Background and challenge
A leading manufacturer was on the verge of acquiring a metal roofing company when it enlisted L.E.K. Consulting to propose an optimal strategy for achieving profitable growth within its roofing business — all while managing a diverse set of assets with unique geographic footprints and selling approaches.
Much like other manufacturers capitalizing on niche markets, our client targeted high-end roofing. This sector, however, has struggled with the challenge of penetration for years. High upfront costs and low consumer comfort with non-asphalt options have left manufacturers reluctant to adopt specialty materials. Additionally, our client faced its own key challenge: positioning. To what extent was the client situated to solve this conversion inertia? And what value would there be in bringing specialty roofing materials to market?
Approach and recommendations
To tackle these challenges, our team developed a detailed market fact base to power a bespoke growth strategy that:
- Bundled specialty roofing materials in a single portfolio. Rather than focusing on a single material, as is common with established players, our client could offer an array of materials to appeal to a wider swath of homeowners.
- Mitigated potential risks of the client’s broad portfolio. Instead of organizing around material types, our client could develop a stand-alone roofing business unit with a dedicated sales force and a unified channel approach.
Our client gained confidence with a multimaterial roofing strategy and proceeded with its acquisition. Consequently, we were engaged to perform diligence on additional acquisition targets, support consolidation of manufacturing operations across the legacy business and acquired assets, and develop a go-to-market sales strategy.
In the year before engaging L.E.K., our client generated less than $1 million in profit from its limited roofing offering. Our engagement boosted growth substantially ― all in the first two years. The company saw:
- A sixfold increase in roofing revenue
- Significant margin expansion
- The creation of a stand-alone business unit
- A roughly 75% increase in share price
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