Grand Oak Strikes Again On The M&A Front, Landing N.C. Operator

Atlanta-based roll-up Grand Oak Builders, expanding on a model of igniting business growth by adding capital resources to entrepreneurial fire, operational chops, and reputational moat in fundamentally expanding geographies, has landed its fourth acquisition since January of this year.

Youngsville, N.C.-based

The spotty, choppy, iffy, and downright dismal prospects ahead can each serve to sharpen motivations, urgencies, and – perhaps most importantly – marketshare and valuation growth opportunities seized when forces of gravity and financial stress build up in the system. The lamp for homebuilding mergers and acquisitions is still lit, despite deteriorating home selling and buying conditions, increasing costs of capital, and a still burgeoning sense of serious economic risk ahead.

Deal drivers for acquirers are broadly the same – access to land [pencilled at favorable internal rates of return], incremental unit volume growth, geographical market expansion or growth, customer segment exposure, and deeper local scale and marketshare gain – but the specifics, nuances, timing, and trigger points have grown in importance as financial markets experience volatility and capital gets more precious in the thrall of uncertainty. Among challenges for acquirers continues to be the fact that many enterprises and capital structures remain in the hunt for specifically targeted acquisitions. This “thick” stream of buyers tends to mean that deals that do work match up for reasons that go beyond sellers’ valuations.

For sellers, urgencies are stacking up for some as they try to operate free of tripping loan covenants and remain cash flow positive even as prices drop and buyer hesitancy and impediments pile higher. However, given the unevenness of economics and household formations trends in the United States highly varied geography, some would-be sellers continue to court acquisition with greater leverage than peers by virtue of both operating area and their position and reputation as a growth-worthy outlier.

One thing you’re going to find with private homebuilding firms operating with a track record in a local or regional market arena, is that they’re highly entrepreneurial,” says Erickson. “That’s frequently a good sign that with some capital and operational support, they’re going to be willing, able, and striving to grow in almost any macro economic environment.”