AV Homes announced yesterday it has acquired 2,500 owned-and-controlled assets and the operations of Orlando, Fla.-based up-and-coming home builder Royal Oak for $65 million.
Here's the link for the press statement posted on AV Homes' site.
The topline facts are these:
AV Homes, Inc. (Nasdaq:AVHI) ("AV Homes" or the "Company"), a developer and builder of active adult and conventional home communities in Arizona, Florida and North Carolina today announced that it has acquired the home building assets of privately held, Central Florida-based Royal Oak Homes LLC and certain land positions from affiliated land development companies, for an aggregate purchase price of approximately $65 million in cash.
Royal Oak Homes is a recognized homebuilding leader in the Greater Orlando and Central Florida market, with a commitment to building exceptional homes in outstanding communities. Focused primarily on the move-up buyer, Royal Oak has experienced strong growth, while earning a reputation for quality and customer service. In 2013, Royal Oak had nine active communities and sold more than 300 homes.
The transaction will establish AV Homes as one of the five largest homebuilders in Central Florida and will complement its well established, existing presence in the Poinciana market. With over 2,500 primary residential lots owned or controlled, Royal Oak enhances AV Homes' position in a key growth market.
In a statement, AV Homes President and CEO, Roger A. Cregg called the acquisition "an excellent strategic step for both companies. Royal Oak is an excellent fit from a geographic and product offering standpoint giving us a more balanced company with a broader customer segmentation focus. We believe this is a great near-term growth driver, with medium- and long-term expansion opportunities that advances our strategy of growing the business in our core markets." Mr. Cregg added, "the combination of the talented and well-respected Royal Oak management team and desirable land positions with our larger platform, existing portfolio, and access to capital will accelerate our earnings growth.
Royal Oak Co-Presidents, Matthew Orosz and Stephen Orosz will continue to run the operations for AV Homes under the Royal Oak brand with no immediate changes to the operations. "This is a wonderful opportunity for our company and our employees," said Stephen Orosz. "We look forward to joining the team at AV Homes and working together as one of the leading homebuilders in Central Florida."
The deal can be said to model as a classic "win-win." In Royal Oak, AV Homes acquires a vibrant, well-operated, well-disciplined operator in a hot market, with talent and pedigree to boot. At the same time, the combination gives the Orosz brothers, Stephen and Matthew, a much-needed infusion of growth capital as the the battle for access to more lots, more development resources, and more expansion opportunity, gets more ferocious.
Michael P. Kahn, LLC represented the buyer and Builder Advisor Group represented the seller.
Of note, the deal is number 101 in the many-year M&A career of Mike Kahn, and, although he's officially in retirement, there's no sign that he plans to slow down.
We've estimated that in 2014 there could be as many as 20 mergers and acquisitions combinations, but Kahn's fairly sure that the tally will be closer to 30 before the end of the year.
Motivations among both buyers and sellers are surging right now, even with uncertainty hovering over how fundamental demand will play out when winter weather finally loosens its grip over some parts of the country.
- Sellers are pushing for capital, both for acquisition and development, and for operational funds
- Sellers may also be motivated by recognizing that playing in the land game is getting tougher by the minute
- Sellers too may be motivated by succession-planning urgencies, since many are pushing toward retirement years
- Buyers need volume growth to absorb their overhead capital structure
- Buyers need talent, since they'd cut way back in their in-house operational capacity during the downturn
- Buyers need access to jobs-based economic markets, some of which are not conventional high-volume new-home markets
Stay tuned. The M&A market is only now beginning to head up.
Learn more about markets featured in this article: Orlando, FL.