Acquisition is the mood of the moment. The latest, announced late on Wednesday, saw Polyframe acquire the Customade Group. You can read more on that and my own personal thoughts on that here.

You may have noticed that there the odd “super-group” knocking about the industry at the moment. Think we can call Polyframe one now, given their hat-trick of acquisitions since their mid-2016 MBO. DW3 Products Group, owners of Solidor, Nice Door Panels, Window Widgets and Residence Collection fit into that bracket. There’s the Synseal Group. There’s Epwin and Latium.

There are established super groups and there are new ones emerging. And they only look set to get bigger. The industry is undergoing a major phase of consolidation. It’s being re-sized according to the amount of business being done. Companies are being bought by bigger companies and being merged into bigger portfolios.

Myself and Nick Dardalis of Aluminium Trade Supply were talking about this the other day, and there are multiple facets to this and it’s effects on the industry.

Reduced competition

There is no getting away from this fact, that the more businesses take each other over in our industry, the amount of competition diminishes. If you’re the one doing the takeovers, there is absolutely no reason for you to worry about that. Why should you? You’re doing what you feel is best for your business.

However, if you’re a customer buying from that business, an installer for example in our scenario, and you’re looking at the market for new options and new directions, less competition is not a good thing. Where do you find the unique selling points and killer products if there less and less singular places to buy that from? Answer is you don’t. You have to pick from a constantly reducing menu, which is not the most attractive proposition.

The dynamics here are simple, the more our industry mergers, the less competition there is. That said, there remains competition within super-groups, where fabricators and installers can trade within the group they buy from. But in terms of true company vs company competition, there is certainly less than there was even just a few years ago.

A stifling of innovation?

It can be said that the more an industry consolidates itself, innovation suffers. Well, I would disagree. The past few years has been the proof against this.

This is the most advanced we have ever been, in terms of energy efficiency, aesthetics and security. You don’t get to this position without innovation. And all this has happened in a period of extreme consolidation. The past couple of years has seen a number of big acquisitions, and yet, our products have never looked and performed as well as they do now.

That’s because although a group might become bigger as they buy up their competition, that company v company mentality within the group never really goes away. That is something that drives progress forward. The urge to do better than the other guy, whether you’re part of a bigger group or not.

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Good or bad for jobs?

There’s two ways you can look at this.

On the one hand, we see on a regular basis, in this industry, where once a company has taken over another and got it’s feet under the table, “streamlining” happens and jobs fall by the wayside and facilities become combined as the merge begins to take shape. Those losing their jobs to streamlining don’t like it, but from the perspective of the business, the new group has to run as efficiently and profitably as possible. Often, people do get offered to be sent to another part of the business, or are offered redundancy.

One the other hand, vertical integration, the act of a fabricator buying the installer who already buys from them, for example, is one way of actually safeguarding jobs. In this, the installer gets direct financial support from their fabricator and can keep the light on and the doors open. In return, the fabricator guarantees business comes to them as they ensure the installer they have just bought always buys from them.

I personally think we’re going to see even more vertical integration as we move forward, as fabricators seek to access the residential market in a more direct manner, and installers look for financial backing and relationship support in their search for growth and expansion.

Consolidation will continue

Whether you approve of this era of acquisitions or not, it is only going to continue. The industry has to become smaller because in parts it is bigger than it needs to be given the amount of business flowing in that part of the market. That means bigger companies will absorb their threats as well as synergies. It means raw competition will reduce and become more focused only in certain areas. It means jobs may be lost. It means competition between super-groups will advance products in their own portfolios.

What it also means is that our economy really does have to perform and perform well. Debt will be playing a big part in glazing industry acquisitions. As nice as it would be, it’s not all free cash that is paying for these companies. Should our economy hit a real speed bump, like another global recession or financial crash, a lot of these deals could unravel as revenues fall and those loans are unable to be serviced.

I don’t think Brexit will actually be a cause for too much concern. Even if the economy takes a leg down, our industry should still be mostly fine and dandy as it comes out the other end. It is things like another Lehman Brothers moment, or worse, that could do real damage.

The acquisitions will continue. Consolidation will continue. There will be surprises. It will make for great content on DGB! Most importantly, it’s going to reshape our industry, perhaps brutally, over the next few years.

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