US LBM’s Biggest '15 Deal Will Be For Its Soul

L.T. Gibson and his gang have been toying with an idea lately: What if they were to place small buildings on job sites and fill them with materials that builders often discover they need at the last minute? Jobsite workers could be given passkeys to enter the supply hut, and all of the products inside could be fitted with RFID tags that would be detected anytime that product was taken outside an electronic fence. Doing so would be regarded as a sale that would automatically be added to the contractor’s invoice. Crews would receive immediate access to stuff they need, and US LBM would avoid having to make an expensive delivery. What could be better?

That’s a fun kind of problem for US LBM, which regards technology as a key competitive advantage. Far less fun, but far more important, is the challenge Gibson and his fellow owners face as US LBM’s major shareholder puts the company up for sale.

More than five years have passed since the private equity fund BlackEagle partners provided the bulk of funds that created US LBM. BlackEagle money has also helped Gibson go on a buying spree these past 12 months, one in which US LBM has purchased at least 14 companies and expanded some existing firms.

Those acquisitions were a big reason why US LBM reported 79% growth last year on total sales of $1.42 billion. No company posted a larger gain in dollars than US LBM’s $626 million; the next biggest was ABC Supply, with $347 million.

Private equity funds typically sell the companies they’ve invested in about five years after taking an initial stake. In March, BlackEagle founding partner Jason Runco told Crain’s Detroit Business that “a sale of US LBM is a necessity sooner or later.”

Sooner appears to have arrived. In April, the Reuters news service confirmed what was an open secret among LBM executives when it reported that BlackEagle hired Harris Williams & Co. to run an auction for the company.

Gibson and the presidents of US LBM’s portfolio of companies collectively own about a quarter of the company’s shares. Both Gibson and Runco have said often that they fully expect that whoever buys US LBM will pledge allegiance to the company’s current operating structure. “The group that is going to want to buy them, you’d have to be crazy to want to buy that company and screw with that,” Runco told ProSales late last year.

Still, a new owner is always an X factor. Private equity firms historically have pumped value into a company by cutting overhead. That’s less of a possibility for US LBM.

Meanwhile, US LBM plans to keep buying. It has more deals in the pipeline, in part because companies are seeking it out as a corporate parent.