Technology

Volumetric Building Cos. Clinches A Global Foothold With Merger

Here's why the VBC-Polcom merger, announced today, signals the emergence of a new power player in the coming industrialization of residential construction, design, engineering, and value creation.

Technology

Volumetric Building Cos. Clinches A Global Foothold With Merger

Here's why the VBC-Polcom merger, announced today, signals the emergence of a new power player in the coming industrialization of residential construction, design, engineering, and value creation.

January 12th, 2022
Volumetric Building Cos. Clinches A Global Foothold With Merger
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No, Katerra is not being resurrected. However ...

Here's the backdrop.

The News – a global building tech merger

Philadelphia-based Volumetric Building Companies, which has evolved into a stalwart of applying advanced building technologies to real-world vertical multifamily community projects, is merging with Polcom, a Gdansk, Poland-based leader in industrialized, modular building and interior design solutions, with a current market footprint in the hospitality business.

Here's the official statement nut-paragraph roll-up of the deal, concluded Jan. 1, 2022, and announced this morning.

The global company will be headquartered in the U.S. and led by Vaughan Buckley and his leadership team in Philadelphia. The firm delivers highly efficient and cost-effective construction projects with a lower environmental impact than any other solution on the market. The combined company will have more than 500 employees located in over 1.25 million square feet of manufacturing space located in 2 continents, with a pipeline of business in excess of $1 billion. Polcom, a new division of VBC, will continue to operate all of its current facilities after the merger, and expansion is expected.

Reasons the merger at least begs a question to be addressed regarding more than nuanced hints of a Katerra-2.0-in-the-making – after the Silicon Valley-styled residential construction company's vaunted collapse in June 2021 – include these four shared characteristics:

  • As The Builder's Daily noted in August 2021, VBC acquired the assets of Katerra's 577,000 square foot Tracy plant through the United States Bankruptcy Court for the Southern District of Texas, for a reported $25 million, about 42 cents on the dollar for the Katerra assets.
  • VBC's stated three-plus year financial goal – by 2025 – is a $1 billion book of business, establishing "arrival" as a unicorn construction sector game-changer, capable of igniting transformational change in the sector's prevailing processes and practices.
  • An investment giant with trillions [with a "tr"] of dollars in portfolio assets – a la Softbank, in Katerra's case – is a major stakeholder in both VBC and Polcom, and has played a role in the combination.
  • The merger – with a Europe-based manufacturing and construction and design operating arena – also harkens to the global ambition, market-hedge strategy, and client and business ecosystem Katerra proposed to feed and feed off as a partner, client, and vendor.

Notwithstanding the notes of a Katerra-redux deja vu, the VBC-Polcom alignment stands quite apart from the multi-layered value stream, business model, operating and strategic sourcing template, technology framework, and real-world growth cadence of the fallen giant.

Most noteworthy among the contrasts, Katerra – at the end of the day -- came to life as a technological hypothesis and breathed as an investment thesis, while VBC evolved its DNA and its array of solutions in the messy real world of job sites, projects, customers, trade crews, budgets, deadlines, and business profitability accountability.

VBC's "complexity simplified" promise dwells – pragmatically, but boldly – in the domain of construction, real estate, engineering, architecture, product and materials, and skilled people, not in a pie-in-the-sky realm of "making a better world."

VBC ceo Vaughan Buckley speaks of the practical, logistical, operational, and competitive benefits of the merger – which will mean integrating Polcom and its brands, its three Europe-based manufacturing facilities, and organizational structure under the VBC enterprise umbrella – strictly in terms of capability, a watch-word of pandemic era construction dynamics.

The combination – which Day One gives us an unfair competitive advantage of pivoting to a global reach on both the supply and sourcing front as well as worldwide client network, and immediately means that our U.S. domestic capability, with Polcom's steel modular structural systems allow us now to build up to 35 stories high – comes with a fundraise of $100 million in financing across the entities," Buckley tells The Builder's Daily. "This is a big step forward in our progress toward the $1 billion business hurdle, a market share saturation point that gives us meaningful impact in capability."

Why the VBC-Polcom combo matters in early 2022

Explicit and between-the-lines take-aways from what amounts to a powerful play in industrialized residential construction commitment and investment in Vaughan Buckley and the time-tested VBC business and operational plan.

Underlying each of these take-aways runs a structural challenge that has either constrained, restricted, or negated prior attempts to transform residential construction and usher the industry into the 21st Century.

That challenge takes the form of a three-headed hydra – where building technology, local and non-local policy and regulation, and real estate capital and property valuations, each with an entirely separate domain of complexities – that interact and conspire with one another to beat back attempts at progress.

Solving for the complexities of one or two of the three domains – necessary but not enough – will founder on the shoals of the third. What Buckley and his VBC team recognize over the more than decade of experience, operations, course-corrections, and adaptations they've navigated is how to take on the tangle of construction, policy, and capital investment, and align them in the field and as a going concern.

One of the exciting aspects of the combination as a financial event is that it allows us to deploy some of the $100 million in funding to allow VBC to acquire and develop a portfolio of its own real estate properties, which will empower us to take our research and development platform, where we can develop new products, and we can really innovate in the space," Buckley says.

Here are the key take-aways to note:

  • Timing – the scaling of VBC with the integration of Polcom's infrastructure and book of business gives the company greater clout – by virtue of business volume, project calendar visibility, locational concentration, etc – in a building, materials, transport, and assembly supply chain expected to experience turbulence for a foreseeable future.
  • Scalability – Blended into the manufacturing volume capability that the VBC-Polcom's 1.2 million square feet across five facilities – including three currently operating in Europe and two U.S. fabrication plants, one of them being the just rebooted Tracy, Calif.-factory – is a streamlining of both architecture-engineering-and-construction complexity as well as code and inspections complexities for structural components. "Getting those players to integrate is a movement in its infancy," admits Buckley. "We're trying to subtract complication and add meaningful benefits – i.e. local code approved structures and systems – to allow each discipline to do its best in creating value."
  • Visibility – Buckley notes that transparent insight into what has gained traction, worked, and excited both vendors and clients in the Polcom empire now gives VBC a richer knowledge base and library of structures, systems, processes, and pathways in North America, and vice versa. "The information sharing with Europe's best practices and expertise in engineering, design, and building solutions – and the ability to port what we do well here in the U.S. across to Europe – gives us court vision into trends, market forces, etc. we would not have otherwise."

What's less evident as a benefit driver of the deal comes through in the precise nature of what Polcom has excelled in, not just as a manufacturer and master of logistics, construction management, and local zoning, etc.

It's the DNA of hospitality as a business culture, its deep connection to customer care and service, and its early-detection radar of trends in smart technology, UX, healthy buildings, environmental impacts, etc., that now weave into a VBC strategic and operational model that has found ways to prosper and push its technological edge forward to where the 2020s signal a step-change in opportunity.

The economics, the manufacturing hubs, the enormous business and operational relationship assets, and the vision all align," Buckley says. "You can expect to see us on the forefront of a space in transformation, and it'll build off our skill and focus on partnerships on the ground, with architecture, engineering, construction, and manufacturer capability. And we've got a great team in place to build that capability.

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ABOUT THE AUTHOR

John McManus

John McManus

President and Founder

John McManus, founder and president of The Builder’s Daily, is an award-winning editorial, programming, and digital content strategist. TBD's purpose is a community capable of constant improvement.

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John McManus

President and Founder

John McManus, founder and president of The Builder’s Daily, is an award-winning editorial, programming, and digital content strategist. TBD's purpose is a community capable of constant improvement.

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