The construction industry is booming, and private equity (PE) investors are getting in on the action.
M&A activity in the space has increased by nearly 5x over the past 10 years. The industry really gained momentum in 2021, as the world began to reopen in the wake of the pandemic.
Source: Grata
Since then, transactions have remained well above historical levels. The North American market in particular has taken off as population, urbanization, investment in infrastructure, and tech capabilities have grown.
In this PE Playbook, the Grata team has put together the need-to-know trends for investors considering making moves in the construction market, including:
- How the industry is fragmented
- Which sectors are seeing the most growth
- Notable acquisitions in the space
The market map above is not intended to be an exhaustive representation of companies in the space.
Companies that provide services that fall into multiple segments are categorized in this report by their primary offering.
Industry Overview
Market Distribution
Geography
Source: Grata
The construction industry in the US is booming, offering a plethora of opportunities for middle market investors from coast to coast.
California leads in terms of number of construction companies. Commercial and mixed-use construction projects in metropolitan hubs like Los Angeles and San Francisco are on the rise as their populations grow.
Texas is another standout state for the construction industry, particularly the commercial sector. Areas like Dallas-Fort Worth and Houston are seeing more demand for projects such as corporate headquarters and retail centers.
In New York, high-profile commercial construction is on the rise. Office buildings, luxury retail spaces, and hospitality developments, in particular, continue to see growth in the New York City metro area.
Dealmakers interested in the construction industry should also pay attention to the Southern states as economic expansion drives business migration and population growth. The South is the fastest-growing region in the US, adding more people from 2023-2024 than all other regions combined. Texas and Florida saw the largest numeric increase, but Washington, D.C. saw the fastest growth rate at 2.2%. Office complexes, retail spaces, and mixed-use commercial projects are currently dominating the region. The area’s lower costs compared to regions like the Northeast or California offer an additional benefit to investors.
Investors should also consider Silver Spring, Maryland, which was the fastest-growing city in the US from 2023-2024. Population surged by 12.9% year over year. The increase will almost certainly usher in a new wave of construction projects.
Ownership
Source: Grata
The overwhelming majority of companies in the construction industry are independently owned, offering a wealth of opportunities for investors.
Currently, there are over 218,000 private companies in the space that are ripe for acquisition.
Middle-market companies account for 20% of industry share.
Segment Distribution
Source: Grata
This report focuses on the following segments of the construction industry. Grata users can see curated lists of some of the companies used to create each segment by clicking the links below.
Public Comparables
Source: Grata
Generally, the sectors analyzed in this report are high performers compared to the industry average across the board.
The commercial segment brings in the most revenue by a significant margin. With commercial projects surging in populous states like California, New York, and Texas, as well as the South, this sector is a strong bet for investors. One caveat is that, though the commercial space continues to grow, it sees the second-lowest growth rate of the sectors analyzed here. It’s also the smallest of the segments covered in this report.
Dealmakers specifically interested in high-growth areas should prioritize the residential and institutional markets, which see average growth rates of 16.5% and 16.2%, respectively. The institutional sector also has significant overlap with the commercial space, offering dealmakers an easy “in” to the top-earning market.
Private Comparables
Source: Grata
In the private sector, industrial construction companies bring in the most average revenue by far. Industrial construction projects typically involve large-scale infrastructure development, which comes with high costs for material and labor. This drives up overall project value and, usually, profit margins. Companies in this sector can also charge premium-level prices because industrial construction requires specialized knowledge and skills for complex work. Additionally, companies can focus on specific niches, such as power plants or manufacturing facilities, and command higher prices that way.
Meanwhile, private institutional construction companies are seeing the highest rate of average annual growth at 71%. Public-use construction projects, including hospital and educational facilities, are on the rise in the US. Healthcare projects, in particular, saw a boost in demand as a result of the COVID-19 pandemic. Meanwhile, a significant portion of schools in the US are aging and in need of major repairs and renovations. Advances in AI, robotics, and building information modeling (BIM) technology are also improving overall efficiency in the sector, promoting growth.
Acquisitions
Top Roll-ups
Source: Grata
The construction industry has seen a significant amount of roll-up activity over the past several years. API Group and Fidelity Building Services Group lead the pack with 12 relevant acquisitions each. Most of API’s acquisitions operate in the commercial, industrial, and civil & infrastructure sectors. Fidelity Building Services has primarily targeted commercial and industrial construction companies.
Recent Acquisitions
Source: Grata
Renew Holdings Acquires Excalon
In June 2024, engineering services group Renew Holdings acquired UK-based infrastructure contractor Excalon. The company had an enterprise value of just over $33M.
Paul Scott, CEO of Renew, said, “"This acquisition broadens Renew's exposure to another critical UK infrastructure market, presenting tremendous long-term growth opportunities. It is consistent with our stated strategic objective to expand into new complementary sectors that have high barriers to entry coupled with resilient attributes.”
If you’re an investor interested in companies similar to Excalon, try these:
Learn more about this acquisition — or any of the others listed below — anytime, anywhere using the latest version of the Grata Go mobile app. Get all of the ownership and investment data you need right in the palm of your hand.
Bird Construction Acquires Jacob Bros Construction
Canada-based Bird Construction completed its $95M acquisition of Jacob Bros Construction in August. Teri McKibbon, Bird’s president and CEO, said of the deal: “Not only does our combined company immediately add scale and diversification in BC’s high-demand infrastructure market, but will also enable us to offer more comprehensive solutions as we pursue projects of various size, complexity, and scope.”
If you’re an investor interested in companies similar to Jacob Bros Construction, try these:
Metro Pacific Tollways Acquires NLEX
Also in August, Metro Pacific Tollways purchased a government stake in NLEX for $43.2M. The move brought MPT’s ownership of the company to 73.39%. NLEX is a Philippines-based company that specializes in toll road construction projects. The company was valued at $2B at the time of the deal.
If you’re an investor interested in companies similar to NLEX, try these:
Nexus Infrastructure Acquires Coleman Construction Group
Nexus Infrastructure bought UK-based Coleman Construction Group in October. The company’s enterprise value was estimated at $7M. Nexus said the move would allow it to expand into key civil engineering sectors, including water, rail, highways, and marine services.
If you’re an investor interested in companies similar to Coleman Construction Group, try these:
B-Lot Company Ltd Acquires Kumashu Construction
Japan-based B-Lot Company purchased Kumashu Construction in November. Kumashu, also based in Japan, focuses on urban revitalization and real estate projects. The company’s enterprise value was estimated at $56.6M prior to the deal.
If you’re an investor interested in companies similar to Kumashu Construction, try these:
TotalEnergies Acquires VSB Group
Last month, TotalEnergies bought Germany-based renewable energy project constructor VSB Group. The company’s enterprise value was estimated at $1.7B. VSB has around 500 employees and a respected track record of building onshore wind power farms in Europe.
If you’re an investor interested in companies similar to VSB Group, try these:
Live Deals
Hundreds of live deals and active mandates are being showcased on the Grata Deal Network. Here are some examples of mandates related to the construction industry:
- A general contractor and construction management company based in central California, with $74.5M in revenue and a $16.7M EBITDA
- A US-based speciality commercial construction product sales and installation firm with $35.2M in revenue and a $7.6M EBITDA
- A construction and maintenance company focused on the energy and industrial sectors, with $5.3M in revenue and a $1.8M EBITDA
- A Canada-based construction and contracting services company with $10.1M in revenue and an expected valuation of $3.5M
If you’re interested in these deals and you want to see more, register to learn more here.
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Get the Most Out of the Playbook
If you’re an investor interested in making moves in the construction space, Grata can help you put the insights in this article into action.
From in-depth market research to sourcing to pipeline management and relationship nurturing, Grata’s end-to-end dealmaking platform streamlines your workflows so that you can close more deals.
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