Why private homebuilders are getting M&A premiums right now

The surge in homebuilder merger and acquisition (M&A) transactions over the past 12 months raises questions about the potential for more deals, their drivers and their mechanics. Will builder M&A deals continue despite low consumer confidence, elevated mortgage rates, and sluggish new home sales? Could we see a mega-merger among new home sector giants? Margaret Whelan, Founder and CEO of Whelan Advisory, LLC, generously shared her expectations and answered my questions. Margaret and her team expertly advise and support sellers and provide introductions to capital. She has closed 49 transactions totaling $15+ billion in volume over the last eight years, earning a reputation in the industry as ‘The Closer.’ Margaret has qualified insights into builder M&A trends. Scale is the driver behind recent big M&A transactions “Eleven builders exceed 10,000 closings annually, and just eleven major housing markets exceed 10,000 single-family permits annually,” Whelan observes. “Builders seeking greater scale must look to acquisitions.” Sources: John Burns Research & Consulting, LLC; Zonda’s Builder 100 The implication is that scale is scarce, and it’s hard to build from scra...