While Stanley Martin had been rumored as a potential M&A target for a couple years, CFO Randy Kotler said discussions with potential investors only got serious three months ago—when Daiwa House USA, a subsidiary of Japanese behemoth Daiwa House Group, entered the picture.
“I joined the company at end of ’14,” Kotler says. “When I joined, we obviously had investors that may be considered short-term investors, but there was never a discussion back then about a liquidity event. It was always [known] at some point in the next whatever number of years, some investors will do something.”
Once Daiwa entered the picture, the process took about three months. “It was the normal M&A process,” Kotler says. “They reached out to go through the typical initial conversations, visited the properties, and did the typical due diligence.”
Daiwa had long been interested in the U.S. market, according to Kotler. “They’re a large builder in Japan and other countries,” he says. “Part of their growth plan was to invest in the U.S. housing market. They have been looking for a number of years and they wanted the right of fit.”
Early on, Steven Alloy, President of Stanley Martin, felt that despite the geographical distance, the two companies shared much of the same DNA, including their views of customers, people, and culture.
“You can look in their corporate handbook and it looks like our corporate handbook—the customer-centric focus, doing what’s right by your customers and your people, and those things,” Kotler says.
For Daiwa, it was important that Alloy stay aboard and that the Northern Virginia’s ownership keep skin in the game. That’s why the Japanese-based company only purchased 82% of the Stanley Martin. The remaining 18% of ownership will remain with the builder’s founders.
“The way Daiwa has always believed in their partnerships with companies they look to invest in is they want companies where there’s ownership that’s involved and has skin in the game,” Kotler says. “When they make these global type investments, they’re looking for a company where the management or owners have involvement both financially and in being owner-operators.”
Growth is important to both Stanley Martin and Daiwa, but Kotler says there haven’t been discussions about what form that expansion will take in the future.
“Stanley Martin has grown a lot over the last several years since the housing recession,” Kotler says. “It’s really using our current balance sheet. We haven’t had conversations with them about them infusing additional capital or us taking advantage of their relationships from a capital markets standpoint. It was more so, them making in an investment is us and we’ll keep doing what we’re doing, which is growing and being successful in the Mid Atlantic.”
