Advent International has agreed to sell Distribution International, one of North America’s leading mechanical insulation distributors, to publicly traded TopBuild for $1 billion in cash.
Advent acquired a majority equity interest in Distribution International from Audax Private Equity and The CapStreet Group in December 2014.
Distribution International (DI) is a distributor of insulation, abatement supplies, fire protection products, refractory products, safety products, and contractor supplies. The company has more than 100 branch locations and serves customers in the commercial building, chemicals, energy, power, railcar and marine end markets.
More than 80% of DI’s sales are derived from ongoing maintenance and repair spending in industrial installations and commercial buildings. The company, led by CEO Steve Margolius, was founded in 1986 and is headquartered in Houston.
During Advent’s ownership term, DI expanded into new product categories, including metal building insulation, and completed 11 add-acquisitions which built its product lines and added new geographies. As a result, DI’s footprint grew by nearly 50 locations, to 101 branches across the United States and Canada, and its TTM revenue through June 30, 2021, grew by more than 50% to $747 million.
According to TopBuild, the TTM Adjusted EBITDA for DI was approximately $75 million. Based on an enterprise value of $1 billion this equals a valuation multiple of 13.3x. Post-closing, and after full integration in two years, TopBuild is estimating annual expense reductions of $35 million to $40 million. This equates to a 9.1x to 8.7x valuation multiple including post-closing expense reductions. Click HERE for a PDF copy of TopBuild’s “Acquisition Overview” of DI.
“We are proud of what we’ve achieved working with Advent and are grateful for their support and expertise, which has been instrumental to our growth,” said Mr. Margolius. “As we take this next step, we’re eager for the new growth opportunities our partnership with TopBuild offers, underpinned by a strong, shared commitment to people, safety, and service. We look forward to working with them to continue our momentum and even better serve the needs of our customers.”
“Over the course of our partnership, DI has cemented its position as the No. 1 distributor and preferred partner for mechanical insulation products in North America through significant investments in M&A, platform expansion, people development, and operational effectiveness,” said Stephen Hoffmeister, a managing director at Advent. “We’re excited for DI to build on its success as part of TopBuild, which is ideally positioned to support DI’s continued growth and goal of being the best employer in the broader distribution industry.”
TopBuild (NYSE: BLD) installs and distributes insulation and other building products to the United States construction industry. In addition to insulation, the company’s products include rain gutters, glass and windows, fireproofing products, garage doors, and roofing materials. Daytona Beach, Florida-headquartered TopBuild, led by CEO Robert Buck, operates approximately 200 installation branches and 75 distribution centers in the United States. The company was formed through the spinout of the installation business of Masco Corporation in March 2015.
“The acquisition of Distribution International is highly strategic for TopBuild. It aligns with our strategy of seeking well-managed companies with experienced, talented teams with expertise in our core business of insulation and adjacent products,” said Mr. Buck. “DI provides us with a direct entry and immediate leadership position in the $5 billion mechanical insulation market, which is a highly attractive and complementary new growth platform for TopBuild.”
Advent International invests in companies active in business and financial services; healthcare; industrial; retail, consumer, and leisure; and technology, media and telecom. The firm has 14 offices in 11 countries and employs 240 investment professionals across North America, Europe, Latin America, and Asia. Founded in 1984 and headquartered in Boston, Advent has $75 billion in assets under management and has completed more than 400 private equity transactions.
The buy of DI by TopBuild, which will be funded through a combination of debt financing and cash, is expected to close during the fourth quarter of 2021.
RBC Capital Markets is the financial advisor to DI and J.P. Morgan Securities is advising TopBuild.
© 2021 Private Equity Professional | September 10, 2021