Pit & Quarry, February 2016
A s we begin 2016 we cannot help but look back at what a remarkable year 2015 was for the construction materials industry For many companies 2015 marked their best year of financial performance since the Great Recession In May Summit Materials closed the industrys first initial public offering in more than a decade The largest deal in our industrys history LafargeHolcim closed in October A host of other mergers and acquisitions reshuff led the competitive slate in markets across the country In addition Congress and the president finally came together after nearly a decade to pass a long term federal highway bill the FAST Act While rising interest rates overheated housing markets and international political instability provide some uncertainty the construction materials industry is in a position of strength for the first time since the onset of the Great Recession seven years ago As we look forward three factors new competitive dynamics in the United States the recovering financial performance of both public firms and smaller independent players and the certainty brought by long term federal highway funding will make 2016 the best year for U S focused mergers and acquisitions since the Great Recession Figure 1 Eastern U S Cement Landscape in 2016 Legacy Plants Newly Merged Acquired Plants The mega deal era For two years merger and acquisition activity in construction materials markets has been heavily dependent on synergies In other words buyers have been unwilling to consummate transactions that did not improve the profitability of the target company post closing This has had two primary effects First smaller deals that traded were limited primarily to bolt ons or tuckins while beachhead deal activity deals in which a buyer enters a new geographic market all but dried up Second buyers gravitated toward mega deals with larger competitors in an effort to cut overhead costs and strategically reposition assets As the nearby table indicates this dynamic resulted in nearly 50 billion in mega deals over the past two years making 2014 ECONOMICS The year ahead BY GEORGE REDDIN Three factors will make 2016 the best year for U S focused mergers and acquisitions since the Great Recession Transaction Deal Value LafargeHolcim Merger 32 Billion Oldcastle LafargeHolcim Assets 74 Billion Heidelberg Italcementi 41 Billion Martin Marietta TXI 28 Billion Summit Materials LafargeHolcim Assets 450 Million 70 PIT QUARRY February 2016 www pitandquarry com
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