BMC Enterprises making moves in the Midwest

Says BMC Enterprises’ Nathan McKean: “We’ll do pure ready-mix deals and pure [aggregates] deals, but it’s aggs first.” Photo: BMC Enterprises

P&Q: How would you characterize the overall M&A environment right now?

MCKEAN: The opportunities are almost limitless right now. Having just closed three fresh deals, I want to say we probably have a dozen NDAs already signed in the pipeline. [For us], all three verticals are active. We’ve got small mom-and-pop shops to some larger businesses that we’re taking a look at.

The interest rate environment is dramatically different than it was 12 to 15 months ago. That’s definitely having an impact. I think sellers are having to recalibrate their expectations of valuations. The cost of capital has more than doubled in just a year, and that’s pulling down multiples and having some impact on how sellers feel. Everyone’s very, very proud of their business and what it’s worth, and I think cost of capital is definitely having some impact on valuations.

P&Q: Despite what’s happening with the cost of capital, it seems like aggregate producing companies are busy and there’s demand for materials. How would you describe what’s transpired thus far in 2023 for BMC?

MCKEAN: We’re having a great year – surprisingly. I feel a lot better about where we’re at today than I would have said 12 or 15 months ago.

[We] were definitely seeing some softening in the residential segment. [With] commercial/industrial, we’ve seen a little bit of softening. The Amazon society [and] the big box speculative distribution centers have kind of come off recently.

In 2022, you had 12 continuous months of single-family home sales in decline. That trend is reversed here into 2023. You also saw homebuilder confidence went above 50 for the first time in a bit. I think the softening in residential may be of shorter duration and not as deep as I would have predicted 12 to 15 months ago.

In light of the softening in residential and commercial/industrial, we’re finally starting to see the impacts of that $1.2 trillion transportation infrastructure spend that’s coming online. For a company of our size with our vertical integration and geographic diversity, the opportunities we see coming in T&I are going to give us a better chance to exploit that segment and, likely, more than offset the softening we’re seeing in residential and commercial/industrial.

So, we’re very bullish, which is also why we’re keeping our foot on the gas on the acquisition strategy.