Larry Webb asked a simple, yet relevant question at the Big Builder '07 Conference in Las Vegas Nov. 27: How many people think 2008 will be a better year than 2007? The room was silent. Then one solitary hand went up. That was it.

Although the question from Webb, the affable CEO and president of John Laing Homes, didn't directly address the issue his panel "Pair Dancing: Consolidation Ahead" faced, it did show the pressures that could force many long-time builders to cash in their chips and get out of the business in the next 12 months.

"In the next year, there will be stuff [mergers and acquisitions] because people will be desperate, but it will be for the wrong reasons," said Webb, who went through the acquisition process himself when Dubai-based Emaar Properties bought his company in 2006.

Webb sees builders selling their companies off because their only other option is bankruptcy. His fellow panelist, Steven S. Benson, executive vice president for Acacia Capital Corp., agreed, adding that transactions may also occur for tax purposes.

But the strategic acquisitions of 2004 and 2005–where one good builder bought another solid operator–may be a thing of the past, though the third panelist, Ronald Robichaud, managing director of Robichaud Financial Services, admitted that he is working on one deal that brings back memories of a better time in 2004 and 2005–where a healthy builder looked to make an acquisition so that it could move into a new market. In their place is a climate where desperate builders sell their companies as a last resort.

"Selling a home building company has never been a major windfall," Robichaud said.

But the panel also noted that there could be other reasons forcing a builder to sell. If a builder sees the end of his career around the corner and doesn't want to suffer through 2008 and maybe 2009 before the market rebounds, selling could become attractive.

"Most businesses are family businesses that get to a certain age and have no exit," Webb said.

Unless they can get a great deal on a builder and its assets, it may take a lot to prompt a buyer to get into the market as well. In the past, buyers could count on upside and backlog to help propel the businesses they were buying. That's no longer the case with high cancellations rates draining backlogs. "Backlogs used to be gold," Robichaud said.

They also can no longer count on a builder's employees to stay on and help grow the business. "You can't expect to buy someone else and have that human potential stay on board," Benson said.

But a well-run company can still attract buyers, even in these tricky times. They need a strong balance sheet, good operations, and maybe even a management team willing to stay onboard. "You need to create an organization that can stand the test of time," Webb said.

Robichaud pointed out a familiar group of players interested in these struggling builders. He said that people who left the business before things got bad will come in and make these purchases. Webb seemed a bit more suspicious of them.

"They want to get what they can," Webb said. "If they don't, they'll take your kid."

Benson posited a different theory. He didn't acknowledge consolidation in the traditional sense becoming more prevalent. Instead, he predicted a type of what he calls "networking," where partners come in as investors and share technologies. In some ways, Webb's partnership with Emaar exemplifies this. Webb shares information and systems with the Dubai-based parent company and even sent two of his top lieutenants to India and Dubai to work for it.