Volume 14, Issue 7- September 2013
The recovery has prompted two window companies to approach the public market with their shares. In July, Associated Materials filed for a $100 million initial public offering (IPO), which had not yet been completed as of press time. The Ply Gem IPO, in May of this year, was met with strong buyer interest. This pushed the final IPO share price over its expected range and made Ply Gem (NASDAQ: PGEM) the most recent publicly traded window company. PGT Inc. (NASDAQ: PGTI) was previously the only publicly traded pure play window maker in the U.S. Ply Gemís sales include revenue from siding and other products, in addition to doors and windows. However, their more national coverage makes Ply Gemís financial performance, in many ways, a better proxy for the performance of the national window market.
On the flip side, privately held companies tend to receive a discounted valuation because of the lack of liquidity of their shares. While shares of a publicly held company can be sold at any time during market hours, the sale of privately held companies requires a time consuming process. The shareholder agreement may even prohibit minority shareholders from selling their shares unless the primary owner also does so. There are a number of factors that influence the EBITDA multiple that should be applied to a given company. While this public information does not provide a perfect proxy, it is information that can be interesting to factor into valuing a private door or window company.
Is it Good News?
We recommend viewing these IPOs as a good sign for the industry, one that brings with it interesting financial information from public filings. Companies wishing to benchmark their financial performance against that of larger competitors will find these IPOs to be the source of valuable and useful information. Also, the financial success of these companies is further indication that the recovery is in full swing.
Michael Collins is an investment banker and a partner in Building Industry Advisors. He specializes in mergers and acquisitions in the door and window industry.