This story was originally published in Builder.

One of home building's present-day, real-life disruptive innovators is at it again.

Berkshire Hathaway's Clayton Properties Group--which made its name on conventional home building's fringes as American manufactured housing's largest player--just propelled itself into a top 20 single-family for-sale home building enterprise, with the acquisition of Irmo, S.C.-based Mungo Homes. Mungo--which operates in eight Carolinas and Alabama markets--completed and delivered 1,752 homes on revenue of $495 million, per our 2017 Builder 100 data, and is said to be on pace to close on 1,900 this year.

The purchase of 65-year-old, multi-generational family-run Mungo--Maryville, Tenn-based Clayton's third private home builder acquisition in 2018, and 8th firm since it bought Georgia operator Chafin Communities in 2014--is Clayton's largest yet, and now gives Clayton an 11-state footprint: Alabama, Colorado, Georgia, Indiana, Kansas, Missouri, South Carolina, North Carolina, Tennessee, Texas, and Utah. Total new home deliveries among Clayton's 8-company portfolio are on pace to reach 4,200 deliveries in 2018, which would catapult Clayton from No. 29 on our Builder 100, into the top 20 overall.

While size and volume--concentrated as it is within an operating sphere that encompasses the U.S. western and lower Midwest heartland and Southeastern markets--counts as a benefit and business value-builder in itself, given Clayton's ability to leverage that deep local scale into operational efficiency, procurement clout for both labor and materials, and sales and marketing local knowledge, even bigger, more disruptive forces are at work.

  • First, who--five years ago--would have imagined that a player out of the manufactured home arena would have emerged among home building's giant, site-build, high-volume builders?
  • Second, Clayton's geographical empire consists primarily of heartland--second- and third-tier economy--housing markets, markets that have been less prone to accelerated price increases over the past five years, and possibly, more resistant--economically--to the market slowdown taking hold in home building's expensive, mostly coastal markets.
  • Third, the lion's share of Clayton's customer-segmentation exposure, through all eight of its acquired site-build companies, is to entry-level--starter, first-time buyer, and rental refugee--buyers, where both the pent-up demand, current supply of inventory, and pace of absorptions continue to run strong, short, and hot.
  • Fourth, and perhaps most importantly, in that regard, the Berkshire unit--one of a half-dozen Berkshire Hathaway companies positioned in the building supply and construction and real estate technology space--has been working, since its first site-build acquisition of Chafin, on tooling, processes, product development, the home buyer's journey, and operational infrastructure to close the construction technology gap between manufactured home building and higher-spec site-building to even better serve the $250,000-and below market for homeownership.

The latest transaction, which sparked up as a conversation in 2016, and gestated for almost two years before current ceo Steven Mungo considered the timing to be right, checks three essential boxes in Clayton's due-diligence requirements list.

  • First, Clayton executives will only consider a deal if current principal owner-operator executives plan to remain on board, operating the company day-to-day.
  • Second, business cultural compatibility, high-priority focus on team members, and
  • Third, Clayton insists that the track-record and history of the firm clearly shows an ability to have been resilient and sustained itself through the Great Recession.

"We're so excited to have Steven and his team at Mungo join the Clayton team," said Clayton Home Building Group President Keith Holdbrooks, reached at his home on Sunday. "The cultural fit with Clayton is right, given that Mungo's priority focus is on giving its team members and customers a good experience, but it's more than that.

"It's important, too, now that Mungo is part of the family of site build companies, that Steven and that team fit well with our other home builder operators. With the eight companies we've bought, we've brought on 8 ceos and 3 co-ceos; that's 11 top-notch home building operator leaders who are all working on the Clayton team now."

For Mungo, which was advised in the deal by Zelman and Associates, apart from the trust and chemistry it had recognized in Clayton management, timing played a big role in the ultimate conclusion of the deal. Wrapping up the terms and getting settled before the end of 2018, when the outlook for 2019 and beyond is heavily shrouded with uncertainty and some material headwinds as it serves its eight markets in the Carolinas and Alabama, is a win for the Mungo team.

"We've positioned ourselves in our eight-market footprint for a lot of running room for growth as we look to become a top five builder in each of our markets," says Steven Mungo. "We've worked to have the right product position, the right land position, and the right team in place to get to this position, and now, with Clayton's partnership and support, we've ensured we'll have the resources to go for it. Without Clayton, our risk profile might have constrained what we could do, given we'd be cautious about how much of our personal security we'd be willing to put at risk to grow the business. Being part of Clayton gives us the best of both worlds."

That factor--enabling outstanding home building operators to focus exclusively on operations and strategy, and spend less time and energy pursuing the next capital raise--has served as a calling card in each of Clayton's courtship rituals with prospective sellers.

The "X factor" appeal of Clayton to stick- and site-build oriented operators is on another plain altogether. It's the opportunity to leverage vertical integration, factory automation, and large-scale distribution infrastructure to exponentially impact productivity gains in the construction start-to-completion cycle and drive those gains into lower asking prices for home buyers.

"The most exciting thing for us is the knowledge Clayton has of the manufacturing process, their ability to cut down the labor burden, their insight into the most effective way to manage material use, procurement, and installations," says Mungo. "The extent to which we can achieve price points we never would have been able to achieve by harnessing their strengths and integrating them into ours is thrilling."

In fact, Clayton plans to unveil off-site manufacturing support on a major scaled level--for both its site build and manufactured home builders--with a new Southeastern-market facility in the next 12 months.

What was initially only an idea--to disrupt single-family home building by integrating factory-based technologies, procurement, distribution, land acquisition, and customer focus--under the Clayton Homes aegis, will play out over the next 12 to 24 months as a reality. Clayton's Holdbrooks characterizes the excitement this way:

"We were driving Mungo Homes' communities and visiting some of our manufacturing facilities and home builder operations over the past few weeks with Steve, and after the first night on the road with him, he wakes up in the morning and says, 'I didn't sleep a wink last night. I couldn't stop thinking about what we can do with the automation, the factory efficiency, the 20 vertical supply companies, the direct-to-site distribution capability. How much closer we're going to be able to get to our customers!'

"That's what's exciting to us, and to Kevin Clayton as well," said Holdbrooks.

Here's the press statement on the deal from Clayton.

MARYVILLE, Tenn., Dec. 3, 2018— Clayton Properties Group®, a division of Clayton Home Building Group® and a Berkshire Hathaway company, today acquired nationally recognized Mungo Homes (Mungo).

Founded in 1954 by Michael J. Mungo in Columbia, S.C., the multigenerational, previously family-owned and operated homebuilder is now led by CEO Steven Mungo. An award-winning builder, Mungo first expanded outside of the Columbia, S.C., market in 2003 to Charleston, S.C. Mungo now builds homes in eight markets throughout South Carolina, North Carolina, Georgia and Alabama, making them the largest builder to join Clayton Properties Group.

“Clayton’s partnership equips our team with innovative tools and technologies, superior leadership training and purchasing power that allows us to continue to grow Mungo with a focus on stability, team members and customers,” said CEO Steven Mungo. “It creates the highest level of opportunity for our company as a whole while allowing us to retain our culture and corporate identity.”

“Mungo Homes is a natural fit for our distinguished group of homebuilders,” said Clayton Home Building Group President Keith Holdbrooks. “Their pillars of success stem from a longevity in the home building industry that is over 60 years old and began when Steven’s father, Michael Mungo, founded the company. The family-like culture is a direct correlation to Mungo’s deep focus on team member and customer experience. Mungo’s tenure in the industry is paramount, and we look forward to coupling this with the talents of our other builders to pursue innovation in housing together.”

The Clayton Properties Group business model stays consistent as they partner with world-class companies in strong growth markets that share the same goals in their culture, innovation and commitment to customer and team member experience.

“Culture was the most important factor in this decision,” said Mungo. “We’ve had offers and overtures from many public home builders over the years, but we never wanted to become part of something that didn’t stand for anything. It was also the most important factor for Clayton. Our strong management and commitment to our communities and team members are qualities that can be found in each of the builders in Clayton Properties Group.”

In 2012, Mungo was named America’s Best Builder by Builder magazine, which is based on overall excellence in homebuilding and is determined by finance and operations, design and construction, customer service and quality, community and industry service and marketing. That same year, the National Association of Home Builders honored Mungo as the National Green Advocate of the Year for hauSmart, Mungo’s exclusive energy-efficiency program. The company was also recognized as the winner of the 2008 National Housing Quality Award and is the only South Carolina-based builder ever honored with this prestigious award.

Mungo sold nearly 1,800 homes in 2017. The company is ranked 33rd on the 2018 Builder Magazine’s Builder 100 list and is projected to close on approximately 1,900 homes in 2018.

Mungo is the eighth acquisition for Clayton Properties Group, and the third this year. Their market footprint now reaches Alabama, Colorado, Georgia, Kansas, Missouri, Tennessee, Texas, Utah, Indiana, South Carolina and North Carolina. Clayton Properties Group is ranked 29 on the 2018 Builder Magazine’s Builder 100 list, and with the addition of Mungo, is on pace to build over 4,200 homes by the end of 2018.

Mungo was advised by Zelman and Associates for the transaction. For more information, visit or

This story was originally published in Builder.