In the wake of Pulte Homes' purchase of Centex Corp., industry speculation has been running rampant over whether the deal should be viewed as a one-off event or whether it marks the start of the next wave of consolidation. Big Builder Online asked its readers to weigh in on the subject.
The majority of respondents--71.1%--said they think the Pulte-Centex deal will spur more industry consolidation. "There are still more companies out there that will not survive if they do not merge with a builder with a positive cash flow and a strong net worth," noted one respondent. The remainder of respondents were unsure or doubtful if it's the beginning of a trend.
Of the 16 public builders operating today, 55.7% of respondents said they believe three to five of those companies will be involved in some sort of M&A activity, either as a buyer or a seller, this year. However, 36.1% of respondents said they think it only will be one to two companies, whereas 6.2% said they believe six to 10 companies will get in on the acquisition action.
D.R. Horton led the list of public companies most likely to buy another home builder in 2009, with 36.1% of the vote. Many respondents noted that D.R.Horton would make this type of move to regain No. 1 status. Lennar, Toll Brothers, and KB Home were other top choices for acquiring other home builders with 12.4%, 11.3%, and 11.3% of the votes, respectively. NVR followed with 9.3%, and M.D.C. Holdings with 7.2%.
Beazer topped the list of home builders most likely to be acquired, with 24.7% of the vote. "Low cost if they can negotiate their debt down and a good footprint," said one respondent. Hovnanian and Ryland came in second on the list with 11.3% of the votes each, with Standard Pacific next in line at 10.3%.
The most likely match-ups, predicted respondents, are D.R. Horton acquiring Beazer, Lennar acquiring Beazer, and a Lennar/KB Home alliance.