Successful Mergers and Acquisitions Require Careful Planning

RCS Influencer Trent Cotney says that mergers and acquisitions can be complex, so roofing companies need to have a good team in place. 

In the past several months, we have seen several mergers and acquisitions (M&A) with roofing and construction-related companies. For example, Gulfeagle Supply acquired Brightview Distribution in June, which will change the supply landscape in the New York area. This past spring, Holcim acquired Malarkey Roofing Products, which has expanded Holcim’s footprint in the residential roofing market. And late last year, BlueSky Restoration merged with J.C. Restoration and, a few months later, merged with American Integrity Restoration, which has expanded its operations to 42 states.  

Many companies choose M&A to ensure that they can remain competitive in this crowded and challenging industry. But before you commit to a merger or acquisition, there are key elements to consider.   

Value and negotiation 

If you are the seller or the buyer, be sure you know the value of the business. As a seller, you want to ensure you are getting a fair price. When negotiating with a buyer, take the time to outline your financial performance and company growth and also highlight any licenses or proprietary technology you hold. These are critical details. Never take the first offer, and always consider multiple bidders. 

As a buyer, you must evaluate what this company can bring to your business. Look at its specialties, its labor force, and its current market impact. This information will influence what price you should offer and how much you can realistically increase it. 

Timeline 

The M&A process is seldom quick, so be patient as the deal unfolds. If you are a seller, you must be sure you understand all the terms of the agreement and how it will impact your company. If you are a buyer, you must be certain you are making a good investment. Both parties are encouraged to complete due diligence before signing an agreement. 

During the COVID-19 pandemic, we have seen many deals taking longer than usual. As prices increase and the supply chain remains volatile, many buyers are more cautious. Lenders are also being more strict, meaning you will need more time to secure financing. So do not be surprised if the timeline is six months or even more.  

Confidentiality 

As you work through the deal, it is advisable that you keep the terms to yourself. Until the details are final, rumors and whispers can cause your employees, suppliers, customers and lenders to worry. So use caution when choosing whom to trust with knowledge of the deal and keep that circle small.  

Legal and financial support 

Before you begin the M&A process, put together a solid team of accounting, tax and legal experts. These professionals can advise you on the viability of the deal and guide you through the necessary steps. Experienced construction attorneys can also review the contract and explain any provisions you should add or remove. It is critical that you approve and understand what you are signing. 

Trent Cotney is a partner and construction team co-leader at Adams & Reese LLP. See his full bio here.