The housing market may be sending out mixed signals, but buyout shops appear focused mainly on the positive ones.
New housing starts in September beat August forecasts but still fell below year-ago levels. Meanwhile, the filing of new building permits—which anticipates housing starts in the coming months—fell below both the August forecast and the September 2008 numbers, according to data released Oct. 20 by the U.S. Census Bureau and the Department of Housing and Urban Development (see accompanying chart for more detail.)
Nevertheless, buyout firms of all sizes have become more comfortable with investments in the housing industry and the related building materials sector. “I think we’re definitely seeing things stabilizing,” said Neil Simpkins, a senior managing director who oversees investments in industrial services at The
Among other recent deals in the sector,
Mike Hogan, a managing director who oversees building products and industrial-related deals for Richmond, Va.-based advisory shop Harris Williams & Co., said he’s seen an uptick in deals since the end of summer. He is working on four or five building materials-related deals. The industry tends to be fragmented, with many small, family-owned companies ripe for consolidation, said Hogan, adding that owners of many of these companies have been waiting for the market to rebound before selling out. “So you have this backlog of businesses where people want some liquidity.”
Hogan added that he expects the housing market to soon return to high double-digit percentage growth, to keep pace with growing population.