DWM - 2006 - September

Volume 7, Issue 8 - September 2006

From the Publisher

The Consolidation Equation
by Tara Taffera

While DWM is the magazine targeted at door and window manufacturers, Folio is the magazine targeted at magazine managers such as myself. So while I hope you devour the articles in DWM, Folio is the magazine I look forward to reading each month to help me further excel in my trade.

The August issue of Folio focused on the rise of private equity and its impact on the growth of the magazine industry. Many private equity (PE) companies have purchased publishing companies, as has happened in the door and window industry with PE firms such as Fortune acquiring SBR. Yes, companies like these are definitely playing more of a role. In fact, Michael Collins of Jordan, Knauff and Co., a Chicago investment bank that analyzes door and window trends, etc., is now a regular columnist for DWM further solidifying the growth and relevance of these companies in the fenestration industry.

In the recent issue Folio editor and publisher Tony Siber wrote that in companies held by private equity firms, “Your day to day world is nearly consumed by analyzing numbers and if you miss it, it gets ugly,” though he concedes that this doesn’t happen solely in PE investments.

While analysis of the numbers shouldn’t be the sole factor in making decisions, it does play a huge role, PE-owned or not.

Let’s look at Andersen’s recent acquisition of SilverLine, a non-PE acquisition. With arguably the country’s largest wood manufacturer acquiring what may be the largest vinyl manufacturer, I’d say Andersen management has a firm watch on the numbers. It’s a safe bet that the company is positioning itself as the largest manufacturer now that it offers both product lines (for more on the merger and its impact on the industry, see June DWM, What’s News, page 22).

From competitors to analysts, it’s a given that everyone is trying to determine what this acquisition means for Andersen and for the door and window industry in general.

As far as future acquisitions, I foresee these to continue. And the joining of two giant companies of competing materials, may spur others to do the same. After all, the competition won’t want Andersen to be getting the biggest slice of both the vinyl and the wood pie, so to speak.

But on the flip side, the fact that DWM posts a circulation of 15,269 actual manufacturers (according to June 2006 BPA audit), tells you that there are a lot of door and window manufacturing companies out there and we know they are not all the size of companies such as Pella, Jeld-Wen, Marvin and the like. So these small and mid-size regional manufacturers will continue to thrive and meet the particular needs of their respective markets even though they may not have a well-known brand behind them.

So, private equity or not, it will be interesting to watch what happens regarding future consolidations, both big and small, in the coming year. One thing is certain: companies of any size and any material offering will be part of the consolidation equation.