Rock Products and Aggregates Industry Market Update – December 2022

Healthy Spending Fuels Robust Aggregates Industry M&A Activity

Capstone Partners released its December 2022 Rock Products and Aggregates Industry Update, reporting that a healthy backlog of construction activity, due to continued labor shortages and an elevated rate of postponed construction work, is expected to drive demand in the Aggregates sector. Challenges related to COVID-19 have persisted in the space, stemming from supply chain issues which contributed to skyrocketing prices for many natural materials. Select public companies in the space have seen significant increases in revenue over the past quarter, with much of this growth attributed to heightened project spending and price hikes in raw materials.

Sector merger and acquisition (M&A) volume has been strong through year-to-date (YTD) 2022 with 100 transactions announced or completed, a 27% increase year-over-year (YOY). M&A volume in 2022 is currently on pace with pre-COVID levels and has already surpassed 2021 full year volume by 9.9%. Large companies, in particular, have sought targeted acquisitions to diversify capabilities in high-growth markets. Strategic buyers have comprised the majority of transactions YTD, accounting for 74% of total M&A activity. Strategics have actively consolidated small regional suppliers, which bodes well for near term middle market transaction activity. Private equity (PE) firms have also remained active in the sector, comprising 26% of YTD transactions, competing with the space’s largest public companies to acquire regional construction product suppliers.

The Aggregates sector’s average M&A purchase multiple of 8.0x EV/EBITDA in YTD 2022 has outpaced the broader Building Products & Construction Services industry three-year average of 7.9x EV/EBITDA, highlighting the resilience of the sector when compared to the broader industry. Active regional consolidation by strategics and healthy project pipelines of sector players have contributed to strong M&A pricing through YTD.

Also included in this report:

• Commentary on key trends and drivers propelling transaction activity in the Aggregates industry.
• Discussion of notable M&A transactions in the sector.
• A detailed breakdown of aggregates materials pricing and volume.

Capstone Partners’ Building Products Investment Banking Team provides M&A, capital formation, and financial advisory services to the owners of middle market businesses in the Building Products and Construction Services industries. Our team partners with leading mid-to-large sized businesses that serve growing end-markets.

For more information on the Aggregates Industry Market trends featured in this report or to speak with one of our Building Products M&A Team members about how to grow, value, and/or sell your company, we are here to help. Contact us today to start a conversation.