When asked about their industry’s recent spate of mergers and acquisitions activity, most builders will insist they aren’t for sale. But that doesn’t mean the right suitor can’t nudge them to give up their independence.
Case in point: When Century Communities, the fast-growing builder based in Colorado, approached the owners of Austin, Texas-based Jimmy Jacobs Custom Homes, “I can tell you [they weren’t] for sale,” recalls Dale Francescon, who with his brother, Robert, owns and runs Century.
Jimmy Jacobs was one of at least 10 builders in Texas that the Francescons had under consideration for acquisition. Those finalists emerged from an even larger list that Century had hired the financial adviser Michael P. Kahn & Associates to cull. “That’s the advantage of utilizing an experienced third party in these situations,” says Dale. “Mike has a way of being very persuasive, even when the companies aren’t on the market initially.”
On Sept. 11, Century acquired Jimmy Jacobs, the industry’s 156th-largest builder in closings last year, for an undisclosed sum. Steve Hayes, a 20-year housing industry veteran, will manage Century’s Texas operations as its division president. The former owners of Jimmy Jacobs aren’t staying on in a daily capacity, but they will continue to help Century find land for growth.
(BUILDER was unable to reach Mr. Jacobs for comment at press time. Jacobs founded his custom building operation in 1986. He continues to operate Jimmy Jacobs Construction, a commercial development and construction firm. On Tuesday, he told the Austin Business Journal that he might be involved in residential construction in the future, without providing details.)
Similar Strategies Georgetown, Texas-based Jimmy Jacobs Custom Homes, which for the past two years was ranked as Austin’s top custom builder by the Business Journal, appealed to Century, says the Francescons, because both companies have similar strategies. “Jimmy Jacobs is primarily non-entry-level, and its focus, like ours, is on prime infill and master planned locations,” says Robert.
Through this acquisition, Century picks up 915 lots in a dozen communities in Austin and San Antonio, bringing its total in all markets to more than 5,700, which represents a 23% increase since the end of this year’s second quarter.
Century’s growth is being fueled by a public offering of stock last year that raised $241.5 million. The Francescons confirm that there’s “a good chance” their company would offer to sell investors more stock in their company within the next 12 months.
Consequently, the Francescons say Century intends to continue its aggressive land acquisition through the remainder of 2013, and is interested in acquiring other builders. They wouldn’t reveal which companies they are targeting, except to say “we are looking to expand in a number of different locations that have a western region focus.” Dale adds, “there are lots of potential acquisition candidates.”
In Texas and Colorado, Century Communities vies with myriad public builders for land and home buyers. The Francescons say Century’s competitive advantages are its understanding of markets and its willingness to act on deals quickly. “That’s where credibility comes in,” says Robert, noting that a lot of “offers” being made by other companies for land or acquisitions turn out to be little more than trial balloons.
Century is still interested in organic growth, too. It is building single- and multifamily projects all along Colorado’s Front Range, and housing markets there “continue to grow,” says Dale. Robert adds that these markets’ demographics “are some of the best in the country.”
John Caulfield is a senior editor for BUILDER.