Service Partners is the largest distributor of residential fiberglass insulation and related contractor accessories in North America with a good strategy in a traditionally low-margin, cyclical business. The Company recognized that the manufacturers of fiberglass insulation maximize their return on assets by maximizing capacity utilization, creating a situation where attractive prices are available to customers purchasing large volumes. Service Partners responded by consolidating smaller distributors, resulting in substantial economies of scale in procurement and logistics, contributing to attractive margins.
In just two years, Service Partners was able to acquire 28 distribution and contracting companies. However, Service Partners' managers needed more capital to fulfill their plan's potential. They also needed an investor who understood their industry and shared their vision. They found that with Monitor Clipper Partners.
In October of 2000, Monitor Clipper Partners invested in Service Partners, guiding the Company's acquisition of 14 additional companies and its expansion into the important West Coast market. As a key strategic partner, MCP helped the Company refine its growth strategies. When Service Partners was presented with a significant opportunity to acquire a leading contracting company, Monitor Clipper Partners helped the Company analyze the implications of the acquisition: what it would do to its risk profile and how the acquisition would position it as a potential acquisition candidate itself further down the road.
Monitor Clipper Partners also helped Service Partners enter the lending market at a time when many people were concerned that the housing market had peaked. MCP had a high degree of confidence that the housing market still had plenty of growth. We also helped develop detailed contingency plans to maintain the health of the Company in the event that the market softened. Service Partners credits MCP with the fact that it was able to obtain financing in an environment where a tremendous amount of credibility and commitment was required to do so.
In September of 2002, Service Partners was acquired by Masco Corporation, a logical strategic partner for the business. During MCP's two-year ownership period, Service Partners' profitability increased by 37 percent and its equity appreciated nearly 150 percent.