Case Studies

Building Products — Merchant Banking

SITUATION OVERVIEW

In 1996, Paul Haefcke, Senior Advisor and Head of Carbide Partners’ Building Products Group, led the acquisition of a $50 million, Midwest-based regional wholesale supplier of roofing products in partnership with two middle market private equity sponsors. Following the acquisition, Mr. Haefcke became CEO of the company, replacing the founder and previous owner of the business. Over the next seven years, Mr. Haefcke led an aggressive program to accelerate the growth of the business and improve the company’s operating performance.

CHALLENGES

As the new CEO, Mr. Haefcke faced a variety of operational challenges at the acquired platform company:

  • Weak executive team and disorganized business process
  • Under-performing branch leadership
  • Below-average operating profit margins
  • Unfocused growth strategy


RESULTS

Mr. Haefcke’s disciplined management efforts produced numerous improvements in the company’s business:

  • Upgraded executive management team and recruited new branch leadership
  • Built the strongest regional roofing supplies distribution business in the Midwest, with local market shares of 80% or more in several metropolitan areas
  • Expanded sales from $50 million at time of acquisition to $188 million at time of sale through greenfield branch openings and strategic acquisitions
  • Achieved above-average operating profit margins for the consolidated business
  • Successfully expanded from the residential roofing core business into the commercial roofing segment, which grew to represent 28% of consolidated revenues
  • Sold business to a financial buyer, generating a return of 5.5 times invested capital and a 35% internal rate of return for the private equity sponsor