Why Builders FirstSource bought ICG; and why Pulte sold it

Builders FirstSource’s acquisition of Innovative Construction Group (ICG) from PulteGroup signals that, while homebuilders see value in off-site construction, many prefer to rely on third-party manufacturers rather than own those operations themselves, especially during down cycles. Builders FirstSource announced Monday that it will acquire ICG for an undisclosed price. ICG, which manufactures, sells and installs off-site components like wall panels and roof and floor trusses, operates a 400,000-square-foot Florida plant and a roughly 200,000-square-foot facility in South Carolina. For PulteGroup, the third-largest homebuilder by sales volume in HousingWire’s Homebuilder Rankings, the deal frees up capital for the company’s core homebuilding competencies at a time when margins remain tight. The builder can continue to utilize ICG’s off-site construction capabilities without carrying the fixed costs and cyclical risks of owning a manufacturing business.For Builders FirstSource, the acquisition builds on its strategy of expanding its value-added manufacturing business and becoming a larger producer of off-site building components. The company posted a net loss in the last two quarter...