Producers of construction materials have become the main targets for private equity funds over the last two years in the wake of high growth rates and high profits.
Enterprise Investors, Oresa Ventures and Advent International were all involved in two acquisitions on the construction materials market (estimated to be worth around 6.5 billion euros last year) after the funds registered an over 30% annual growth rate, and hope to make a profitable exit in five years' time.
"We expect this market to continue to grow at a fast rate due to the large investments in new residential, commercial, and industrial buildings, as well as in infrastructure and renovations. The market of construction materials is already extensive, and allows major companies to grow, making them attractive for global players, as well as for a potential stock exchange listing, which would secure a profitable exit," Cornel Marian, managing director of Oresa Ventures Romania, local subsidiary of Swedish private equity firm Oresa Ventures, told ZF. The company controls half of the shares of Fabryo Corporation (a varnish and paint producer) and of Bau Profil (a producer of metal profiles and adhesives).
Advent International, which took over dry mortars producer Bengoss Comimpex for 18.9 million euros, and Enterprise Investors, which acquired the Simcor group for 53 million euros, have conducted the most recent transactions on the construction materials market.
"Construction materials producers will remain attractive acquisition targets as long as they maintain their growth and profit rates. According to some forecasts, these growth rates and profit rates will be preserved for at least five years," says Cristian Nacu, a partner of Polish private equity fund Enterprise Investors. Through the acquisition of the Simcor group, the Polish fund has strengthened its position on the AAC (Autoclaved Aerated Concrete) market, bringing its total production capacity to around 800,000 cubic metres, i.e. a 10-12% share of the masonry materials market.
Advent has expanded the portfolio of varnish and paint producer d?fa Deutek in the wake of experience in the construction materials market, and due to its upward trend. Since it is not an entirely new portfolio, but rather one complementary to the already existing one, Advent's decision was a natural one.
The decision also came amid the maturing of the d?fa Deutek's business, and as a result of the company's desire to improve its performance, onto an additional product segment - that of construction mortars," said Advent representatives, who, in 2005, took over D?fa Romania, currently d?fa Deutek, from German group Meffert and two local businesspeople.
Construction materials market
The construction materials market was worth around 6.5 billion euros last year, with an over 30% annual growth rate
Private equity funds regard the construction materials market as attractive because of high growth and profit rates
The most recent transactions have been the acquisition by Advent International, of dry mortars producer Bengoss Comimpex for 18.9 million euros, by Enterprise Investors, which acquired the Simcor group for 53 million euros.
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