February 21, 2019
Tracking the Impact of Merger Mania
by Eric Thompson
It’s no secret that 2018 was a big year for mergers and acquisitions (M&A) in the window and door industry. There was some significant market consolidation, and it’s enough to wonder what the impact will be on the market as we get further into 2019.
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Last year was expected to be a big year for these types of deals. “Consolidation in the fragmented window and door market is accelerating, in line with the broader building products industry, which has seen a record level of deal flow during the last 12 months,” wrote contributor Andrew K. Petryk, of investment bankers Brown Gibbons Lang & Co for Window & Door magazine. “Renewed optimism in the economy is fueling investor appetite, with acquisitive growth a primary strategy in value creation, driving an active M&A market.”
A positive outlook. So how about 2019? After the blockbuster Ply Gem-NCI deal in mid-2018, DWM magazine suggested that continued consolidation could be in the future—and that it was a good indicator for the industry.
Building Industry Advisors’ Michael Collins, who contributed to DWM on the subject of M&A in the building products industry, wrote at the tail end of 2018 that the long-term outlook is bright. “Today, home buyers are putting down substantial down payments but not waiting until they can pay cash for a home. Companies in the building industry should simply exhibit the same blend of caution—and optimism.”
Impact on new products. There’s an interesting bit of research from Duke University that examined how increasing market consolidation in the radio industry impacted product positioning—the types of music played on stations owned by a common entity after consolidation. The paper drew some conclusions about how those effects could be applied to other industries. Among them: “Firms may prefer to make their products more similar to exploit economies of scale or scope in the development or purchasing of components.”
Certainly not a direct line of comparison to the window and door industry, but it could be interesting to see how increased market consolidation could impact how window and door makers innovate and bring new products to the market. Some product repositioning is likely, with newly merged entities not wanting to compete with themselves.
We’ll see how it shakes out. Window & Door magazine’s latest Industry Pulse report indicates that more than 50 percent of respondents plan to launch new products in 2019, while 80 percent of manufacturers said they would be adding production capacity. It’s another positive indicator for the year ahead.
Questions or comments? Contact me directly at Eric.Thompson@Quanex.com.
February 21, 2019 by Eric Thompson
Filed under: consolidation