2022 Marcum National Construction Survey

CONSTRUCTION M&A ACTIVITY HAS SPIKED—WHAT DOES THIS MEAN? By Joseph Natarelli, Marcum Office Managing Partner / National Construction Industry Leader

Macro trends in the industry also make construction attractive for investment. These include: • Ongoing high backlogs for construction companies across the sector. This is driven by the federal infrastructure bill, local and regional programs, and prior project delays. • Supply chain issues and material cost increases are motivating bigger players to compete for bids and pool purchasing power. • Shortages of skilled labor are driving some companies to secure talent through acquisition, driving consolidation within trades. In parallel, increasing specialization within construction is increasing demand for highly skilled workers, which is also driving M&A activity. • Many construction companies are emerging from the pandemic without a succession plan, and M&A is an option.

ResearchAndMarkets.com reported that mergers and acquisitions (M&A) deal value in the global construction sector grew from $354 billion in 2020 to $505 billion in 2021, a 43% increase. That data mirrors the uptick in questions about M&A-related issues we are getting from our clients at Marcum. We’re also seeing better structure around those deals, indicating increased sophistication in these transactions. While activity slowed somewhat in the first quarter of 2022, we think the underlying conditions driving this uptick in activity remain in place. Much of this trend is driven by the increasing interest in construction from the financial industry, particularly private equity. In January 2022, private equity had an all-time high of $1.8 trillion in “dry powder” (money available to invest). When private equity firms put that money to work for their investors, it creates a competitive M&A landscape in many industries — including construction.

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