Depending on whom you talk to these days, all of home building is divided into three parts ... from a mergers and acquisitions standpoint.
With apologies to Julius Caesar, a production home building company is either buying, for-sale, or in between (possibly either buying or for-sale, or maybe even both, in a few cases).
That's a lot of deals that may get done in the next couple of weeks to 18 months. And for this reason, one of high volume home building's legendary M&A experts, Michael P. Kahn has gotten jostled out of retirement. What this means for Kahn is that he can't pay quite as much attention as he might want to pay to details of work on his new home in Palm Coast, Fla., where they're installing plantation shutters, a shower head equipped with a smartphone, and other smart home security, lighting, and electronic controls and devices.
"He's not even in the business, and he's done four deals (NVR-Heartland, Pittsburgh, Ryland-LionsGate, Dallas-Ft. Worth, Meritage-Phillips, Nashville, and now Century-Jimmy Jacobs Custom Homes) in the past eight months," says one of Michael Kahn's friendly competitors, who's been around the block a few times himself and today finds himself advising a growing roster of private firms whose principals want to explore whether now's the time "to get out."
On Wednesday, aptly enough, Colorado-based Century Communities announced it closed on the purchase of an Austin and San Antonio, Tex.-based operator, Jimmy Jacobs Custom Homes, along with a series of land deal in the area. Suddenly, Texas is a going concern for Century, and it wants more there.
For Michael Kahn, who's officially "not in the business," Century was his deal No. 100.
Rightfully, our friendly competitor points out that Kahn's post-retirement engagements have only been with parties he's had longstanding relationships with. But that rules out only about a handful of companies he hasn't dealt with over the years, and even in those cases, he's probably dealt with their fathers, or mentors at some point in the past quarter century.
Kahn speaks of the motivations of buyers in the market this way:
1. big builders who want to enter a market
2. big builders who want to build market share in an area where they're already operating
3. big builders who exited markets during the downturn who want to re-enter them because of the volume opportunity
Among sellers, it's mostly three- or four-cycle home builder family dynasties whose patriarchal leader has gotten the firm through this latest housing "Depression," but who don't have the fire-in-the-belly necessary to start through the whole housing cycle again.
"The time to sell something is when everybody wants it," Michael Kahn quotes wisdom he'd heard along the way. He's in the middle of conversations these days because he's known as someone you can trust, and someone who'll call something as it is.
"If you don't want to know what Mike Kahn thinks about something, don't ask him," former Centex ceo and current Cordalla Inc. principal Tim Eller is said to have quipped.
Kahn's roots in home building date back to days as a builder developer in Tucson, Az., in the 1960s, and he sold a company at age 33 to conglomerate Safeguard Industries, and ran the operation for six years to his first retirement at the old age of 39.
His history in mergers and acquisitions traces to 1988, and he describes the start this way. He attended an International Home Builders Show in Dallas, and picked up a copy of BUILDER magazine from one of the bins on the show floor. On the flight home, he circled all the California companies and realized that very few of the top 100 companies were doing much building in California, where the lion's share of home building was taking place even then.
"I wrote 70 letters to California builders, told them who I was and what I observed about their opportunities, and that it didn't make sense that more of them weren't on the BUILDER 100 list, and I could introduce them to my builder connections... I got 17 responses."
Kahn's earliest deals look like this:
• Acquisition of H.R. Remington, building in Southern California, by NVR, Inc.
• Represented H.R. Remington in the sale of its Scottsdale Country Club community to Marufuji, a Japanese conglomerate with U.S. real estate holdings
• Represented DiGeorgio Development in the sale of its Rams Hills community to an investment group
How many more deals could Kahn get involved with in retirement?
"They're all for sale," says one knowledgeable industry insider. And there are a lot of people who trust and want to know what Michael Kahn thinks. So, they ask him.