Volume 47, Issue 2 - February 2012

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Acquisitions Make Grey Mountain a Major Player in the Industry
The name Grey Mountain Partners (GMP) has become relatively familiar to glass professionals, despite the fact that, until recently, the Boulder, Colo.-based private equity firm had no holdings in this industry. In November 2009, GMP bid to purchase the bankrupt Arch Aluminum & Glass, while in 2011 the firm put in a bid to purchase Vitro America. In both instances, it was outbid by Sun Capital Partners Inc.

Experts did not expect GMP’s interest in the glass industry to be short-lived. It was within the first two weeks of 2012 that the firm had formally announced four acquisitions: Global Security Glazing (GSG) in Selma, Ala.; Binswanger Glass in Memphis, Tenn.; Custom Components Co. in Tampa, Fla.; and Columbia Commercial Building Products in Rockwall, Texas. The acquisitions give the private equity firm a wide range of product and service offerings.

GMP announced its acquisition of Columbia Commercial Building Products (CCBP) on January 11. CCBP manufactures high-performance extruded aluminum windows, storefronts and curtainwall for new and replacement construction, and gives GMP a firm national presence in the commercial glass and metal industry.

“We are thrilled to add Columbia Commercial Building Products to our family of security and architectural glass manufacturers,” commented Beth Lesniak, vice president of GMP, in the announcement. “Columbia will allow us to provide an even more diverse range of product solutions to our customers and opens the door to synergies and cross-selling opportunities among the existing glass fabrication businesses in our portfolio.”

CCBP representatives could not comment on the acquisition as of press time.

The acquisition of GSG from Michael D. Hartley, who also owns Standard Bent Glass and Coastal Glass Distributors, also adds to GMP’s portfolio a range of protective glazing products from bullet- and burglar-resistant glass to transparent armor.

“The heightened focus on safety and security for government buildings, as well as the increasing demand for energy-efficient glazing solutions, represent growing market needs that GSG is uniquely suited to address,” Lesniak said.

GSG representatives had not responded to requests for comment at press time.

Rounding Out Offerings
Just the day before the CCBP deal, GMP announced its acquisition of Custom Components (CC). The company supplies railing systems, interior office fronts, sun control devices and other engineered architectural products.

“Custom Components’ niche product line, value-added services, technical leadership and strong management team are a critical part of our go-to-market and acquisition strategy in the glass sector,” Lesniak said. “The combination of Global Security Glazing and Custom Components Co. will enhance our security- and commercial-focused products and open up new end markets and geographies.”

Jim Ellsworth, one of the principals at CC, talked to USGlass about the acquisition, which representatives of both companies had been discussing since July 2011.

“Custom Components needed the financial strength of a private equity firm to support its growth initiatives, given the banking community’s restrictive lending practices,” Ellsworth said. “We solicited over 4,500 private equity firms beginning in March of 2011 and provided our ‘book,’ containing company history, business plan and financial history, to over 30 interested companies. We entertained nine groups during site visits, that ultimately translated into five letters of intent, of which Grey Mountain was our best choice to help us move the business to the next level.”

Ellsworth noted that the fabrication companies beneath the GMP banner will begin to work together and promote to the market its various product brands, but continue to operate under their own corporate identity. He added, “It will be business as usual, with no planned changes to employees, sales organization, vendors or facilities.”

Both CCBP and CC brought metals to the glass and metal mix. And the glass?

On January 6 the purchase of Binswanger from Sun Capital Partners was announced. The company provides installation services for commercial, residential and automotive products.

“We are buying an excellent business with incredible growth prospects,” commented Will Pucillo of GMP in a company news announcement. “Since 1872, Binswanger has been a leader in a fragmented industry and is known as a reliable, customer-centric organization. Binswanger serves the commercial and specialty glass, auto glass and residential glass end markets through over 70 locations.”

“In the last few months, Binswanger has become a standalone organization, something it has not been in at least 20 years,” then-president Arturo Carrillo told USGlass. “So, Binswanger has created its own back office such as accounting, IT, payroll and human resources departments. In the future as it prepares for growth it will grow its operations, marketing and sales departments.”

“We were always planning to sell Binswanger, because it’s our customer, and we didn’t want to compete with our customer,” Jeff Leone, CEO of Trulite, Binswanger’s most recent parent company, commented on the acquisition. “We will continue to make acquisitions that fit Trulite. Binswanger did not fit; you don’t compete with your customers.” “We were always planning to sell Binswanger, because it’s our customer, and we didn’t want to compete with our customer,” Jeff Leone, CEO of Trulite, Binswanger’s most recent parent company, commented on the acquisition. “We will continue to make acquisitions that fit Trulite. Binswanger did not fit; you don’t compete with your customers.”

Carrillo told USGlass at the time of the acquisition that there were no immediate plans to shift product mix or make major changes. “Employees, customers and vendors are very excited,” he added. “They all recognize how being standalone will allow us greater focus to grow and improve our business.” One major change was announced a few weeks later, however; Carrillo has since left Binswanger to join the GMP team. David Draper has been named chief operating officer of Binswanger (see page 54 for more).

No Comment
Representatives of GMP had not responded to USGlass’ request for comment as of press time. However, Ellsworth offered some insight as to where GMP is heading with its strategic plan.

“Grey Mountain Partners’ desire to put together a group of synergistic companies with brand identity, that would complement each other, while supporting the needs of the commercial glazing market place, garnered our interest and attracted us to GMP,” Ellsworth told USGlass. “We had nine other equity groups express various levels of interest with several materializing into formal letters of intent. We are very pleased that we were able to consummate a deal with GM.”

Ellsworth noted that, so far, the two companies’ corporate culture has meshed well.

“We are very comfortable with those [individuals] who we have met from GMP,” he said. “They are young, energetic and wanting the best for the existing organizations. One of their slogans concerning ‘… helping portfolio companies achieve operational excellence,’ has been evidenced so far in the transaction. Likewise, their desire to ‘… help each company surpass its competitors and better serve more customers…’ will be the underlying business plan as we move forward.”

Professionals across the industry also are taking note of the rapid-fire announcements, and what the rise of this large-scale glass entity might mean for the industry.

William C. Keen, chief operating officer of Tepco Contract Glazing Inc. in Dallas, points out that GMP is following a pattern set by companies such as Oldcastle BuildingEnvelope of Santa Monica, Calif., of acquiring a broad range of companies to fulfill needs from fabrication to installation.

“Their objective, it appears, is to obtain companies which would complement each other, create synergy and even vertical integration. This should allow them to gain an economic advantage with lower overhead, increased sales volume and sometimes even use tax advantage,” Keen says. “It is likely Oldcastle BuildingEnvelope has structured [itself] to have this advantage,” Keen says “Economics push in that direction, and it’s an inevitable development. For GMP, the next natural step would be to acquire more manufacturing companies within our industry, even contract glazing companies, which would capture the larger commercial construction market [that] Binswanger is not structured well to handle. I expect to see more acquisitions.”

For the acquired companies, this seems to be a good move.

“I don’t see any paradigm shifts taking place as Grey Mountain’s business practice is likely to operate companies independently,” says Oliver Stepe, senior vice president, YKK AP in Austell, Ga. “So, those companies will now have new ownership, and go about their business as usual. We might expect to see new revitalization efforts, but nonetheless, business is tough and they’ll compete as before, except with some new energy. It’s probably more positive for the employees of the acquired companies as Grey Mountain’s ownership may create new life and new blood for them.”

Michael Collins, an investment banker with Jordan Knauff and Co. of Chicago, agrees.

“The combined market share of these companies isn’t enough to ensure an effect on the industry as a whole,” Collins says, “However, among the benefits that accrue to companies acquired by private equity funds are enhanced access to capital and industry connections that can lead to increased revenues. The competitors of the acquired companies may find them to be tougher competitors in the future for these reasons.”

This seems to be the perfect time to buy, industry professionals agree.

“The commercial construction industry is depressed now, but it’s a cyclical business and it appears to have bottomed out,” Keen says. “So, now is the opportune time to acquire companies. When they’re at the bottom of the cycle, set them up right, properly finance them and ride them to the top. That’s what the private equity firms are doing.”

Stepe shares Keen’s opinion.

“After two to three years of recession some companies have weakened, and these firms are seeing opportunities to acquire companies with viable futures at attractive prices,” Stepe says. “Foreign investment also has increased in the past few years, because of the weak dollar and attractive prices. I wouldn’t be surprised if we see more acquisitions, but the glazing industry is a niche industry, and at some point we’ll reach saturation. Ours is not like the financial industry with many companies, and I think we may be close to an acquisition saturation point. We also have seen regional suppliers being absorbed.”

Collins believes private equity interest in glazing and other building products remains strong. “Now that key indicators like employment and certain housing numbers are becoming more consistently positive, it is easier to see that we’re beginning the recovery process,” he says. “Private equity investors that take a ‘top down’ approach to industries are largely in agreement that the building products industry is a great play over the next several years.”
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