BXC - Bonhoeffer Capital - Builders FirstSource:  Acquisition And Consolidation To Drive 26% IRR Over The Next 5 Years

2024-02-14 10:45:00 ET

Summary

• Builders FirstSource's management team has developed an M&A engine and an operationally efficient firm in the building products distribution and value-add building product industries.
• The key to the valuation of BLDR is the expected growth rate.
• If the continued acquisition/consolidation thesis plays out over the next five years, then a value of $540, or a 26% IRR could be realized.

The following segment was excerpted from this fund letter.

Builders FirstSource ( BLDR )

Builders FirstSource ("BLDR") is the United States' largest building product distributor (2.6% market share). It serves large single family and multi-family homebuilders and re-modelers. BLDR has over 115,000 customers with a 90% customer retention rate. BLDR has over 30,000 employees at over 570 sites including 160 truss and 120 millwork facilities serving 89 of the top 100 MSAs in the United States in 43 states.

Over 75% of its revenue is associated with value-added or specialty products. This large portion of value-added and specialty products and services allows BLDR to generate industry leading gross margins of 35%. The predecessor to BLDR was Builder's Supply and Lumber Company which was purchased by JLL Partners in 1998. In 2005, BLDR went public through an IPO and in July 2015, the company completed its first large acquisition of ProBuild, a large competitor with 400 locations....

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