Private Equity in Roofing: What Investors Must Know About This Resilient Sector

The roofing industry has been an active sector for private equity investors for years. As a non-discretionary item, roofing is less exposed to the ups and downs of the U.S. economic and construction cycle than most building product categories, making roofing distribution and installation services relatively “recession resistant” sectors.

At Bantry Partners, we have deep expertise in the roofing industry from advising multiple PE investors on dozens of deals in the sector and working directly with roofing businesses on growth and GTM strategy. Here are some key lessons:

MOST ROOFING DEMAND IS REPAIRS AND REPLACEMENTS

Unlike most building product categories, only a small share of U.S. demand for roofing materials comes from new construction projects. 70-80% comes from replacing or repairing roofs on existing buildings. For building owners, roofing is a non-discretionary category – unlike siding or fencing, roof repairs cannot be delayed or deferred, and insurance policies provide good roofing coverage. As a result, re-roofing (as opposed to new roofing) is by far the biggest segment of the market and a key reason why PE investors looking for more “recession resistant” parts of the building products industry find roofing appealing.

WEATHER IS A KEY DRIVER

But not all re-roofing work is regular routine maintenance - a sizable chunk each year is weather-driven and impossible to predict. In many parts of the U.S., hailstorms are the biggest cause of roof damage to buildings and a key driver of roofing demand. Windstorms can cause severe damage to roofs, as do ice dams in the Northern states. For PE investors, it is critical to understand the volatility this brings to the roofing market each year. Assessing the impact that weather can have on a roofing business in its local market should be a key element of any diligence. In one deal that Bantry assessed, the target – a roofing distributor in Oklahoma – saw its revenues and EBITDA treble in a single year. Our diligence found that this was due to a spike in local demand from a very active storm season. As expected, the following year the target’s business returned to its previous norm.

DISTRIBUTOR COMPETITION IS FRAGMENTED AND INTENSIVE

The competitive landscape for roofing distributors is fragmented and noisy. At the top of the pyramid are players like ABC Supply, Beacon (now “QXO”), and SRS Distribution who continue to expand through acquisitions and greenfield branches. PE has been an active participant in the roofing industry for decades, with Berkshire Partners’ sale of SRS to Home Depot in 2024 the most recent example of a large exit. But as in all building product categories, the landscape comprises more than just roofing specialists. Many generalist building product distributors sell roofing and are big players in any given U.S. metro. Home Depot and Lowes are large players in the residential roofing market. While their roofing lines are limited and contractor services lacking, the Big Box’s scale and pricing make them a key factor in every U.S. metro.

MARKET STRENGTH IS BUILT FROM THE GROUND UP, NOT THE TOP DOWN

From advising multiple roofing distributors, Bantry has demonstrated the correlation that exists between market share and margins. But critically, in roofing this requires market share leadership at a local, not just national, level. Given how supply chain relationships work in the roofing industry, the leading distributor in a given local market will have better negotiating power with manufacturers and a better cost position than its competitors. Any market assessment for a roofing distributor must start with assessing its market share position in each local market it serves – not just looking at the overall national picture.

STRONG REGIONAL AND LOCAL BRANCH MANAGEMENT IS A KEY SUCCESS FACTOR

As with any building product distributor, roofing distributors need high caliber local managers to be successful. A competent branch manager must excel at multiple competencies from customer service to sales and sales team management, supply chain and logistics to pricing, and recruiting and training. They must have a deep understanding of their local market – the mix of customers in residential and commercial roofing, product trends, and competition. This is another reason why we believe that for building products distributors, true strength comes from the bottom up, not top down.

Interested in learning more about Bantry Partners’ expertise in roofing and building products distribution? Contact us at info@bantrypartners.com

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