construction M&A
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Engineering Segment Players Experience Strong Buyer Interest

Robust backlogs and healthy sector spending have provided significant tailwinds for the Construction Services sector through year-to-date (YTD)—creating a favorable backdrop for Construction merger and acquisition (M&A) activity. While the Residential segment of the market has struggled in recent months, evidenced by housing starts falling 14.8% year-over-year (YOY) in August (U.S. Census Bureau)1, many areas of the Nonresidential market have maintained strong revenue visibility. In particular, federal support for infrastructure projects has spurred demand for construction in segments including Highway and Street and Sewage and Water Disposal, which have seen spending rise 12.6% and 21.8% YOY, respectively, according to the U.S. Census Bureau.2 Substantial future contracted work has further supported optimism in the Infrastructure segment, with backlogs rising to 10.2 months in August, an increase of two months YOY, according to Associated Builders and Contractors (ABC).3 The Commercial & Institutional and Heavy Industrial segments have also demonstrated healthy near-term prospects, with backlogs both rising YOY to 9.5 months and 7.7 months, respectively. As demand has remained robust across Commercial, Industrial, and Infrastructure end markets, Engineering and Design sector participants have attracted significant buyer and investor interest.

Engineering services providers, including sector players offering energy efficiency solutions, civil engineering, utilities services, and wastewater services, have captured healthy demand approaching the final quarter of 2023. Near-term optimism has been fueled by the healthy financial positions of segment players and expectations for continued project demand for engineering services. Notably, 88% of engineering firms surveyed hold a positive current sentiment for the condition of the broader Engineering and Design Services industry, according to the American Council of Engineering Companies.4 In addition, 87% of engineering firms have a positive sentiment on their current overall finances. The broader Nonresidential Construction market has shared this favorable perspective on operating performance and sector health, with contractors anticipating an expansion in sales and profit margins over the next six months, according to ABC. Sector players also expect staffing levels to improve, which have been the main inhibitor to project completion. Moving through year end and into 2024, high-quality contractors and professional services providers are expected to garner strong revenue opportunities, which is expected to contribute to a robust Construction M&A market.

2023 is continuing to be a seller’s market as sector participants are benefiting from increasing margins and growing backlogs, coupled by the fact that financial and strategic buyers have access to capital and a strong desire to grow through acquisitions.

Darin GoodHead of Building Products & Construction Services, Capstone Partners

Valuations Among Public Players Remain Robust, Bolstered by Strong Revenue Gains and Backlogs

Large strategic players in the Construction Services sector have captured strong revenue gains which have contributed to robust pricing in equity markets. Notably, valuation multiples in Capstone’s Professional Services index have averaged 15.9x EV/EBITDA, outpacing the S&P 500’s pricing at 14.5x EV/EBITDA. On the Contractor Services side, valuations have appreciated meaningfully, with Capstone’s Contractor Services index rising to 13.9x EV/EBITDA, compared to 11.3x EV/EBITDA in the prior year.

Engineering segment participants have benefited from persistent project demand and revenue visibility, which has been evidenced by healthy backlogs and revenue growth. Notably, Stantec (TSX:STN), a leading engineering, architecture, and environmental consulting provider, recorded a 14.5% YOY net revenue increase with contract backlog rising one month to 13 months in Q2, according to its earnings release.5 AECOM (NYSE:ACM) echoed similar sentiment with revenue increasing 13% YOY and backlog in its design business expanding 10% to a new record in its Q3 fiscal 2023, according to its earnings release.6

Construction M&A Draws Interest from Strategic and Financial Buyers Through Year-to-Date

M&A activity in the Construction Services sector has remained resilient amid a trough in dealmaking across the broader market. Through YTD, 367 transactions have been announced or completed, marking a modest 6.4% decline YOY. Despite volume declining slightly, M&A valuations have improved compared to the prior year, with the average purchase multiple amounting to 9.9x EV/EBITDA compared to 8.6x EV/EBITDA in the prior year. The favorable pricing environment bodes well for prospective middle market business owners preparing for a liquidity event.

Strategic buyers have continued to drive transaction activity, accounting for 62.9% of YTD M&A volume. Sector players with defensible margins, strong backlogs, and a recurring revenue profile have garnered persistent buyer and investor interest. Financial buyers have also demonstrated sustained appetite in the space, despite an elevated cost of capital facilitating heightened caution among private equity firms. Through YTD, financial acquirers have comprised 37.1% of total transactions, largely pursuing add-on acquisitions (28.6%) to bolster existing portfolio holdings.

Engineering firms have been of particular interest in the current market with buyers competitively bidding on high quality companies in M&A processes. The stable revenue and defensibility of segment players have created a healthy pool of interested acquirers. Notably, GHK Capital Partners, a leading middle market private equity firm, announced its acquisition of WSB & Associates in September for an undisclosed sum. WSB provides infrastructure engineering consulting for end markets including Transportation, Environmental, Utility, Renewable Energy, and other critical infrastructure markets. In the Contractor segment, electrical services providers have garnered strong buyer interest from private equity firms seeking to gain broader exposure to the space. This has been demonstrated by Hull Street Energy-backed SunGrid Holdings' acquisition of Black Electric in September for an undisclosed sum. Capstone Partners has been active in both the Engineering space and Electrical Contracting market, evidenced by the two recent transaction closings outlined below.

  • Capstone Partners advised RK Electric on its sale to Huron Capital (October 2023, Undisclosed) – Capstone Partners advised RK Electric, a full service electrical contractor, on its sale to private equity firm Huron Capital. Terms of the transaction were not disclosed. Huron Capital’s acquisition of RK Electric coincides with the launch of its facility services ExecFactor platform, which has been established to facilitate a buy-and-build strategy in the mission critical, highly technical Electrical Services space, according to a press release.7 The transaction highlights the healthy appetite among private equity firms for high quality businesses in the in the Electrical Contracting market serving attractive end markets.

“Having been with RK Electric for over three decades, I am thrilled to see the progress we have made, the team we have and look forward to what we will achieve by working with Huron. Their knowledge and expertise gained from previous buy-and-builds within the complex facility services ecosystem will allow us to accelerate growth both organically and through acquisition with confidence,” said RK President Raul Real in a press release.

  • Capstone Partners advised Poulos & Bennet on its partnership with Pape-Dawson Engineers (September 2023, Undisclosed) - Capstone Partners advised Poulos & Bennett, LLC—a civil engineering firm—on its partnership with Pape-Dawson Engineers, LLC. Terms of the deal were not disclosed. Established in 2009, Poulos & Bennett is a leading land planning, civil engineering, and development services firm with more than 65 employees in Orlando and Jacksonville. The company services residential, commercial, healthcare, municipal, and higher education developments. Poulos & Bennett also provides power & energy, water resources, roadway, and utility services. Founded in 1965, Pape-Dawson Engineers, LLC is a leading provider of engineering and consulting services. The firm provides a comprehensive range of services, including civil engineering, environmental, and surveying services for development and critical infrastructure projects.

"We continue to see strong interest for engineering services firms, especially in the South where population trends remain strong and are forecasted to continue to grow for decades to come. In a labor-constrained market, firms are looking to acquire businesses with a strong reputation and culture that offers best-in-class services, solving complicated problems for their clients," commented Crista Gilmore, Director at Capstone Partners.

Firm Transactions in Market

Capstone Partners’ Building Products & Construction Services Team has represented clients across various construction specialties. Our deep industry focus allows us to provide our clients with real-time transaction feedback and immediate access to key decision makers among the most active acquirers and investors in the Construction industry. A sampling of ongoing transactions is shown below.

Project Watts: The Company customizes residential solar design solutions.

Project Coast: The Company provides heavy civil, marine, and infrastructure construction services to clients along the gulf coast.

Project Cypress: The Company is a value-added distributor of vinyl and lumber products primarily to the Fencing industry.

Project Big Horn: The Company provides engineering and design, project management, and machining services.

To discuss in-market opportunities, provide an update on your business, or learn about Capstone's wide range of advisory services and Construction M&A market knowledge, please contact us.

Connor McLeod, Vice President, was the lead Market Intelligence contributor to this article.


  1. U.S. Census Bureau, “Monthly New Residential Construction, August 2023,”, accessed October 2, 2023.
  2. U.S. Census Bureau, “Construction Spending,”, accessed October 2, 2023.
  3. Associated Builders and Contractors, “ABC’s Construction Backlog Indicator Steady in August, Contractors Remain Confident,”, accessed October 2, 2023.
  4. American Council of Engineering Companies, “2023 Q3 Engineering Business Sentiment Survey,”, accessed October 2, 2023.
  5. Stantec, “Stantec reports strong second quarter 2023 results, achieves record backlog and increases guidance for the full year,”, accessed October 2, 2023.
  6. AECOM, “AUGUST 08, 2023 / 12:00PM, ACM.N - Q3 2023 AECOM Earnings Call,”, accessed October 2, 2023.
  7. Business Wire, “Huron Capital Invests in RK Electric,”, accessed October 12, 2023.

Related Transactions

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