Merger and Acquisition Activity Continues into Early 2022

Capstone Partners released its April construction services sector update, reporting that surging demand 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. Public companies in the sector have largely been successful in maintaining margin strength.

Merger and acquisition activity in the construction services sector has continued its torrid pace, with 128 transactions announced or completed—surpassing the year-to-date 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.

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, according to Capstone’s Middle Market Valuation Index. 

Private strategic buyers have continued to lead acquisition activity, 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.

To access to full report, click here.