Despite the ongoing corona changes, last year was a record year for acquisitions in the construction and installation sector. Where does this increase in acquisition activity come from? And what else does 2022 offer? Sebastiaan Hoftijzer, acquisition specialist at Match Plan, explains.
“Last year, there were 590 mergers and acquisitions in the construction and installation sector. This is the highest number in no less than fifteen years, “says Hoftijzer.
While the industry has undergone a similar move to the overall takeover market, there are also specific trends in the construction and installation sector that are causing sellers and buyers to find each other more and more.
Economies of scale
“An important reason for the sharp increase in merger and acquisition activity is that many entrepreneurs are chasing economies of scale,” says Hoftijzer.
In today’s market, where the prices of building materials are rising sharply, this search for economies of scale is more relevant than ever. “Entrepreneurs face challenges due to rising purchasing costs. The prices of, among other things, wood, steel and plastic have risen markedly in recent years. This is followed by the increase in energy-intensive materials such as concrete, brick and cement, ”explains Hoftijzer.
By merging with competitors or acquiring smaller players, companies can create the desired economies of scale. Hoftijzer: “Larger companies can exert more influence on purchase prices. In addition, larger companies can organize processes more efficiently – think staff and organization, finance, sales, marketing and logistics. ”
Read on: The Dutch installation sector is awaiting further consolidation.
It’s all the time in the news: the Netherlands is struggling with a severe shortage of labor. This is no different in the construction and installation sector. This is reflected, according to Hoftijzer, in the increased acquisition activity. “There is a huge shortage of technical staff due to significant reductions in staff numbers, especially during the economic crisis from 2008 to 2013.
“During that period, many workers changed sector, and there were fewer prospects, so fewer educations were chosen in the construction and installation sector. This has resulted in a great shortage of skilled labor. Taking over a company, including its workforce, is becoming an increasingly popular strategy for hiring new employees. “
Read on: The installation industry is increasingly buying for talent through acquisitions.
A third important factor that, according to Hoftijzer, has led to more trades in the construction and installation sector is the rise in private equity. Now a well-known phenomenon in sectors such as technology and healthcare, financial investors are also on the rise in the construction and installation sector.
“The construction and installation sector is an increasingly interesting sector for investors,” says Hoftijzer. “The market is still very fragmented, there are relatively many small parties active. In addition, many construction and installation companies have shown significant revenue growth in recent years and there are good and stable future prospects for the coming years. These elements lead to interest from investment firms. “
“Investors often work from a fund on a so-called ‘buy and build’ strategy, where they add more small companies to their ever-expanding platform organization. This leads to a consolidation process in the market. ”
Hoftijzer expects acquisition activity to increase further this year. “If you look at the housing shortage, the growing demand for sustainability and the staff shortage, the growth in the number of acquisitions is expected to continue. Together with the favorable investment climate and the fragmented market, there is a good chance that new records will be broken in 2022. ”