Gibraltar Industries nearly bagged its biggest deal ever in more than 12 years of aggressive acquisitions, but backed off because it wasn't fully comfortable with the seller, executives said.
The Hamburg-based maker of metal building products revealed Thursday that it had sought to acquire a company of "significant size" during the quarter but didn't finish the deal. Officials would not identify the company, citing confidentiality agreements.
But that decision didn't come without a price. Gibraltar took a charge of $1.5 million in the second-quarter to reflect legal, accounting and other "due diligence" costs that it incurred while exploring the deal.
To be Gibraltar's biggest acquisition ever, the aborted deal would have been larger than its $240 million purchase of Alabama Metal Industries Corp. in September 2005. That deal added a building products manufacturer that had $285 million in annual sales at that time to Gibraltar's stable of businesses.
Chairman and Chief Executive Brian J. Lipke said the company continues to look for acquisitions to "improve the operating characteristics of the business" and strengthen its market position. About 80 percent of Gibraltar's sales come from products where it holds the No. 1 or No. 2 market share.
But he and others stressed that they will remain "strategic and selective" in their choices, even more so given the business dynamics of the market today.
Formerly Gibraltar Steel, the company has increasingly focused on making and selling a broader range of products for the building and automotive markets. However, those businesses have been struggling, as the residential building market faces "a severe slowdown" and the automotive market turned sluggish, Lipke said.
So the company has moved more aggressively into the commercial building and industrial markets, while also expanding its international presence, through a series of acquisitions. It now employs about 3,600 employees and operates 83 facilities in 26 states, Canada, China, England, Germany and Poland.
Gibraltar has made 31 acquisitions in the last 12 years -- including two in the second quarter -- but goes through "very comprehensive and diligent" reviews every time, Lipke said on a conference call with analysts after the company released earnings. Gibraltar looks for businesses of all sizes that will help improve its operating performance and generate higher profit margins and returns on capital.
But even though it spends money on such reviews, he said, it won't proceed "if it's not going to be right."
"We took a look at this one and there were some factors involved that we could not get our arms and head around and we decided it was best for shareholders to walk away from the deal," he said.