college football broadcasts, not in ProSales. But since I’m entering my 10th year covering LBM, I felt that I might finally be reaching a point where I’m qualified to make some forecasts. Here are my top five. What's on your list? Tell us in the comments section below.
1. Mega-Merger Spinoffs.
If 2015 was the year in which giants came together, 2016 is the time in which those newly merged firms will shed units that don’t fit their plans. Candidates include the retail-oriented Dixieline and Spenard units that Builders FirstSource acquired when it took over ProBuild, as well as rural ProBuild operations in the Upper Midwest.
2. Even More Consolidation.
New-home starts still are at least 25% short of what economists regard as a sustainable level of construction, so you can be sure that investors will keep placing their bets on LBM roll-ups. But that’s not the only M&A action. This country is full of independent yards run by folks who are looking to retire and don’t have children who want to take over the store. America also is loaded with neighboring companies that have younger people coming in who are willing to expand. These friendly takeovers don’t get the publicity that big deals do, but they are probably more common.
3. Whither US LBM and Its Kin?
By kin, we mean firms like Kodiak Building Partners and Central Network Retail Group that believe in tiny headquarters staffs and a holding company structure. All grew markedly in 2015. The trio’s success to date with this model has drawn praise and may prompt imitators. At the same time, however, doubts remain about how big such a business model can get before it becomes unwieldy.
4. Obama’s Legacy.
The Affordable Care Act isn’t the only achievement Barack Obama wants on his record when he leaves the White House. His administration also aims to issue and/or enforce rules involving overtime, independent subcontractors, and job safety issues like silica dust.
5. Right People, Right Places.
This variation on a Good to Great tenet for success makes special sense in 2016, because the recent volume of personnel changes within and between dealers is even greater than the number of M&A deals. All these new names and company affiliations is sure to confuse builders, vendors, and the general public. Some dealers will suffer as a result. Companies with a strong corporate culture will soar. Which will be your fate?