Goense Bounds & Partners acquired L&S Plumbing Partnership Ltd. in May for an undisclosed amount. L&S performs plumbing contracting services for developers building housing tracks in the Dallas/Forth Worth single family residential housing market.
L&S fits right into Goense Bounds’s portfolio because the firm has spent a lot of time in the building materials and services space, said Mark Bounds, a managing director and co-founder of the firm.
L&S looked like an attractive target for three primary reasons, Bounds said.
First, the company has an attractive growth profile, having doubled its business in the last three years, he said. The firm is confident that L&S can double its business again during the time it owns the plumbing company. Secondly, the company, which is more than three times as large as its nearest competitor, is the clear market leader in its sector in the Dallas/Fort Worth area, Bounds said. The company provides the plumbing for 5,000 new homes a year, he added. Finally, L&S has solid relationships with leading homebuilders in its region. The company has an average relationship of 10 years with its top 10 customers.
Goense Bounds’s plan for L&S’s future calls for the plumbing services company to expand into new marketplaces. L&S has already started in on this course, moving into the west side of the Dallas/Forth Worth market shortly after the deal was closed.
The company will likely continue to grow into other markets in Texas and contiguous states, Bounds said. “As we expand, the plan is to bring our business model to new markets and leverage our relationships with national builders when we move into new areas,” he said, adding “we may enter new markets through small acquisitions, say, less than $5 million in size, just to get a foundation of skilled workers and client relationships.”
L&S has an excellent management team, which will continue to run the company, Bounds said. The only thing L&S lacked on its management team was professional financial management, so Goense Bounds has brought in a new chief financial officer for the company.
Looking further down the road, L&S is not a candidate for an initial public offering, Bounds said. The company, with its scalable business model and low capital expenditures, should be an attractive prize for a financial buyer or services conglomerate, he added.
Following this transaction, Goense Bounds is now halfway through the $225 million it closed on in 2001. The firm has done seven deals so far and will likely do another five to six, Bounds said. The firm will likely begin fund-raising efforts again in 2004, he noted.