Construction Services M&A Update – February 2026

Construction merger and acquisition (M&A) activity continued to expand in 2025 as buyers sought to offset headwinds through added scale and capitalize on booming artificial intelligence (AI)-fueled construction activity. Profit margin strains accelerated as new tariff policies drove construction material prices higher, while persistent skilled labor shortages pushed employee costs up and project timelines out. Meanwhile, increasingly steep project financing costs and dwindling federal funding caused construction spending to drop 1% year-over-year (YOY) through October 2025, according to the U.S. Census Bureau. ¹ Although macroeconomic headwinds are expected to keep both nonresidential and residential construction spending subdued into 2026, AI-driven data center and power infrastructure demand is anticipated to remain robust, buoying contractor backlogs and margins. In response, sector participants ramped up consolidation activity to supplement their skilled workforce and revenue streams. Private equity (PE) buyers underscored this momentum, as long-term tailwinds, plentiful buy-and-build opportunities, and an easing cost of capital supported the group’s continued expansion of sector M&A. Sector participants’ efforts to acquire scale and market share will likely keep construction M&A activity robust through 2026. Capstone expects targets serving the high-growth Data Center and Power Infrastructure end markets to generate outsized acquisition interest as AI demand continues to surge.

Data Center, Power Infrastructure Construction Uplift Sector Outlook

Intense demand for data center and power infrastructure construction outweighed rising input costs and labor shortage concerns in 2025, shielding margins and ensuring backlog levels remained durable. The introduction of new tariff policies saw the price of key construction inputs expand throughout 2025. Through November 2025, input costs jumped 3.4% YOY, representing the largest YOY increase since January 2023, according to the U.S. Bureau of Labor Statistics.² Prices for aluminum, copper, and steel—key construction materials—experienced outsized inflation due to new 50% import duties. Moreover, producer prices for construction services increased 4.2% YOY as sector participants accelerated base pay raises for workers to maintain employment levels amid chronic skilled labor shortages. The rising cost landscape outpaced contractors’ last twelve-month (LTM) project bid prices (+2.7% YOY) despite efforts to pass along cost increases, according to a November report from the Associated General Contractors (AGC) of America.³ Input cost inflation increasingly pressured the profit margins of sector participants throughout 2025, significantly burdening smaller scale operations in particular. However, more than a third (36.6%) of contractors expect margins to expand over the next six months, according to the Associated Builders and Contractors’ (ABC) December 2025 Construction Confidence index reading.⁴ This optimism was supported by surging data center construction activity as the AI race continued to heat up. In December 2025, sector participants with data center projects under contract reported significantly longer project backlogs (11 months) compared to those who did not (7.8 months).

The ripple effects of rising AI demand in 2025 extended beyond heightened data center construction activity, with the expansion in energy infrastructure to power the technology further uplifting end market demand. Through November 2025, data center construction spending rose 138.6% YOY to $53.7 billion, significantly outpacing broader construction spending which contracted 1% YOY as of October 2025, according to a ConstructConnect report and the U.S. Census Bureau.⁵ Data center construction spending has doubled each year since 2021, fueled by the ongoing development and rapid commercialization of AI-powered technologies. However, U.S. energy infrastructure has struggled to keep pace with the power demands needed to support increased AI usage and its associated data center buildout. In 2025, the growing number of data centers in the U.S. required 22.4% more grid power than in 2024, according to 451 Research and S&P Global.⁶ Data center power demands are expected to almost triple through 2030 in order to feed the market’s estimated $6.7 trillion of capital expenditures scheduled for the same period, according to a McKinsey & Company report.⁷ Many developers and federal agencies have explored new methods to expand or supplement power generation capabilities as this data center growth increasingly pressured consumer energy costs and available capacity across most U.S. grid systems. In December 2025, Alphabet (Nasdaq:GOOGL) announced its acquisition of Texas-based Intersect Power—a builder of renewable energy plants designed to power data centers—for an enterprise value of $4.8 billion. This deal builds upon Google’s $40 billion Texas data center project announced in November, where the company pledged to invest in renewable energy capacity as part of its effort to acquire and develop more power generation, according to a press release.⁸ On the government side, federal agencies prioritized nuclear energy investments and unlocked federal land to help drive AI data center power demands.

Booming data center and power infrastructure construction demand propelled acquisitions of targets serving these verticals in 2025 as sector participants attempted to buoy project backlogs and gain access to these high-value projects. The average 2,000+ square foot data center costs $597 million to construct, reflecting a 59.6% YOY increase as data center projects grew larger and construction costs expanded, according to the November 2025 ConstructConnect report. Sector participants serving these verticals in Texas, Louisiana, Virginia, Mississippi, and Pennsylvania were prime M&A candidates, given these five states comprised the majority (74.5%) of data center construction spending between January and November 2025. Notably, Dycom Industries (NYSE:DY) acquired Power Solutions for an enterprise value of $1.9 billion, equivalent to 1.9x EV/Revenue and 9.7x EV/EBITDA (December 2025). Given Power Solutions’ position as one of the largest electrical contractors serving data centers across the Mid-Atlantic, the deal significantly expands Dycom’s revenue generation from the end market and bolsters its skilled labor force, according to a press release.⁹ “Power Solutions…positions us to benefit from continued strong demand for digital infrastructure solutions among hyperscalers and other industry participants. Our customers will benefit from our expanded capabilities to support data center development…,” noted Dycom CEO, Dan Peyovich, in the press release. The continued development, usage, and power demand needed for AI technologies will likely position Construction Services sector participants serving the high-growth, high-demand Data Center and Power Infrastructure segments as prime acquisition targets for the foreseeable future.

Consolidation Activity Drives Third Consecutive Year of Construction M&A Growth

Construction M&A activity expanded for the third consecutive year in 2025, supported by durable backlogs and increased consolidation activity as sector participants looked to offset rising input costs and skilled labor shortages through added scale. Deal volume in the Construction Services sector totaled 562 transactions announced or closed in 2025, an 18.2% increase from 2024.

Bolt-on transactions enabled sector participants to enhance service capabilities, expand labor capacity, and gain additional revenue streams. These tactics were increasingly leveraged by private strategics in 2025 as added scale and strong revenue allowed participants to better navigate sector headwinds. Through year-end, private strategic M&A increased 16.6% YOY to 204 transactions. Many public consolidators in the space—such as Comfort Systems USA (NYSE:FIX), Installed Building Products (NYSE:IBP), and TopBuild (NYSE:BLD)—maintained their aggressive roll-up activity and indicated that M&A pipelines remain strong for 2026. However, public strategic deal volume contracted 18.5% YOY in 2025 as others opted to either defer M&A until macroeconomic volatility settles or pursue one-off, transformative transactions. In 2025, public buyers comprised all large-scale (enterprise value greater than $500 million) transactions in the space, which totaled $7.1 billion in value—a 172.1% increase from the $2.6 billion of large-scale public strategic deal value in 2024. While these high-value transactions will likely continue gaining traction throughout 2026, public buyers are expected to reaccelerate middle market consolidation as macroeconomic and trade volatility settles.

Years of increased PE penetration continued to underpin overall construction M&A gains in 2025, fueled by the sector’s fragmented landscape, recurring revenues, and exposure to high-growth markets such as Data Centers and Power Infrastructure. Through year-end, PE M&A increased 30.9% YOY to 305 transactions. After seven years of consecutive growth, PE buyers led construction M&A for the first time, overtaking strategic buyers to represent the majority (54.3%) of sector transactions in 2025. The ongoing surge of new platform formations in the space helped fuel the deluge of add-on transaction growth over the years. In 2025, construction M&A saw 68 platforms (+4.6% YOY) and 237 sponsor-backed transactions (+41.4% YOY). Easing cost of capital constraints coupled with limited partner (LP) pressure to deploy elevated dry powder levels helped spark this increase, particularly for targets exposed to end markets with long-term growth expectations. Specifically, growing AI power needs and pent-up demand for new residential construction made targets providing services to Data Center, Power Infrastructure, and Residential markets, prime acquisition candidates for PE buyers. PE firms’ increased presence across the sector had a demonstrable impact on M&A bid prices, with the group’s debt-financed and historically above-market offers driving sector valuations up. Between 2018 and 2025, construction M&A multiples paid by PE firms averaged a robust 10.6x EV/EBITDA compared to the 7.5x EV/EBITDA average paid by strategics during the same period. In addition to the growing number of transformative, large-scale public strategic transactions, heightened competition with PE buyers for quality targets is expected to persist and drive sector valuations even higher into 2026.

Labor Shortages, Rising Workforce Costs Underpin Accelerating Subcontractor Deal Activity

Labor shortage and cost concerns deepened in 2025, a headwind that fueled M&A targeting subcontractor businesses. Among surveyed contractors, more than 80% reported difficulty hiring for craft positions and salaried openings in 2025, the highest rate in the past three-year period, according to AGC’s 2026 outlook survey report.¹⁰ In an effort to prevent labor shortages from worsening, 40% of contractors reported increasing base pay salaries at a higher rate in 2025 than in 2024. Sector participants also accelerated Subcontractor segment M&A activity to shore up service capabilities by acquiring additional labor, with total segment deal volume rising 38.6% YOY to 366 transactions. This growth saw the share of Subcontractor segment M&A increase from 55.8% in 2024 to 65.1% in 2025. Private strategic (31.7%) and sponsor-backed (48.1%) buyers comprised a combined majority of deal activity in the segment. These buyers prioritized the acquisition of businesses in the Data Center and Power Infrastructure markets to capitalize on rising AI power needs and residential subcontractors to address the pipeline of growing demand for new single-family home construction. The majority (53%) of contractors expect hiring to remain difficult or worsen in 2026. As a result, most contractors cited an insufficient supply of workers (57%) and rising labor costs (56%) as their top concerns for 2026. This subdued outlook is expected to continue accelerating subcontractor M&A activity into 2026. Notable Subcontractor segment transactions are outlined below.

• Franchise Equity Partners-Backed Reliable Residential Acquires ACG Smith Texas (December 2025, Undisclosed) – Reliable Residential, a portfolio company of PE firm Franchise Equity Partners, acquired ACG Smith Texas for an undisclosed sum in December 2025. ACG provides garage door repair, replacement, and installation services through its Precision Garage Door Service franchise locations in Dallas, Fort Worth, and Palo Pinto. Reliable Residential is the largest franchise operator within the neighborly system of residential service brands, which includes Precision Garage Door Service, according to a press release.¹¹ The deal expands Reliable Residential’s presence into the Southwest region and supports its goal of creating a multi-brand residential services platform within the Neighborly franchise system.

“This partnership is an exciting opportunity for us to enter one of the largest and fastest-growing markets in the country. The success we’ve seen over the past several years with [Franchise Equity Partners], including expanding Precision Garage Door Service across Florida, Ohio, Oklahoma, Arizona, and beyond, has built a strong foundation for continued growth,” noted Carlos Morales, Reliable Residential CEO, in the press release.

• Legence Acquires The Bowers Group (November 2025, $475 Million, 0.6x EV/Revenue, 6.6x EV/EBITDA) – Engineering, consulting, installation, and maintenance services provider, Legence (Nasdaq:LGN), acquired The Bowers Group in November 2025 for an enterprise value of $475 million, equivalent to 0.6x EV/Revenue and 6.6x EV/EBITDA. Bowers provides mechanical contracting services, specializing in mechanical and plumbing solutions for complex building systems. The deal expands Legence’s access to the Life Science/Healthcare and Data Center/Technology spaces, bolsters its presence in the leading Data Center markets of Northern Virginia and the D.C. Metro area, and significantly enhances its fabrication capabilities. Legence also cited strong revenue and project backlog visibility as key deal motivation, with Bowers contract commitments valued at $1.3 billion and revenues expected to reach between $825 and $875 million in 2026, according to a press release.¹²

“This acquisition marks an exciting new chapter for Legence and further accelerates our strategy to deliver comprehensive building solutions to more clients in complex and high-growth sectors…With the addition of Bowers, we are unlocking new opportunities to deliver value for our clients and shareholders in ‘Data Center Alley,’ where they are one of the leading mechanical contractors for data center clients,” noted Legence CEO, Jeff Sprau, in the press release.

• Transom Capital Group Acquires Binswanger Enterprises (November 2025, Undisclosed) – PE firm Transom Capital acquired Binswanger Enterprises, a provider of custom glass design, engineering, fabrication, and installation services, for an undisclosed sum in November 2025. Founded in 1872, Binswanger operates 42 locations across 11 states and offers its full suite of flat glass services to a diversified mix of national retailer, corporate account, and general contractor clients, according to a press release.¹³ Transom cited Binswanger’s service-driven operating model and industry leading capabilities—including its recognition as a top 10 U.S. glass and metal contractor by USGlass Magazine and Glass Magazine—as key deal motivation. Transom plans to further scale the business and solidify its position as the U.S.’ leading glazier. TM Capital, a division of Capstone Partners, served as Transom Capital’s financial advisor for the acquisition.

“Binswanger exemplifies the type of resilient, service-driven business that aligns with Transom’s investment strategy. The Binswanger team has built an impressive platform known for its quality of work and customer service. We see significant opportunity to build on Binswanger’s legacy and leverage our hands-on operational approach to unlock the Company’s next phase of growth and innovation,” noted Conor Davenport, Transom Capital Managing Director, in the press release.

Heading into 2026, construction M&A activity is positioned to remain robust as sector participants continue to pursue inorganic growth to bolster scale, market share, profit margins, and skilled workforce capacity. While macroeconomic volatility, rising prices, and elevated mortgage rates are anticipated to keep both residential and nonresidential construction spending subdued through the first half of 2026, booming data center construction will likely continue uplifting sector backlogs. Moreover, accelerating AI power demand is anticipated to propel energy infrastructure construction as data center developers and federal agencies look to supplement and expand power generation capacity across the U.S. This activity is expected to drive investments in renewable energy projects and continue positioning sector participants serving these end markets as attractive acquisition candidates throughout 2026.

To discuss rising data center and power infrastructure construction activity, provide an update on your business, or learn about Capstone’s wide range of advisory services and Construction M&A knowledge, please contact us.

Izzy Jack, Associate, was the lead Market Intelligence contributor to this article.

Endnotes

1. U.S. Census Bureau, “Monthly Construction Spending, October 2025,” https://www.census.gov/construction/c30/current/index.html, accessed January 21, 2026.

2. U.S. Bureau of Labor Statistics, “Producer Price Indexes,” https://www.bls.gov/ppi/, accessed January 21, 2026.

3. Associated General Contractors of America, “Construction Costs Rise at Fastest Rate Since January 2023 in November, Outpacing Increases in Contractors’ Bid Prices for New Buildings,” https://www.agc.org/news/2026/01/14/construction-costs-rise-fastest-rate-january-2023-november-outpacing-increases-contractors-bid, accessed January 21, 2026.

4. Associated Builders and Contractors, “ABC’s Construction Backlog Indicator Inches Higher in December, Fueled By Data Center Momentum,” https://www.abc.org/News-Media/News-Releases/abcs-construction-backlog-indicator-inches-higher-in-december-fueled-by-data-center-momentum, accessed January 21, 2026.

5. ConstructConnect, “January 2026 Data Center Report: Spending Surges Fivefold in Two Years,” https://news.constructconnect.com/january-2026-data-center-report-spending-surges-fivefold-in-two-years, accessed January 21, 2026.

6. S&P Global, “Data center grid-power demand to rise 22% in 2025, nearly triple by 2030,” https://www.spglobal.com/energy/en/news-research/latest-news/electric-power/101425-data-center-grid-power-demand-to-rise-22-in-2025-nearly-triple-by-2030, accessed January 21, 2026.

7. McKinsey & Company, “The Data Center Balance: How US States Can Navigate the Opportunities and Challenges,” https://www.mckinsey.com/industries/public-sector/our-insights/the-data-center-balance-how-us-states-can-navigate-the-opportunities-and-challenges, accessed January 21, 2026.

8. Google, “Google’s Investments Run Deep in the Heart of Texas,” https://blog.google/company-news/inside-google/company-announcements/google-american-innovation-texas/, accessed January 21, 2026.

9. Global Newswire, “Dycom Industries to Acquire Power Solutions, Premier Data Center Electrical Contractor, Positioning the Company for Accelerated Growth in Digital and Data Center Infrastructure Services,” https://www.globenewswire.com/news-release/2025/11/19/3190806/0/en/Dycom-Industries-to-Acquire-Power-Solutions-Premier-Data-Center-Electrical-Contractor-Positioning-the-Company-for-Accelerated-Growth-in-Digital-and-Data-Center-Infrastructure-Servi.html, accessed January 21, 2026.

10. Associated General Contractors of America, “Dampened Expectations: The 2026 Construction Hiring and Business Outlook,” https://www.agc.org/sites/default/files/users/user21902/2026%20Construction%20Hiring%20and%20Business%20Outlook%20Report_Final2.pdf, accessed January 21, 2026.

11. PR Newswire, “Franchise Equity Partners and Reliable Residential Acquire Precision Garage Door Service in Dallas-Fort Worth,” https://www.prnewswire.com/news-releases/franchise-equity-partners-and-reliable-residential-acquire-precision-garage-door-service-in-dallas-fort-worth-302640567.html, accessed January 21, 2026.

12. Legence, “Legence Announces Agreement to Acquire Bowers,” https://www.wearelegence.com/media/legence-announces-agreement-to-acquire-bowers, accessed January 21, 2026.

13. Transom Capital Group, “Transom Acquires Binswanger Glass, Accelerating Next Phase of Growth for Leading U.S. Glazing Company,” https://transomcap.com/news/transom-acquires-binswanger-glass-accelerating-next-phase-of-growth-for-leading-u-s-glazing-company/, accessed January 21, 2026.