Building products like insulation and roofing are often manufactured domestically because safety and building codes vary significantly country-to-country. This makes it more practical to produce goods closer to the end market where they will be used, rather than exporting a standardized global product.
Unlike private equity sellers focused solely on price, family-owned businesses are deeply concerned with their legacy and how an acquirer will treat their company, employees, and community. A buyer perceived as a good steward may win a deal even without offering the highest price.
The roofing industry directly profits from severe weather like hailstorms and hurricanes that damage homes. CEO Brad Jacobs notes the strange psychological position of feeling empathy for affected homeowners while simultaneously recognizing that these events are a primary driver of revenue and demand for his business.
Brad Jacobs advises against focusing on one acquisition at a time, which can lead to emotional attachment and overpayment. By maintaining a wide, active pipeline and moving multiple candidates through a funnel simultaneously, acquirers can remain disciplined on price and avoid the pressure of closing a specific deal.
While insulation is crucial for data centers, the demand extends across a wide range of building products. These facilities also require extensive roofing, waterproofing, and lumber-related materials. This creates a broad-based growth driver for diversified building product distributors, not just specialists in one category.
CEO Brad Jacobs uses AI to automatically take notes and generate summaries from important meetings across his company. This technology provides him with near-instantaneous, unfiltered insights into operations and challenges that previously would have taken months to surface through the corporate hierarchy.
Despite extensive online and third-party checks, Jacobs considers multi-day, in-person interviews with the target's senior management to be the most crucial part of due diligence. This direct interaction is essential for uncovering hidden risks, opportunities, and the intangible "skeletons" that don't appear in financial statements.
Many small roll-up funds simply buy companies at low multiples to gain a higher valuation on the aggregated entity. Jacobs argues true value creation comes from being an operator: integrating, optimizing, and genuinely improving the acquired businesses through better technology, processes, and customer value propositions.