US LBM Holdings, LLC

Situation

• Through the 2008/2009 recession, the weak housing market was frequently a lead news story. The decline in housing starts, along with the fall in home prices, was unprecedented. Most predictions for economic recovery in the US hinged upon an improvement in this construction activity.
• Through working with industry executives, BlackEagle was interested in a contrarian play in the building materials industry. In particular, we were attracted to the distribution segment of the market because of its consistent margins.
• In August 2009, through an industry relationship, we were introduced to a management group with the concept of creating a regional building materials distribution business. L.T. Gibson and his management team had a plan to acquire three regional markets from Stock Building Supply, a leader in the building materials distribution industry, which was going through bankruptcy. The bankruptcy filing made this opportunity highly actionable and by October 30, 2009 BlackEagle closed the transaction which then became US LBM.
• In the approximately eight weeks from being introduced to the opportunity, BlackEagle completed extensive due diligence and secured third party asset-backed financing. Well capitalized, US LBM currently serves as a platform for additional acquisitions. In 2010, the company acquired five additional businesses ranging in size from $2 million to $90 million of revenue.
• Currently, US LBM is one of the top lumber and building materials distributors in the industry, approaching 1,000 employees and is actively seeking additional investments.

Thesis

• Acquire market leading businesses at an all-time cyclical low. Residential construction was at its lowest level in more than 50 years. Wood prices were at their lowest levels in 35 years.
• Partner with a management team with extensive industry experience and direct knowledge of the companies in question.
• Focus on non-production builders with virtually no customer concentration that allows for higher than average margin opportunity. Service customers with a higher margin product mix (windows, cabinets, siding, etc.).
• Consolidate a highly fragmented industry with a large number of acquisition opportunities. Capitalize on the financial distress in the market and the lack of financing for small businesses to create further opportunities.
• Create a balance sheet that can withstand a prolonged industry downturn and appropriately staff the organization to scale up significantly when the housing market recovers.

“From the very beginning, I felt very confortable with BlackEagle’s commitment to me and my management team’s vision. Our partnership has allowed US LBM to grow its footprint quickly and become an advantaged acquirer in our industry. We are extremely well positioned for future growth and profitability.”

L.T. Gibson
President & Chief Executive Officer
US LBM Holdings, LLC