Fast Track Rankings

Big Buyers: D.R. Horton, Arlington, Texas

D.R. Horton is one of the most acquisitive builders in the industry, picking up 17 companies since 1994 from Hawaii to Florida. But three deals stand out in CEO Donald Tomnitz's mind: Continental Homes in 1998, Cambridge Properties in 1999, and Schuler Homes in 2001.

Merging with Continental "put us in the big leagues purchasing-wise," Tomnitz says, pushing Horton's volume to 14,000 closings in 1998. "That's when we had the volume for national purchasing to realize efficiencies." Cambridge represents a "sentimental" favorite for the CEO: Horton's share price fell during the acquisition process, but the sellers agreed to postpone the stock-based deal until Horton values rose, rather than selling to another builder. As for Schuler, "that put us over the top," Tomnitz says, as the combined company delivered 31,584 homes last year, making it the largest home builder in the country, based on U.S. closings.

Revenue has climbed as well. In 2002, Horton generated $7.3 billion, resulting in a three-year compound annual growth rate of 40.1 percent. But the company's penchant for acquisitions has gotten Horton in trouble with stock analysts, who'd prefer to see more internal growth at the Arlington, Texas-based builder. "I'm really indifferent about whether we do it internally or externally," says Tomnitz, who says that since 1994, the company's growth has come half from operations and half from acquisitions. Still, the company nodded to the organic growth pressure, promising to provide 20 percent earnings-per-share growth in 2003 without acquisitions.

Donald Tomnitz

Horton's internal growth strategy: market domination. The company is already among the top five builders in 70 percent of its markets, but division presidents receive bonuses if they land in a market's top five builders, occupy the No. 1 spot, or capture double-digit market share. "We don't want them resting on their laurels," says Tomnitz.

While the home building industry remains fragmented, Tomnitz says that the rise of the mega-builders has changed some of the attitudes about growth and the potential size of a home building company. "I think most people thought a home builder doing 20,000 units a year would implode. I don't think they thought there was a corporate structure to support it," he says. "Now they're talking about a 50,000-unit builder or a 100,000-unit builder."