The M&A Market for Tile and Stone Companies is Poised for a Strong Recovery in 2025, Driven by End-Market Improvement, Interest Rate Decline, and Pent-up Demand
- Even though the M&A market for Tile and Stone companies was sluggish in 2024, we still saw some notable transactions. In the last two years, private equity and strategic buyers have largely been on the sidelines. Buyers have been more targeted in their M&A strategy, seeking companies with high repair and remodel exposure and selectively filling geographic, product, and customer gaps in portfolios. Notable M&A transactions include Mill Point Capital’s formation of International Designs Group (“IDG”) through the acquisitions of Cancos Tile and Stone (“Cancos”) and Construction Resources; Paceline Equity-backed AHF Products’ acquisition of Crossville; Transom Capital-backed Galleher’s acquisition of Virginia Tile; and The Home Depot’s (“THD”) acquisition of IDG.
- Macro and sector-specific challenges slowed the pace of M&A. Despite record level of “dry powder,” private equity buyers waited to see the impact of higher interest rates on markets and whether the Federal Reserve can engineer a “soft landing.” Lender reluctance to finance acquisition of building products companies steered private equity firms towards other industries. Strategic buyers faced business-related challenges, having to navigate through inventory de-stocking, cost inflation, freight cost volatility, and softening consumer demand. These business-related challenges often manifested themselves in companies that were being sold. As performance weakened in 2023 and 2024, buyers focused on the potential depth of decline. Uncertainty around performance created a wide “bid-ask” spread between buyers and sellers, causing companies to put M&A transactions on hold.
- 2025 will see a strong rebound in Tile and Stone M&A. The last two years’ slower pace has created pent-up demand for Tile and Stone M&A. Private equity firms with Tile and Stone portfolio companies continue to want to scale and are now two years behind on their investment theses. Aging founders that planned to sell are also two years behind and have more urgency. With the Presidential election in the rear-view mirror and the Federal Reserve beginning to cut rates, consumer confidence, construction end-markets, and acquisition financing environment are all set to improve. If the new administration can reach detente in Ukraine and the Middle East and reduce government “red tape”, stars could align, fostering a highly favorable environment for Tile and Stone M&A. Brad Jacobs and QXO’s reported bid to acquire Beacon Roofing Supply, although not a Tile and Stone company per se, may be a harbinger of an exciting 2025.
- Potential M&A transactions to look for in 2025. Irrespective of market conditions, THD may want to divest Cancos, a tile distributor focused on homeowners and architects and designers on Long Island, as THD acquired IDG to increase connectivity with contractors and multifamily property owners and managers. M&A involving private equity owned companies will be more dependent on market conditions. Based on a typical investment horizon of three to five years, private equity owners of Architectural Surfaces Group, Lunada Bay, Mosaic Companies, and Paramount Global Surfaces may be eyeing exits. Potential risks to a more robust deal-making environment include weak or no market growth, tariffs on Indian tile, trade war with China and other countries, and impact of silicosis on the quartz supply chain.
As a trusted advisor to owners and executives in the Tile & Stone space, we leverage our unmatched industry knowledge and M&A expertise to achieve best-in-class outcomes for founders and owners. We welcome a confidential conversation to discuss your options and strategy in this rapidly evolving market.
The International Surface Event 2025 – Las Vegas: We would love to see you at The International Surface Event in Las Vegas on January 28-30, 2025. If you are interested in an on or off-site meeting, please reach out to me at [email protected] or call at 551.795.5725.