IBMG

Community Building: Interview with Group CEO, Martin Stables

The Independent Builders Merchant Group is a powerhouse for the construction sector, made up of a host of local businesses supporting local communities.

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IBMG (Independent Builders Merchant Group) is the parent organisation for 20 independent brands that serve the building industry across the south of England and Wales. “We supply the industry from Penzance to Thanet, and as far north as Coventry,” says Martin Stables, Group CEO of the Independent Builders Merchant Group.

The Group’s story begins in 2018 when Cairngorm Capital Partners made an initial platform investment in the then £80 million revenue, Southeast-based Parker Building Supplies and took the first step in building what became Independent Builders Merchant Group.

“We are fortunate to be backed by genuinely actively involved investors,” Stables tells us. “They are all very supportive of what we do and how we go about delivering our strategy. The depth of funding and experience they bring is a huge asset for us. It lets us move at pace on many fronts while remaining focused on our core activities.”

When we speak with Stables, it is only recently that the company announced that it has raised additional capital investment with the support of its founding sponsor, Cairngorm Capital Partners. The new investment comes from funds that have been managed or advised by the leading investment firms Ares Management Corporation and Farallon Capital Europe LLP.

“We are thrilled to partner with Cairngorm Capital and IBMG to support the company’s next phase of growth,” James Kim, a Partner at Ares, has said. “We are impressed by IBMG’s talented management team and performance since inception which speaks to their strong market positioning and high-quality operations. In addition to the funding provided, Ares looks forward to sharing its operational and strategic resources to help support IBMG accelerate value creation for all stakeholders.”

The Independent Builders Merchant Group’s clear value creation strategy and strong management team have attracted capital from these investors to create a solid platform for continued growth, new market entry and further mergers and acquisitions, building on the strong growth the company has already enjoyed since its inception as a standout builders merchant platform for the entire South of England.

“We are excited by the partnership with IBMG, the firm has proven resilient in recent months, has an excellent leadership team, great brands and a focus on what matters to their core customers,” said Philipp Strepp, Managing Director at Farallon. “We are delighted to support IBMG’s team on what is a clear strategy to deliver a best-in-class customer proposition and continue to consolidate their part of the market.”

Over time the Group has acquired 25 established businesses and opened numerous new branches while experiencing sizable organic growth to the £650 million turnover it enjoys today.

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A Local Perspective

The business comprises 180 branches across five divisions. A heavy builder’s merchant with 86 branches makes up 60% of the Group’s revenue, while 15% of its revenue comes from the Group’s 46 plumbing and heating bathroom specialist branches. Another 7% of the Group’s turnover comes from the Group’s 23 electrical branches and a further 10% from its 21 specialist roofing branches. The rest of the Group’s revenue is generated by its three timber sites with bespoke milling capabilities and an online business Trading Depot.

But while the company’s reach has extended across half the country, it continues to work from a defiantly local perspective.

“We are protective of our brands and their strong history; heritage is very important to us. Kent Blaxhill has traded for 186 years, RGB for 174, and our youngest business is now 11 years old. The Group has some 1313 years of trading heritage behind us, it is a remarkable legacy which we are proud to grow further. We are equally protective of our customers and our teams that serve those customers,” Stables says. “We try to keep everything local because those relationships are the bedrock of the business.”

Between its customers and branch teams, IBMG has built a community within the construction sector, fostering the Group’s brands and their independence.

“Our customers are primarily local independent businesses themselves, so they value that approach,” Stables says. “We provide repair, maintenance and improvement in the domestic environment.”

That closeness to local communities informs how Independent Builders Merchant Group does business. Local communities take pride in what makes them unique, forming bonds and connections that last. This is reflected in the construction materials that build and house those communities. The materials that the Group provides are the building blocks of those connections, so they need to be done properly. But as well as focussing on the local environment, the Group also takes a wider perspective.

“The final bit of jigsaw is that we are aware of the need to reduce societal drain on the planet’s resources,” says Stables. “We have a significant part to play here. It is a global challenge, but one with local solutions.”

Independent Builders Merchant Group is uniquely placed to provide those solutions. It is one of the few firms that can support a project from footings to ridge tiles, supplying every specialist trade in between. It is the only company of its size with the specialist knowledge necessary to carry out those trades.

“Generalist merchants in our sector don’t have that depth of knowledge, while specialists can’t bring the breadth of those trades together,” Stables points out. “We can advise on solutions that work both locally and traditionally, and how to integrate modern solutions into the project for optimal results. We have the best of what our industry has to offer. We work with local people who care about their community and its projects. It gives us a proposition that is pretty difficult to beat in the marketplace.”

 

A People-First Business

As a company with connections to businesses and communities across the South of the UK, IBMG has had a close-up view of how those communities have been affected by the various crises the UK has seen over the last few years.

“We all lived through Covid, the impact of Brexit on the workforce, and then more recently we have seen Trussonomics, which as a nation we are still striving to recover from,” says Stables. “And though the RMI and Housebuilding markets fight to recover from those shocks, we have navigated those challenges with aplomb, learning and improving.”

But among all the challenges the Group has faced, one of the biggest has been that the firm can be a victim of its own success. The Merchant Group has expanded rapidly, acquiring many other businesses and brands along the way, and integrating all those businesses into one company is a big job.

“We are a complicated and symbiotic ecosystem of people and processes,” Stables points out. “Our people are the best in the industry, just excellent at what they do. But when we buy new businesses, we have to ensure that our processes are consistent. Showing people the best processes should be straightforward, but people are often resistant to change. As individuals, we only know what we know, sharing that there are better ways to get things done and keying into that has become a constant for us as a group.”

The Group has integrated 25 businesses in a relatively short timeframe, and while best processes are always the goal, it has also required flexibility.

As Stables tells us, “We do not have a one-size-fits-all franchise model. We seek out businesses and empower their people to choose the best processes. They act as entrepreneurs. That has yielded the best results most rapidly.”

Once IBMG acquires people, it tends to keep them, boasting a low turnover compared to the rest of the industry.

“We acquire brands, build upon their hard-earned local reputations and bring growth to those businesses while retaining their independent ethos,” says Stables. “We are a business where the best people really can thrive, because we understand that customers’ first loyalty is often to our people, not always our brands. Lots of businesses try and break that relationship but we recognise and celebrate it.”

 

ibmgRenewed Optimism

The company has not been without its challenges – last year’s market in particular was a difficult one for the entire sector, but despite that, Independent Builders Merchant Group has maintained a relentless focus on customer service, which has paid off in the form of market share and a growing active customer base. IBMG is making major initiatives to consolidate and enhance its supplier partnerships, as well as continuing to invest in people and pricing.

Altogether, this amounts to an enhanced product mix and increased competitiveness, while allowing the company to navigate pressures around volume and deflation. It means that Independent Builders Merchant is enjoying improved trading margins even as the rest of the sector is seeing performance challenges.

As Stables looks forward to the rest of 2024, he is anticipating the launch of new, exciting customer propositions around renewables and sustainability, as well as an expansion of the Group’s independent brand network through new branches and still further mergers and acquisitions, where strategically appropriate.

The growth opportunities are clear for a strong, well-run platform with plenty of available capital, such as the Independent Builders Merchant Group. While others in the sector are working on reducing costs, restructuring, or trying to keep in step with the cyclical housebuilding market, the Independent Builders Merchant Group is concentrating on seeking out ways to grow its offering to local trade customers who can provide consumers with services to enhance their homes.

As Andrew Steel, Managing Partner at Cairngorm Capital has said, “Despite the economic uncertainty of the last 12 months, IBMG’s investment thesis has been strong and continues to meet all our objectives. IBMG has achieved sustained success since our initial acquisition in 2018, becoming the largest independent building supplies merchant in Southern England in under four years.”

Looking forward, in the short term the markets continue to look uncertain, but Independent Builders Merchant Group remains focused on sales, profit margin and market share.

“Particularly over the last 18 months we have launched investments in our technology and management information systems across the business,” Stables points out. “We are bringing new capabilities to all of our teams right across the business, placing us in a better position than we have ever been as the market accelerates in the coming months.”

The company continues to look like a strong investment for Cairngorm, Ares and Farallon thanks to its strong, locally established merchanting brands that can offer best-in-class service to a loyal customer base. Moving forward, there are big plans for growth, but the Group will continue to benefit from an integrated and sophisticated centralised infrastructure that allows it to offer a uniquely winning proposition with the customer at its core.

In terms of further community building, Stables ensures IBMG is thoroughly engaged with the Industry Trade Association, BMF (Builders Merchant Federation).  The federation has over 900 member companies, representing £45.3 Billion of contribution to the UK economy.  IBMG play an active role in many of the association’s forums & committees and have won awards for their Learning & Development programs.  Stables will speak at this year’s BMF Conference in September, sharing his views on the sector, how IBMG thrive and also play a part in wider BMF campaign to make a Material Difference to the Skills Shortage that the industry faces throughout the building materials supply chain.

As Adam Watson, Investment Director at Cairngorm Capital has pointed out, “Securing further investment from such respected partners will ensure the business is in an advantageous position as economic conditions improve during 2024 and competitors entrench. IBMG’s performance has proven robust during challenging markets, while management remains agile and proactive in seeking growth opportunities and disrupting new markets.”

It will be exciting to see just what opportunities and market disruption the Independent Builders Merchant Group can leverage during the second half of 2024, and beyond.

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