Pit & Quarry, September 2016

MARkeT InsIghTs Figure 3 Privately Owned Housing Starts and Highway Street Construction Spending 2500 2000 1500 1000 50 New Privately Owned Housing Starts 0 2001 12 01 2003 02 01 2005 06 01 2006 08 01 2004 04 01 2015 12 01 2014 10 01 2012 06 01 2013 08 01 2010 02 01 2011 04 01 2007 10 01 2008 12 01 Source Federal Reserve Bank of St Louis crete have been the most active participants in M A markets this year while larger international acquirers continue to integrate recently completed transactions or work to deleverage their balance sheets Cemexs 400 million divestiture of cement plants in Lyons Colo and Odessa Texas as well as three terminals and a building materials business to GCC Grupo Cementos de Chihuahua in May is direct evidence of the latter dynamic Highway Street Construction Spending 100000 95000 90000 85000 80000 75000 70000 65000 60000 2006 01 0 2016 02 0 2015 03 0 2013 05 0 2014 04 0 2011 07 0 2012 06 0 2010 08 0 2009 09 0 2007 11 0 2008 10 0 2006 12 0 As we noted in January more than 20 cement plants in the Millions of USD U S are under new ownership as a result of these mega transactions with an additional two added to this list through the GCC Cemex deal FMIs premise is that the new competitive dynamics driven by these changes will result in a host of M A activity particularly as markets continue to rebound in the U S As shown in Figure 1 more than 45 billion has changed hands or will change hands in construction materials mega deals since July 2015 This excludes Oldcastles 13 billion acquisition of U S glazing products manufacturer C R Laurence which closed in September 2015 This is an extraordinary dollar volume of transaction activity that requires substantial integration work post closing This integration work has limited the appetite of several buyers that have traditionally been active in auctions for smaller U S firms However of particular interest is the return of at least one buyer to the M A market for so called platform acquisitions Summits purchases of Boxley Materials Co American Materials Co and Sierra Ready Mix are good examples of platform deals that provide the buyer with operations in a new geography from which they can build a stronger presence Platform acquisitions are larger than so called bolt on transactions whereby investors add companies to solidify a local market position but smaller than transformational mega deals Since the onset of the Great Recession most transactions have fallen into either the mega deal or bolt on categories with little appetite from buyers to enter new markets on a smaller scale With new strategic dynamics in the U S and the integration work on mega deals wrapping up we expect a renewed interest from strategic buyers on platform type acquisitions Meanwhile the Market recovery continues The two key drivers of construction materials volumes in the U S housing and transportation infrastructure both continued to grow in the first and second quarters of 2016 90 PIT QUARRY September 2016 pitandquarry com