Elevated Sector Demand Drives Active M&A Market
Capstone Partners released its April 2022 Construction Services Sector Update, reporting that surging demand in the Construction Services sector has manifested in heightened construction spending through early 2022, despite elevated input costs and supply chain disruptions. Input cost inflation and production constraints have challenged the sector since the onset of the pandemic, with contractors and professional services providers keenly monitoring profitability and optimizing efficiencies. Through early 2022, public companies in the sector have largely been successful in maintaining margin strength.
Merger and acquisition (M&A) activity in the Construction Services sector has continued its torrid pace through early 2022, with 128 transactions announced or completed—surpassing the year-to-date (YTD) total in 2021 which saw a blistering M&A market. The 560 transactions announced or completed in 2021 marked a new record for the sector, with volume increasing 60.5% year-over-year (YOY). This market exuberance has also been consistent at lower enterprise value ranges, supporting optimism among privately owned middle market businesses. Notably, transaction volume for businesses under $500 million in enterprise value across the broader Building Products & Construction Services industry increased 55% in 2021, marking the largest YOY increase among middle market industries tracked by Capstone, according to Capstone’s Middle Market Valuation Index.
Private strategic buyers have continued to lead acquisition activity through early 2022, accounting for 52.3% of total transactions. Consolidation among contractors has continued at elevated levels as market participants work to scale service offerings and geographic reach to meet surging levels of demand. Private equity buyers have been noticeably active in the sector, comprising 40% of transaction activity, largely through add-on acquisitions. The Professional Services segment has been a favorite among sponsors, particularly those specializing in the Infrastructure market.
Also included in this report:
- Discussion of how leading public companies in the sector have performed
- Insights into the record setting M&A market
- M&A valuation analysis of professional services and contractor services companies
Insights for Middle Market Leaders
Receive email updates with our proprietary data, reports, and insights as they’re published for the industries that matter to you most.