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Acquisition Growth Strategy – Why Has It Paid Off for Lennar?

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Apr. 1 2015, Updated 5:05 p.m. ET

Aggressive acquisitions – a way of life for Lennar

Since 1980, Lennar Corporation (LEN) has grown aggressively, mainly through its acquisition growth strategy. It started in 1979 when Lennar acquired Mastercraft Homes and Womack Development Company to move out of its local market to Phoenix, Arizona.

During the 1980s and 1990s, the company expanded its operations in several markets, including California, Florida, and Texas. It did this in organic as well as inorganic ways such as the acquisition of Pacific Greystone Corporation in 1997. In the same year, in order to focus entirely on homebuilding and mortgage services, the company spun off its commercial real estate operations as LNR Property Corporation.

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Acquisition of U.S. Home Corporation

The acquisition of U.S. Home Corporation for $1.1 billion in 2000 made Lennar (LEN) a major national player. This expanded Lennar’s (LEN) operations into New Jersey, Maryland, Virginia, Minnesota, and Colorado and further strengthened its position in other states.

From 2002 to 2005, Lennar (LEN) pursued aggressive expansion strategies further. It acquired several regional homebuilders, entered into new markets, and further strengthened its position in several existing markets. From 2010 through 2013, the company started and expanded its homebuilding operations in Atlanta, Oregon, Seattle, and Nashville.

Acquisition helps boosts revenue

Overall, Lennar (LEN) has acquired more than 35 companies in its lifespan. In the process, it has become the nation’s second largest homebuilder in terms of revenues. It currently operates in 18 US states.

Acquisition also helps Lennar acquire prominent sites at competitive rates. The company is expected to follow inorganic growth strategies in the near future in order to maintain its growth momentum and to thwart competition from big players such as D.R. Horton (DHI), PulteGroup (PHM), Toll Brothers (TOL), and NVR, Inc. (NVR).

Because of Lennar’s growth momentum, homebuilder ETFs such as the SPDR S&P Homebuilders ETF (XHB) and the iShares Dow Jones U.S. Home Construction Index Fund (ITB) have taken significant stake in Lennar.

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