CHRIS KEMMERLY WASN'T LOOKING TO SELL HIS BUSINESS. The 44-year-old owner of Kemmerly Homes in Tucson, Ariz., had rebuffed buyout offers from several national builders that coveted his company, which delivered 180 homes and generated $48 million in revenue in 2004. But when Irvine, Calif.-based Standard Pacific Homes came knocking in April 2004, Kemmerly had a change of heart. Within four months of his first meeting with Standard Pacific's managers, Kemmerly Homes was part of the stable of the industry's 11th-largest builder.
Its acquisition of Kemmerly Homes followed a pattern that Standard Pacific has established in the past several years, as it has expanded outside its traditional California markets into Arizona, the Carolinas, Colorado, Florida (where it acquired four builders in 2002 alone), and Texas. Much like Hovnanian Enterprises and a few other national builders, Standard Pacific encourages the current management of companies it purchases to stay put and grow their businesses. In fact, before it pursued Kemmerly Homes, Standard Pacific broke off talks with another Tucson builder because that company's owner wanted to exit shortly after the deal.
Kemmerly based his decision to sell, which was announced last August, largely on impressions formed after only a few meetings with senior-level officers. “Our philosophies were the same, and the way we did business was very similar. Acquisitions require a tremendous amount of work on both sides, so there's not much point in going forward unless you're a good match from the start,” he says.
Like Attracts Like What's unique about Standard Pacific's approach, say its associates and several investment and development partners, may be how palpably its core values-fairness, integrity, dedication to quality workmanship and customer service, and a workplace that fosters empowerment and longevity-have become the touchstones for a growth strategy that has seen this builder acquire nearly a dozen companies in seven years. Those acquisitions helped the company grow from six divisions in two states in 1997 to 23 divisions and 175 communities in seven states at the end of 2004.
Standard Pacific has practical reasons for seeking out like-minded builders to acquire. As its operations have become more far-flung, it is relying more on the judgment of its regional and divisional managers. Kemmerly notes how pleased and surprised he was to negotiate directly with Kathy Wade, president of Standard Pacific's Southwest region, who is now his boss. It was Wade, in fact, who lit a fire under Standard Pacific to accelerate its construction activity beyond the Phoenix market.
All the regional and divisional presidents (most of whom have long tenures with the company) take their strategic cues from Standard Pacific's 56-year-old chairman and CEO, Steve Scarborough, and its 57-year-old president, Mike Cortney, who, by all accounts, personify Standard Pacific's corporate identity and temperament. Both have been with the company for nearly a quarter century and were tutored by founders Art Svendsen and Ron Foell in the values they now pass on. When asked to describe his management style, Scarborough says simply that his role is to “put a lot of good people in place and get out of the way.”
“Steve and Mike identify companies whose culture and values are consistent with ours,” says Bruce Dickson, president of Standard Pacific's Southeast region, which is made up entirely of acquired builders. “We can focus on operations because we don't need to spend a lot of time talking about what we stand for.”
Cortney says that the Kemmerly deal was the first time that he stayed in the background during negotiations for an acquisition. He and Scarborough met with Chris Kemmerly for a day at their Irvine headquarters, and Cortney visited Tucson a few times, but that was the extent of their involvement. “Standard Pacific isn't a star system,” asserts Doug Neff, president of IHP Capital Partners, who has consulted on several of the builder's projects. Indeed, as BIG BUILDER went to press, Standard Pacific's divisional president in Southern California was acting as lead negotiator to acquire a local builder.
Other acquisitions seem likely. In recent presentations to investors and analysts, Standard Pacific identified no fewer than 15 markets-including Atlanta, Boston, Chicago, Cincinnati, Columbus, Indianapolis, Minneapolis, Nashville, Philadelphia, Portland, St. Louis, and Seattle—where at least 10,000 permits are issued annually but where Standard Pacific does not build homes. Company officials aren't offering many clues about specific acquisition targets. The rumor mill keeps recycling names like Toll Brothers and Brookfield Homes, although neither would be a perfect fit. All Cortney will say is that he's been getting “lots of calls” from builders around the country inquiring about Standard Pacific's intentions.