GMS Completes the Acquisition of Yvon Building Supply and Affiliates

Rhea-AI Summary

GMS, a leading North American specialty building products distributor, has completed its acquisition of Yvon Building Supply and its affiliates, expanding their footprint in Ontario, Canada. The acquisition includes Yvon Insulation, Yvon Insulation Windsor, Laminated Glass Technologies, and Right Fit Foam Insulation. Yvon, with seven locations in Ontario, generated CAD$195 million in net revenues for the twelve months ending May 31, 2024. The transaction, valued at CAD$196.5 million, was funded with cash and borrowings from GMS’s revolving credit facility. This acquisition is expected to be slightly margin-accretive for GMS.

Positive

• GMS has expanded its market presence in Ontario, Canada.
• The acquisition is expected to be slightly margin-accretive.
• Combined net revenues of CAD$195 million from Yvon businesses.
• Purchase price of CAD$196.5 million, with a portion payable over five years.

Negative

• Funding includes borrowings from GMS's revolving credit facility, implying increased debt.

Insights

Financial Analyst

GMS Inc.'s acquisition of Yvon Building Supply and its affiliates is a strategic move to bolster its presence in the Ontario market. The acquisition was completed with a combination of cash on hand and borrowings from the company's revolving credit facility. This financing approach suggests prudent financial management, ensuring that GMS maintains liquidity while expanding its footprint.

Yvon's net revenues for the twelve months ending May 31, 2024, stood at CAD$195 million. Integrating these revenues into GMS's financials should provide a positive impact on top-line growth. Additionally, the transaction is expected to be slightly margin-accretive, meaning it could improve GMS's profit margins, albeit marginally.

From an investor's perspective, the acquisition aligns with GMS's strategy of growing through acquisitions, particularly at valuations consistent with or below its market multiple. This disciplined approach to valuation helps in ensuring that acquisitions are value-accretive over time.

In the short-term, the acquisition might lead to some integration costs and minor disruptions within the newly acquired entities. However, in the long-term, the extended product offerings and expanded geographical reach within the Greater Toronto Area could lead to significant revenue synergies and improved market share.

Market Research Analyst

The acquisition of Yvon Building Supply by GMS Inc. is noteworthy within the context of the North American specialty building products market. Yvon's strong presence in Ontario, with seven locations, adds substantial value to GMS's distribution network.

Ontario's construction market has been robust, with significant investments in residential and commercial projects. By enhancing its product offerings in this market, GMS positions itself to capitalize on ongoing and future construction activities. The inclusion of diverse product lines such as drywall, insulation and steel further reinforces GMS's ability to meet varied customer needs.

From a competitive standpoint, this acquisition strengthens GMS's market position in Canada, providing a competitive edge against local and regional players. The ability to leverage Yvon's existing relationships and customer base can drive incremental sales growth. Furthermore, as GMS integrates Yvon's operations, there could be opportunities for operational efficiencies, such as optimized supply chain logistics and consolidated procurement.

In summary, this acquisition enhances GMS's market reach and product depth in a key region, potentially driving both revenue and cost synergies.

Industry Expert

This acquisition is a strategic move for GMS in the building supplies industry. Yvon Building Supply’s established operations in Ontario provide GMS with an immediate boost in market presence and service capabilities.

Yvon’s diverse product portfolio, including drywall, insulation and steel, aligns well with GMS's offerings, allowing for seamless integration and cross-selling opportunities. Furthermore, the acquisition is expected to be margin-accretive, indicating that Yvon’s operations are already profitable and should enhance GMS’s overall profitability.

Given the size of Yvon’s net revenues (CAD$195 million), this acquisition is significant in scale. For retail investors, it’s important to note that acquisitions can often bring about economies of scale, which might not be immediately apparent but could result in long-term cost savings and increased market share.

Moreover, the commitment to pay a portion of the purchase price over the next five years provides financial flexibility, ensuring that the company does not over-leverage itself in the short term. This prudent financial management is a positive indicator for GMS’s future stability and growth.

TUCKER, Ga.--(BUSINESS WIRE)-- GMS Inc. (NYSE: GMS), a leading North American specialty building products distributor, today announced the successful completion of its previously disclosed acquisition of Yvon Building Supply Inc. together with its affiliates, Yvon Insulation Corporation, Yvon Insulation Windsor, Laminated Glass Technologies, Inc., and Right Fit Foam Insulation Ltd. (collectively “Yvon”), a leading distributor of building supplies in the Ontario, Canada market.

“As we highlighted during our recent earnings conference call for the fourth quarter and full year fiscal 2024, we are pleased to enhance our service and product offerings in the Greater Toronto market with the successful completion of this transaction,” said John C. Turner, Jr., President and Chief Executive Officer of GMS. “We are excited to welcome the Yvon team to GMS Canada and look forward to expanding our Core and Complementary Products in southern Ontario.”

With seven locations across Ontario, Yvon provides high-quality building supplies including drywall, insulation, steel, ceilings and other complementary products and related services throughout Greater Toronto and Ontario. For the twelve months ended May 31, 2024, Yvon generated net revenues of approximately CAD$195 million.

This transaction, which is expected to be slightly margin-accretive to the broader GMS business, was funded with cash on hand and from borrowings on the Company’s revolving credit facility. With more than a quarter of the CAD$196.5 million purchase price scheduled to be paid over the next five years, the transaction value is consistent with GMS’s track record of acquiring at or below the Company’s market multiple.

About GMS
Founded in 1971, GMS operates a network of over 300 distribution centers with extensive product offerings of Wallboard, Ceilings, Steel Framing and Complementary Products. In addition, GMS operates more than 100 tool sales, rental and service centers, providing a comprehensive selection of building products and solutions for its residential and commercial contractor customer base across the United States and Canada. The Company’s unique operating model combines the benefits of a national platform and strategy with a local go-to-market focus, enabling GMS to generate significant economies of scale while maintaining high levels of customer service.

For more information about GMS, please visit www.gms.com.

Forward-Looking Statements and Information
This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. You can generally identify forward-looking statements by our use of forward-looking terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "seek," or "should," or the negative thereof or other variations thereon or comparable terminology. We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates, and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. The following important factors could cause the future results, to differ: the company’s growth strategy, changes in economic or industry conditions, competition, inflation and deflation, input costs, timing and integration of acquisitions, timing and implementation of price increases for the Company’s products, consumer markets, and other factors identified our filings with the SEC. We undertake no obligation to update any of the forward-looking statements made herein, whether as a result of new information, future events, changes in expectation or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240702829030/en/

Carey Phelps

Vice President, Investor Relations

Phone: 770-723-3369

Email: ir@gms.com

Source: GMS Inc.

FAQ

What is the significance of GMS acquiring Yvon Building Supply?

The acquisition expands GMS's market presence in Ontario, Canada, and enhances its service and product offerings.

How much did GMS pay for Yvon Building Supply?

GMS paid CAD$196.5 million for Yvon Building Supply and its affiliates.

What impact will the acquisition of Yvon Building Supply have on GMS's margins?

The acquisition is expected to be slightly margin-accretive for GMS.

How was the acquisition of Yvon Building Supply funded by GMS?

The acquisition was funded with cash on hand and borrowings from GMS's revolving credit facility.

What products does Yvon Building Supply provide?

Yvon provides building supplies such as drywall, insulation, steel, ceilings, and other complementary products.

How much revenue did Yvon Building Supply generate before the acquisition?

Yvon generated approximately CAD$195 million in net revenues for the twelve months ending May 31, 2024.