Home building merger and acquisition (M&A) activity has been steady for the past several years. Builder magazine reports that the appetite to grow via merger is particularly important this year amid a slower than typical spring selling season and an environment where organic growth is challenging. Public and private buyers, as well as foreign companies, are all looking to grow market share via acquisition.
Mergers create opportunities for small, mid-sized, and regional homebuilders to grow and expand into new markets putting them in a better position to compete with large public builders. A recent example is the acquisition of Dallas-based Olivia Clarke Homes by Austin-based Scott Felder Homes.
Other investors seek to capitalize when companies fail to launch in the publicly owned maketplace. California-based New Home Co. was a public company that went private when it was purchased by the New York City private equity firm Apollo Global Management in 2021 for 40% of its book value. And now, two years after Landsea Homes moved its headquarters to Dallas from California in 2023, New Home Co. will take Landsea private in a deal that values the publicly traded builder at $1.2 billion (60% of its book value). Builder reports that the deal brings together the No. 33 (Landsea Homes) and No. 62 (New Home Co.) companies on the 2025 Builder 100 list. “The combination of the two companies will create an asset-light home builder with nearly 4,000 annual closings, which would rank 25th on the 2025 Builder 100 list,” says Builder.
The Federal Trade Commission (FTC) and the Department of Justice (DOJ) review all M&As exceeding $101 million. Of particular interest to homebuilders is “the 30% rule,” which states that mergers resulting in a combined market share of 30% or higher on a market-by-market basis may be “impermissible.” Based on analysis by John Burns Research & Consulting of 2024 sales in the top 15 US markets, no builder has over 30% of new home sales. However, Lennar Corp. holds over 25% of the new home sales in the markets of San Antonio and Tampa.
