Merger and acquisition pros whose business went radio silent amid the doldrums that have swept over residential construction slowdown may have a temporary workaround. While they brief up about a potentially growing specialty of bankruptcy law, there may be profitable short-term M&A work in the building products supply industry.

Even as home builder M&A have slowed to a near standstill, Wolseley plc, the world's largest specialist trade distributor of plumbing and heating products and a leading supplier of building materials has continued its corporate buying spree. In the last year the U.K.–based company has acquired 43 new "bolt-on" businesses, 20 of them in the United States.

And it shows no signs of slowing the pace. "In response to the challenges in the U.S. housing market, there is no change in strategy," says Denise Waters, manager of corporate communications for Wolseley's North American division. "We aim for 50 percent of our average 10 percent sales growth each year to come from acquisitions."

Still, says Waters, the company is careful to choose profitable companies that are synergistic with the company's other operations and goals. "We have clear financial hurdles for our acquisitions–we are not just buying sales–our acquisitions must help us diversify by customer, products, or geography and create true shareholder value."

The United States' faltering residential construction business, lower lumber prices, and an unfavorable currency transfer rate have hurt profits for Wolseley's Stock Building Supply division in the past year. Lumber and structural panel prices, which combined account for about 45 percent of Stock's revenues, have fallen by 21 percent and 27 percent, respectively.

But Wolseley's Ferguson plumbing supply division's revenue climbed 15 percent last year. Also of help to Wolseley is the fact that it is diversified beyond the residential construction business, serving the repairs, maintenance, and improvement market, as well as commercial and industrial construction, which have suffered less from the downturn.

Some U.S.-based building supply companies also closed acquisitions in the past year. Building Materials Holding Corp.'s (BMHC) SelectBuild Constructions subsidiary finished buying the remaining 27 percent of Riggs Plumbing, a turnkey rough and finish plumbing installer to high-volume residential builders in the Phoenix and Tucson, Ariz., markets.

Masco Corp. bought Erickson Construction Co. and Guy Evans in May. Erickson provides turnkey framing, including prefabricated wall panels and millwork, for builders in Arizona, California, and Nevada. Guy Evans is an installer of millwork, interior and exterior doors, windows, and bath hardware for residential builders and commercial contractors in California and Nevada. The companies operate under Masco's subsidiary Masco Services Group.

The slowing market has caused Masco executives to take a harder look at potential acquisitions. "We are always looking for the right fit and the right value," says Sharon Rothwell, Masco's vice president of corporate affairs. "We are trying to be very strategic about our acquisitions."

Extending the Pipeline

Wolseley's 20 U.S. Acquisitions

August 2006

Water Works Supplies, a distributor of water works products based in southern Indiana, central eastern Kentucky, and southern Illinois.

Palermo Supply Co., Palermo Plumbing Center, and Palermo Wholesale Supply, plumbing and heating distributors in northern New Jersey and the greater New York areas.

United Automatic Heating Supply, an Ohio-based distributor of heating ventilation and air conditioning equipment and supplies.

October 2006

Lawrence Plumbing Supply Co and the shares of Castle Supply Co. and Castle North Corp., distributors of plumbing products with 27 locations in Florida.

Northern Water Works Supply, the largest independent wholesaler of waterworks products in the states of Minnesota, North Dakota, South Dakota, Iowa, western Wisconsin, and northern Illinois.

Gulf Refrigeration Supply, a distributor of HVAC equipment, parts, and supplies based in Tampa, Fla.

Kandall Fabricating & Supply Corp. KF Industries, a fabricator and distributor of fire sprinkler systems based in Passaic, N.J.

Lee Window & Door Co., a distributor and installer of commercial and high-end residential windows in Sanford, N.C.

Perfection Truss Co., a leading truss manufacturer in central New Mexico, based in Albuquerque.

November 2006

Kempsville Building Materials, the leading independent distributor of building materials in the Greater Hampton Roads region of eastern Virginia. From three locations, the company offers traditional building materials as well as value-added products and services such as roof and floor trusses, wall panels, staircases, and doors.

December 2006

Onda-Lay Pipe & Rental, which operates from three locations, distributing polyethylene, fiberglass pipe products, and providing installation services from Midland, Texas; Hobbs, N.M.; and Damascus, Ark.

T'N'T Sales, trading as Page's Appliances, a leading independent appliance dealer operating from Albuquerque and Santa Fe, in central New Mexico.

Tonto Verde Construction and Precision Forest Products, a framing contractor supplying the Phoenix residential housing market.

It was Stock's first entry into the Phoenix market.

Cal-Steam Supply, a distributor of plumbing products with 10 locations primarily in the San Francisco Bay Area.

Guntersville Fabrication and Sprinkler Co. and Guntersville Pipe and Supply, a distributor and fabricator of fire protection systems with three locations in the Southeast serving the Ohio Valley, Florida, Georgia, and Louisiana.

February 2007

Grif-Fab, a distributor and fabricator of fire protection systems with three locations in Colorado, Arizona, and New Mexico.

Oregon Pacific Building Products, doing business as Albuquerque Door, an assembler of pre-hung exterior and interior doors and specialty architectural millwork items.

March 2007

Improvement Direct, a network of online stores selling a wide variety of home improvement products, including taps, plumbing supplies, lighting fixtures, cabinet hardware, window treatments, tools, heating, ventilation, and air conditioning.

July 2007

Hollow Metal Specialists, a Sarasota, Fla.–based fabricator, distributor and installer of commercial doors, hardware, and access control devices for commercial and institutional projects.

July 30, 2007

Fire Fab, a Minneapolis, Minn.–based distributor and fabricator of fire safety and suppression systems.

Learn more about markets featured in this article: San Francisco, CA, Phoenix, AZ, San Jose, CA.