It's only August, but home building's boldest move in 2015 thus far is the merger that will combine Ryland and Standard Pacific into CalAtlantic, a $5.2 billion enterprise, operating in 17 states, 41 market arenas, 538 active communities, and 74,000 lots owned and controlled.
The merger's inner logic--pairing organizations whose customer segments dovetail, and whose geographies align and whose financials can probably stand up to at least a few years of battering by goodwill and a host of integration costs--is clear. Intentions stated as they now have been, one can only wonder what scenarios may have opened to each organization had they not chosen to wed. The challenge now: to move from a "merger of equals" to unity.
It will likely still be some months before Securities and Exchange Commission and other legal processes and details have been resolved to lawyers' and agencies' satisfaction, leading to a close date. Meanwhile, integration. Making the nation's 4th largest home building company from a blend of the 5th and 11th largest is no mean feat, especially with promises to begin saving $50 to $70 million in annual operational costs by late next year.
The new moniker submerges two five-decade identities into a single corporate blend that its executive managements believe will serve stakeholders well. The choice of CalAtlantic, with its grand if not grandiose suggestion of corporate-style geographical sweep and manifest destiny, suggests that its management aims to tell Wall Street, its combined employee associates, its network of business partners, land sellers, trades and other vendors, and down the pipeline, home buyers a clear story of who it is, who it has been, and who it wants to be as a company.
Choosing a name was an important line in the sand for this type of public to public merger in home building. A more important line in the sand now is living up to a name in a way that confers trust, confidence, and integrity among all of those whose business and personal interests intersect with it. Ryland and Standard Pacific have those traits in their respective histories, dating from 1967 and 1965, respectively.
What's admirable from the get-go in the choice of corporate brand is the sense that its folks are saying with it, "we're thinking big. We're now a grown-up in company with the likes of D.R. Horton, Lennar, and Pulte, and we're going to behave that way."
Good starting point. Between the mid-June announcement of the deal and the closing, executive management has a critical agenda, and execution is everything, as they visit the respective Ryland and Standard Pacific troops, tell them the story, and go about the painstaking--and sometimes painful--task of selecting out who'll be part of the new, unified organization, and who won't.
We're picking up a strong vibe that talk of an east-coast corporate headquarters type of presence may ironically bring the company back to Ryland's Maryland-area roots.
We're not picking up a whole lot more about how the corporate ranks--marketing, sales management, finance, and other disciplines might be blended and filtered and streamlined into who CalAtlantic will be.
We do know that many critical decisions--and the manner in which those decisions are taken--tend to come down in the pre-close, integration process.
Out of it all, we'll have a new brand in home building. A good story for tomorrow.