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B U I L D I N G P RO D U C T S & S E RV I C E S
SECTOR INSIGHTS
2019 | BDO MERGERS & ACQUISITIONS
B U I L D I N G P RO D U C T S & S E RV I C E S
SECTOR INSIGHTS
2018 | BDO MERGERS & ACQUISITIONS
01 BUILDING PRODUCTS & SERVICES | BDO MERGERS & ACQUISITIONS
BDO is the #1 M&A advisor in the World.*
A leading adviser in the Building Products and Services sector, our
deep knowledge, experience and expertise helps our clients achieve
their strategic objectives.
KEY THEMES
04 07 08 09
THE UK AND US ARE BUILDING PRIVATE EQUITY IS UK QUOTED
THE MOST ACTIVE MATERIALS, HVAC KEEN TO INVEST SECTOR INDEX HAS
M&A MARKETS FOR AND PLANT HIRE ARE IN THE SECTOR, OUTPERFORMED THE
BUILDING PRODUCTS THE MOST ACTIVE UK CREATING A HIGHLY STOCK MARKET
& SERVICES SUB-SECTORS OVER COMPETITIVE DEAL
TRANSACTIONS THE LAST TWO YEARS ENVIRONMENT
10 21 25
COMPANY GROWTH IN KEY FACTORS SUCH
VALUATIONS IN THE INFRASTRUCTURE AS TECHNOLOGY
SECTOR CONTINUE SPEND ACROSS AND GREEN
TO INCREASE EUROPE IS EXPECTED CONSTRUCTION
TO SUSTAIN DRIVING INVESTOR
GROWTH IN INTEREST IN
THE SECTOR THE SECTOR
*#1 Global M&A advisor by deal volume – Pitchbook 2018 league tables
#1 European M&A advisor by deal volume – Pitchbook 2018 league tables
#1 UK M&A adviser by deal volume - Experian 2018 adviser league tables
BDO MERGERS & ACQUISITIONS | BUILDING PRODUCTS & SERVICES 02
The Building Products and Services sector continues to see unprecedented
levels of M&A activity.
Double-digit growth in transaction volumes over the last four years has been driven by rapid technological innovation,
legislative changes and evolutions of supply chains and business models. There is immense opportunity for corporates
and private equity investors alike to drive value. We are looking forward to a dynamic year ahead and expect to see M&A
activity levels sustained.
JOHN STEPHAN and MITHUN PATEL
OVER
3,300 SECTOR
TRANSACTIONS
EUROPEAN
DEAL VOLUMES
43% TO 228
ACROSS THE GLOBE IN THE LAST 6 YEARS INCREASED BY IN 2018
28% OF GLOBAL TRANSACTIONS WERE
CROSS-BORDER IN THE LAST 6
YEARS
OVER
1,000 DEALS IN THE UK IN THE
LAST SIX YEARS
26% OF UK BUILDING
PRODUCT TRANSACTIONS AVERAGE EV/EBITDA
7.1x (6.9X IN 2017)
HAD PRIVATE EQUITY PAID IN 2018 WAS
INVOLVEMENT IN 2018
(20% IN 2017)
MULTIPLES AND
INCREASE UK INFRASTRUCTURE CONSTRUCTION TO RISE BY
8.8%
TRANSACTION IN 2019 AND 7.7% IN 2020
VOLUMES ACROSS ALL SECTORS
CONTINUE TO
03 BUILDING PRODUCTS & SERVICES | BDO MERGERS & ACQUISITIONS
INTERNATIONAL M&A ACTIVITY
OVER 800 DEALS IN 2018 AND DOUBLE DIGIT GROWTH
NUMBER OF TRANSACTIONS BY SELLER LOCATION
SECTOR TRANSACTIONS 2013-2018
% growth YOY -4.4% 22% 29.3% 25.6% 11.3%
900
800 42
700 40
600 159 228
35
500 141
44 233 238
400
60 59 136
300 206 25
125 102 40
200 163 28
126 125 265 287
100 9
16 19 177
62 67 102
0
2013 2014 2015 2016 2017 2018
United States Other Americas United Kingdom Other Europe Rest of World
BUILDING PRODUCTS & SERVICES M&A SEES ANOTHER YEAR OF DOUBLE-DIGIT GROWTH WORLDWIDE
The Building Products & Services sector is a highly active and OVER A QUARTER OF M&A ACTIVITY IS CROSS BORDER
dynamic market for M&A transactions and has seen yet another
Number of cross- Percentage of
record-breaking year for deal volumes across the globe, with 820
border deals total
transactions completed in 2018.
2018 206 25.1%
The UK and the US remain by far the most active markets for
2017 188 26.2%
deals, accounting for 29% and 35% of global transactions
respectively in 2018. Europe (excluding UK) saw a 43% increase 2016 143 25.3%
on deal activity in 2018, accounting for 28% of global M&A. 2015 136 30.0%
Cross-border deals remain a major feature of the market, 2014 116 31.2%
representing over a quarter of all transactions. This trend is 2013 128 32.9%
expected to remain a solid feature of the landscape as businesses
seek to develop global reach and acquire sector specialisms,
technology and skill-sets.
OVER
3,300 SECTOR
TRANSACTIONS
EUROPEAN
DEAL VOLUMES
43% TO 228
IN 2018
ACROSS THE GLOBE IN THE LAST 6 YEARS INCREASED BY
BDO MERGERS & ACQUISITIONS | BUILDING PRODUCTS & SERVICES 04
MOST ACTIVE COUNTRY ANALYSIS
UK AND US ARE THE MOST ACTIVE M&A MARKETS
MOST ACTIVE COUNTRY ANALYSIS
AS A BUYER AS A SELLER
UNITED KINGDOM UNITED KINGDOM
224 238
UNITED STATES UNITED STATES
274 287
SWEDEN SWEDEN
72 40
FRANCE FRANCE
41 19
GERMANY GERMANY
35 32
CANADA CANADA
28 24
1,000 800 600 400 200 0 0 200 400 600 800 1,000
2018 2017 2016 2015 2014 2013 2018 2017 2016 2015 2014 2013
Source: MarketIQ and BDO Analysis
THE UK AND THE US ARE THE MOST ACTIVE COUNTRIES FOR M&A IN THE SECTOR
Building Products & Services transactions We expect the US Building Products & Services
continued to rise in the UK market in 2018. sector to experience continued growth in 2019,
Following three years of double-digit growth in albeit at a more modest pace. The US economy
volumes, the UK saw another encouraging year remains relatively strong and demand for new
in 2018, with deal volumes rising by 9.5%. The construction and remodels continues, thanks to
proportion of cross-border activity increased low unemployment, gradually increasing wages,
to 19% as international acquirers continue to view the UK as an and a stabilizing interest rate environment. Forward looking indices
important international trading partner. Financial investors have published by industry groups such as National Association of
sustained interest in the sector, representing 26% of transactions Home Builders (NAHB) and the Joint Center for Housing Studies,
in the year. Looking forward, geo-political and macro-economic as well as data gathered by Dodge Data, all support this view. There
uncertainties may create some market challenges. However, are notable headwinds however, including the increasing cost
most business leaders we speak with are optimistic about of material and labor inputs – resulting from a tight skilled labor
the coming year and believe the strong underlying demand, market and the recent tariffs – which will remain a drag on sector
particularly from infrastructure, will sustain the sector in 2019. growth this year. These inhibitors are fueling M&A activity though
MITHUN PATEL | M&A Director, United Kingdom as industry players seek to improve efficiencies in part though
synergistic acquisitions. As such, sector valuation multiples should
remain high by historical standards.
DANIEL SHEA | Managing Director, United States
05 BUILDING PRODUCTS & SERVICES | BDO MERGERS & ACQUISITIONS
MOST ACTIVE COUNTRY ANALYSIS
BUOYANT M&A MARKETS EXPECT TO SEE VOLUMES SUSTAINED IN 2019
The German Building Products M&A market NUMBER OF TRANSACTIONS BY TARGET REGION
was very buoyant in 2018, not only compared to EUROPE
2017 but also to the last five years. The number EUROPE
of deals involving a German target increased 500
by 77% and those involving a German bidder 450
66
increased by 66% year-on-year. This was above 400
32
wider M&A trends in Germany. Trade buyers were the most active, 350
56
38
with international bidders predominantly originating from Europe 300
38
18
18
16 19
22
and the US, while German bidders were primarily active in Europe 30
15
14
11 47
73
250
with the significant exception of Gebr. Knauf’s US$7bn acquisition 27
23 24
23
18
60
200
of United States Gypsum. 21 16
16 50
150 39 20
There were a number of deals involving mid-market PE investors 15 26
206
233 238
100
including Adcuram, Afinum, Alveus, Finatem, KAP and Odewald. 126 125
163
50
While Adcuram has a history of investing in the sector the
others were relative newcomers. Interestingly, two of the deals 0
2013 2014 2015 2016 2017 2018
involved service providers reflecting increased interest in the sub- United Kingdom Nordics France Benelux Germany Other Europe
sector driven by full order books and the increasing complexity
of buildings driven by regulation and technology including
AMERICAS
digitization. Transactions were widely spread across a large range
of sub-sectors, heavy and light, manufacturing and distribution 350
1
with a perceptible ongoing interest in HVAC systems and 300
4
24
security, and new interest in specialist installers/maintenance and 36
250
technical planners. Deals in HVAC are being driven by a desire to 3
extend geographical footprint and/or gain access to 200
26
new technologies. 150
265
287
1
The German construction market is the largest in Europe and 100
4 6 8 177
13
while growth is expected to slow in 2019, the level of output is 50
12 102
62 67
still very high in absolute terms. The biggest perceived risk to 0
growth is a lack of capacity and skilled workers, which is already 2013 2014 2015 2016 2017 2017
leading to an increase in prices and delays on projects in some United States Canada Other Americas
regions. Given these parameters, combined with technological
and regulatory trends we anticipate M&A activity to remain REST OF WORLD
buoyant with a strong likelihood that deal volumes will increase
again in 2019. 70
JANE EVANS | M&A Senior Manager, Germany 60
50
29
40 25
17 22
30 17
5 16
10 3
20 2 6
12 9
9 7 2
10 10
13 4
7 11 11 12
6
0
2013 2014 2015 2016 2017 2018
Australia China India Other
Source: Market IQ and BDO analysis
28% OF GLOBAL DEALS WERE CROSS-
BORDER IN THE LAST SIX YEARS
BDO MERGERS & ACQUISITIONS | BUILDING PRODUCTS & SERVICES 06
M&A activity in the M&A activity in Canadian M&A
Building Products & France was sustained activity within the
Services sector in the at high levels in building products
Nordics saw a boom in 2018, supported sector experienced
2018, with 180 deals by 3.2% growth in strong growth in 2017
recorded involving construction output and companies are
a Nordic buyer or seller, up by 89% in the year. Alongside a wide spread of expected to continue growing through
compared to 2017. Noteworthy deals mid-market deals, there have been some acquisition in 2018. Despite the concerns
in 2018 include the 49.8% stake sale of large transformational cross-border of US tax reform and trade agreements,
the Swedish flooring company Välinge transactions. These include the sale 2017 saw several Canadian and foreign
Innovation by US-based investment of Edilians, (formerly known as Imerys buyers looking to capitalize on favourable
firm KKR to the Danish holding and Toiture, a subsidiary of Imerys group economic conditions to expand
investment company Kirkbi for a value of specialising in tiles and bricks), which geographically or expand their service
€417m, and the sale of Blowtech Group, was sold to the US Lone Star Funds for offering. For example, Exchange Income
a Swedish developer and manufacturer of €1bn midway through the year, and more Corporation, a Canadian conglomerate,
high performance blow moulded plastic recently, the sale of The Parex Group, a acquired Quest Window Systems, a
components to listed Swedish company specialist in dry mix mortars, which was Canadian manufacturer of unitized
Xano Industri. The year also saw the merger sold to Swiss group SIKA, manufacturer window wall system, for 6.7x EBITDA.
between Swedish engineering consultant of speciality chemicals in early 2019. The Further to this, Dormakaba Holding
ÅF and Finnish engineering group Pöyry Parex Group was sold by CVC Capital AG, a Swiss access and security solution
Plc. The takeover offer by ÅF represented Partners for an enterprise value of €2.2bn. provider, acquired Skyfold Inc., a Canadian
an enterprise value of €586m (EV/EBITDA Corporate carve-outs are being progressed manufacturer of automated vertical
multiple of 19.5x). We anticipate M&A by French building products leader Saint folding wall systems, for 8.5x EBITDA.
activity in the sector to sustain at current Gobain, whose portfolio review is leading Driven by a favourable economic outlook,
levels through 2019. to a divestment program with a number the optic of Canada as a safe harbour for
CLAES NORDEBÄCK | of subsidiaries earmarked, including investment capital and the abundance
Partner, Corporate Finance, Sweden Xuzhou Pipe, building distribution in of cash on corporate balance sheets,
Germany, a silicon carbide business, we expect 2018 to be positive for M&A
and possibly further business units. The transactions in the sector.
outlook for M&A in 2019 is positive: RYAN FARKAS |
construction output continues to Corporate Finance Partner, Canada
develop particularly in infrastructure as
opportunities arise in preparation for the
Paris 2024 Olympics.
PASCAL MARLIER |
Partner, Le Bipe, BDO Advisory, France
07 BUILDING PRODUCTS & SERVICES | BDO MERGERS & ACQUISITIONS
UK M&A ACTIVITY SUSTAINED
NEW RECORD FOR DEAL VOLUME IN 2018
2018 TRANSACTION VOLUMES UK TRANSACTION VOLUMES SINCE 2008
254 deals involving a UK buyer or a UK seller completed in 2018, 300
an increase of 9.5% over 2017 volumes, which follows three
previous years of double-digit growth. In spite of uncertainty in 250
the wider market, M&A remains highly dynamic and competitive.
200
Given the strong underlying fundamentals and ongoing market
demand, we expect consolidation in the UK to be sustained.
150
Although large corporates are increasingly looking to overseas
markets for M&A, the UK is still a key area for acquisitions due
100
to the high number of quality businesses and the importance of
maintaining and growing market share. Meanwhile, private equity
50
has cash ready to invest in the market, stiffening the competition
between buyers and increasing the potential to drive high values
0
for attractive target businesses. 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Manufacturing Distribution Services
Manufacturers continue to make up the majority of transactions
Source: Market IQ and BDO analysis
in the sector, with investors attracted to high margins,
innovative products, use of technology and in particular, IP.
Technology is driving the evolution of business models, creating SUB-SECTOR ANALYSIS:
opportunity for dynamic businesses to capitalise. TRADE AND FINANCIAL TRANSACTIONS SINCE 2008
Distribution assets continue to be sought by investors and 300
corporates seeking to build a regional or national roll-out model. 250
Typically, building product distributors have limited or nascent
200 39
online offerings, which makes for an interesting and attractive
growth opportunity. 150
Transactions involving companies that provide services to the 100
sector have steadily increased year on year. Service providers
50
benefit from recurring revenues and the highly fragmented 7
nature of the sector presents numerous opportunities 0
Building
Materials
& Insulation
HVAC
& Plumbing
Electrics
& Lighting
Windows
& Doors
Interiors &
Surface finishing
Kitchen &
Bathroom
& Access
Flooring
& Carpet
Plant hire
Merchant /
Distributors
for consolidation.
Roof, Cladding
Security
Building materials continued to be the most active sub-sector
in 2018, maintaining its share of 15% of deals. The attraction of
gaining greater control of raw materials and the supply chain Source: Market IQ and BDO analysis Trade Financial
through vertical integration continues to be a strong rationale.
HVAC & Plumbing has been the most active sub-sector since
2008, and accounted for 14% of deals in 2018. Regulatory
change and technological advancements spur ongoing interest
from both trade and private equity investors.
OVER
1,000 DEALS IN THE UK IN
THE LAST SIX YEARS
BDO MERGERS & ACQUISITIONS | BUILDING PRODUCTS & SERVICES 08
PRIVATE EQUITY HAS A GROWING INTEREST
IN THE SECTOR
CREATING A HIGHLY COMPETITIVE DEAL ENVIRONMENT
PRIVATE EQUITY DEALS SNAPSHOT
Private equity is a growing feature of the M&A landscape for Building Products & Services. Since 2008 nearly a quarter of all investments
in the sector have received private equity investment. Certain sub-sectors have attracted higher levels of investor interest: since 2008
37% of Windows and Doors transactions, 35% of Kitchen & Bathroom deals, 31% of Roof, Cladding & Insulation deals, and 28% of
Interiors & Surface Finishing deals have attracted private equity investment.
Private equity is attracted by the potential high returns in the sector, which can be achieved through consolidation of fragmented sub-
sectors and the professionalisation of businesses. Product innovations, increased regulation and a shift in economic conditions have
created opportunities for investors to create value and maximise returns. Opportunities exist throughout the supply chain, where private
equity has had increasing success in bidding against trade for quality assets.
PRIMARY CAPITAL CAIRNGORM CAPITAL
STRATEGIC BUYS IN DISTRIBUTION AND RAIL SERVICES ACCELERATED BUY-AND-BUILD STRATEGIES IN BUILDING
Primary Capital and management acquired VJ Technology, PRODUCTS MANUFACTURING AND DISTRIBUTION
a distributor of technical fixings, fasteners and consumables
Cairngorm Capital is developing platforms in fragmented
to the infrastructure, commercial and wider construction
sub-sectors of the Building Products market where it can apply
industry. Acquired from SIG, the disposal was part of a
sector expertise to enable transformational growth and build
medium-term strategy of disposing of smaller non-core
industry-leading companies.
businesses to refocus the Group’s portfolio and strengthen its
balance sheet. Primary’s investment will accelerate the growth Cairngorm acquired Thornbridge in November 2017 as a
plans of VJ Technology and establish the business as a leading platform to consolidate the specialist UK timber distribution
distributor on a national basis. market. This transaction was followed by three further deals in
the next twelve months. North Yorkshire Timber was acquired
In the previous year, Primary backed the MBO of in February 2018, bringing seven branches in the North East
Readypower, which provides rail infrastructure services. of England and specialist timber engineering capability. This
Following the MBO, Readypower acquired Terrawise to was followed by Dundee-based Rembrand Timber in July
further develop the range of services and enhance its 2018, creating the leading timber merchant in Scotland. The
market-leading position. acquisition of Arnold Laver, headquartered in Sheffield with
£140 million turnover in November 2018 was the next step in
establishing the National Timber Group. Today the National
Timber Group has 52 timber processing and merchant sites
across the UK, revenues of more than £250 million and over
1,300 employees.
Customade Group, a £100 million revenue multi-product
trade fabricator of windows and composite entry doors was
created through the acquisition of four companies in a nine
month period including the initial acquisition of Polyframe in
July 2016. Cairngorm led five proprietary investments in ten
months to build Customade’s sister company, Stevenswood,
into a national distributor of windows and doors from 36 trade
counters across the UK.
Cairngorm led the investment in Parker Building Supplies in early
2018, a leading Builders’ Merchant based in the South East of
England with turnover of £67 million. Parker has an ambition to
grow significantly in the next few years through a combination
of further bolt-on acquisitions and organic branch openings.
26% OFTRANSACTIONS
UK BUILDING PRODUCT
HAD PRIVATE EQUITY
INVOLVEMENT IN 2018
More recently, Cairngorm acquired Sentry Doors in early 2019,
a specialist manufacturer of timber fire and security door-sets,
as an entry point into the fire protection sector.
09 BUILDING PRODUCTS & SERVICES | BDO MERGERS & ACQUISITIONS
SECTOR INDEX PERFORMS STRONGLY
CAPITAL MARKET INVESTORS REMAIN INTERESTED IN THE SECTOR
BUILDING PRODUCTS INDEX OUTPERFORMED THE FTSE IN 2018
UK listed Building Products & Services companies performed strongly in 2018, with share prices maintaining a growth profile, and
overtaking the FTSE all share. The dip seen in both indices at the end of 2018 started to bounce back early in 2019.
SHARE PRICE PERFORMANCE IN THE BUILDING PRODUCTS & SERVICES SECTOR
500% 14.0
12.0
400%
10.0
Share price % change
300%
Quoted EV/EBITDA
8.0
200%
6.0
100%
4.0
0%
2011 2012 2013 2014 2015 2016 2017 2018
-100% 0.0
BDO's top 30 quoted Building Products FTSE All Share BDO's top 30 quoted Building Products
& Services companies: share price index share price index & Services companies: historic EV/EBITDA
Source: Capital IQ and BDO Analysis
CHARACTERISTICS ATTRACTING HIGH VALUATION MULTIPLES
• Manufacturers with intellectual property or a defensible • Businesses operating in highly regulated sectors such as HVAC
market position
• Businesses with contracts in the
• Distribution businesses with growing online sales high-growth infrastructure market
• Service providers with a strong forecast order book and • Timber-based businesses are increasingly sought after
recurring revenues
• Flexible business models that can quickly adapt to changing
• Businesses with exposure to the growing off-site supply chain dynamics
construction market
• Industry recognised brand names.
• “Smart” product and/or process, including digital enablers
such as BIMBDO MERGERS & ACQUISITIONS | BUILDING PRODUCTS & SERVICES 10
...AND VALUATIONS CONTINUE TO INCREASE
2018 SEES UK AVERAGE TRANSACTION MULTIPLE RISE TO 7.1X EV/EBITDA
COMPANY VALUATIONS HAVE STEADILY INCREASED
Average EV/EBITDA multiples for sector transactions in the UK It should be noted that this average includes a number of plant
have gradually risen from 5.7x in 2011 to 7.1x in 2018 indicating hire companies which trade at between 5x and 6x EBITDA,
increasing attractiveness of the sector overall. given the higher CAPEX element of business models, therefore
EV/EBITDA multiples average between 5.8x for plant hire, in supressing the sector average. Overall, the multiples mirror
line with valuations for capital-intensive businesses and 7.1x for the upward trajectory seen in private company valuations over
building materials, reflecting the premium for scarce and highly recent years.
sought-after raw materials. A multiple of 7.1x has also been the
Quoted company EV/EBITDA multiples remain at considerably
average valuation in the fast-developing security & access sector.
higher levels than multiples achieved in unquoted transactions.
UK quoted company historic EV/EBITDA multiples have been For listed acquirers with a strong current trading multiple,
consistently above 8x since mid-2012, and rose to a high point this provides an opportunity to obtain multiple arbitrage on
of 11.8x in 2014. Averaging 8.5x at the end of 2018, the average acquisitions, and more easily gain shareholder approval for
climbed higher to 9.1x early in 2019. ambitious buys. Private equity players may also be able to
achieve multiple arbitrage on exit from businesses in the sector,
which adds to a compelling investment thesis.
TRANSACTION VOLUMES AND VALUATIONS BY SECTOR
Average EV/EBITDA multiple, 2012-2018
7.1x 6.3x 6.0x 5.6x 6.7x 6.4x 6.5x 7.1x 6.6x 5.8x 6.8x
50
45
Number of Transactions / EV/EBITDA Multiple
2012 2013 2014 2015 2016 2017 2018
40
35
30
25
20
15
10
5
0
Building Roof, Cladding HVAC Electrics Windows Interiors Kitchen Security Flooring Plant Merchant /
Materials & Insulation & Plumbing & Lighting & Doors & Surface & Bathroom & Access & Carpet Hire Distributors
Finishing
Source: Market IQ, mergermarket, Companies House, BDO Analysis
AVERAGE EV/EBITDA MULTIPLES AND
TRANSACTION INCREASE
7.1x (6.9X IN 2017)
PAID IN 2018 WAS
VOLUMES ACROSS ALL SECTORS
CONTINUE TO11 BUILDING PRODUCTS & SERVICES | BDO MERGERS & ACQUISITIONS
SUB-SECTOR KEY THEMES
AND DEAL HIGHLIGHTS
20
14 MERCHANT/
ROOF, CLADDING DISTRIBUTOR
& INSULATION
19
PLANT HIRE
13
BUILDING
MATERIALS 18
FLOORING &
14 CARPET
HEATING,
VENTILATION & AIR
CONDITIONING
(HVAC) & PLUMBINGBDO MERGERS & ACQUISITIONS | BUILDING PRODUCTS & SERVICES 12
18
SECURITY
& ACCESS
17
KITCHEN &
BATHROOM
17
INTERIORS
& SURFACE
FINISHING 15
ELECTRICS
& LIGHTING
16
WINDOWS
& DOORS13 BUILDING PRODUCTS & SERVICES | BDO MERGERS & ACQUISITIONS
BUILDING MATERIALS
SECTOR COMMENTARY Following a rise of over 50% in building materials transactions in
2017, volumes in 2018 were sustained as corporates and private
Highly fragmented sector with
further consolidation likely in the
equity continue to focus on increasing control of the vital flow of
mid-market. raw materials into the supply chain.
Disposals from larger corporations
possible due to competition issues, 2018 DEAL HIGHLIGHTS
particularly in aggregates market. Aggregates Timber
Ibstock disposed of Glen-Gery, America’s Corporate investments in the year
Larger companies control a
fourth largest brickmaker to Brickworks included the acquisition of Continental
significant portion of the market and
for $110m, and is now refocusing on its Wood by Swedish business Bergs Timber
have the benefits of economies of
core UK markets. for £60m, and the acquisitions of SIG’s
scale. This is often not available to
timber modular building business by
smaller companies whose margins Breedon Group made three acquisitions Urban Splash. Donaldson Timber
are tightening. They are also in in the year, including a Scottish quarry, Engineering acquired Cambridge Roof
a better position to pass on the a mini-mix concrete operator in the Truss, and Premier Forest Products
increasing costs of labour inflation. Midlands, and Irish construction materials acquired Merlwood Timber, both deals
Businesses operating in the UK business Lagan, which it acquired for serving to extend geographical reach.
timber market are highly sought after £455m. The combination with Lagan
provides Breedon with an enhanced Private equity are alive to the strong
and attracting robust valuations. growth prospects in timber. Cairngorm
platform for further organic growth and
The departure of skilled European bolt-on acquisitions. continued its march in the sector, adding
bricklayers as a consequence of Arnold Laver, Rembrand Timber and North
Brexit, and the lack of local skills Yorkshire Timber during the year. Builders
to replace them, could mean that merchant Huws Gray received investment
construction companies will look from Inflexion during the year and went
increasingly to alternatives, such as on to acquire five businesses, a number of
timber. Widespread in Scotland as which specialise in timber.
a building material, timber is now
becoming increasingly popular in
England. Sustainable and versatile,
timber lends itself to the advancing
off-site construction market and 45
modular building methods, and 40
will support the forecast growth in
Number of transactions
35
housing starts. 30
25
20
AVERAGE EV/EBITDA 15
MULTIPLE 10
2012-2018 7.1x
5
0
2012 2013 2014 2015 2016 2017 2018BDO MERGERS & ACQUISITIONS | BUILDING PRODUCTS & SERVICES 14
ROOF, CLADDING & INSULATION
SECTOR COMMENTARY Growth prospects in the UK housebuilding sector, alongside
environmental and regulatory drivers are creating an attractive
The sector is being increasingly driven
by off-site manufacturing and speed
investment thesis for businesses operating in the Roof, Cladding
of delivery. Companies with such & Insulation market.
capabilities are winning more tenders,
in part due to reducing the risk profile 2018 DEAL HIGHLIGHTS
of construction companies.
US-based GCP Applied Technologies Solutions. €20m turnover RoofSpace
International businesses have been acquired RIW for $30m, a supplier of was sold to Saint Gobain in a deal which
completing cross-border acquisitions waterproofing products including liquid, will accelerate its involvement in off-site
to increase their foothold in the UK sheet and cement systems alongside manufacturing and complement existing
market, underlining confidence in the structural drainage. businesses including Pasquill roof-trusses,
long term prospects of the UK roofing CUPA Group, the Spanish company Scotframe timber-frame houses and Saint-
materials market. engaged in the production and distribution Gobain steel-frame systems.
A number of corporates have been of roofing slate acquired Burton Roofing
carving out non-core subsidiaries as merchants and Brian Gow Roofing 16
they seek to reshape their businesses. Warehouse, which consolidates its position 14
in the UK market, adding £60m turnover.
Number of transactions
12
Alumasc sold its Façades unit to Northern- 10
Ireland based Kilwaughter Minerals,
8
AVERAGE EV/EBITDA which is the UK’s largest independent
manufacturer of silicone render. 6
MULTIPLE
2012-2018 6.3x
Alongside other disposals SIG sold the 4
assets of Proteus, a façade panel systems 2
manufacturing business and also UK offsite 0
manufacturing business RoofSpace 2012 2013 2014 2015 2016 2017 2018
HVAC & PLUMBING
SECTOR COMMENTARY HVAC & Plumbing has been the most active sector for M&A deals
since 2008, as buyers have sought to gain exposure to a market
Smart technology has been widely
adopted by the HVAC sector and
characterised by regulatory change and technological developments.
continues to evolve fast.
Services to the HVAC sector are 2018 DEAL HIGHLIGHTS
fast-growing, with technology-driven Volution continued its drive into Reliance to expand market presence
diagnostics driving strong recurring international markets with four strongly in Europe.
revenue streams. acquisitions: Simx, a New-Zealand-based Ferguson, the specialist distributor of
The European market is more evolved supplier of residential ventilation products plumbing and heating products has been
than the UK and UK based companies for £37.8m; Finland-based Pamon, a exiting a number of geographies, selling its
often look overseas for acquisitions. manufacturer of Mechanical Ventilation Nordic business for €1bn and most recently
with Heat Recovery products for £10.2m; its Dutch subsidiary.
The online model in the Plumbing
Denmark-based Air Connection for £2.8m;
sector is still in its infancy but is an area
Dutch specialist distributor AirFan.
with significant growth opportunities.
Volution aims to continue growing by
Larger companies still dominate the
acquiring value-adding businesses in new
market and further consolidation in
and existing markets and geographies
the sector is likely from businesses
across the residential ventilation market,
looking to fill-in certain geographies or
and where appropriate, in the commercial 50
from companies looking to build their
ventilation market. 45
presence in the online market.
Reliance Worldwide acquired UK global 40
Number of transactions
fittings manufacturer John Guest, which 35
specialises in plastic PTC (push to connect) 30
fittings. Australian-based Reliance, which 25
is the leading manufacturer in the world of 20
AVERAGE EV/EBITDA brass PTC plumbing fittings paid £687.5m 15
MULTIPLE for John Guest, representing 10.3x EBITDA 10
2012-2018 6.0x
after synergies. The combined businesses 5
have a strong strategic fit and will allow 0
2012 2013 2014 2015 2016 2017 201815 BUILDING PRODUCTS & SERVICES | BDO MERGERS & ACQUISITIONS
ELECTRICS & LIGHTING
SECTOR COMMENTARY The UK lighting market is developing fast and maintaining its
position within intelligent and connected built infrastructure. There
The UK Electrics & Lighting sector is
moving towards a European based model
is high demand for new innovations and energy efficient designs
of online sales direct to the end-user. The which are sustaining growth and increasing levels of M&A activity.
European market has a more advanced
and mature market for lighting and 2018 DEAL HIGHLIGHTS
complementary products.
Baird Capital acquired a majority interest BLE Lighting & Power is a leading
Faces strong foreign currency pressures in Collingwood Lighting, a leading name in the provision of emergency
due to imports of final products & parts designer and supplier of residential, lighting products & solutions and
from the Far East. Companies with a commercial and exterior luminaires into emergency power systems, supplying to
strong brand and customer relationships the professional and new-build markets a broad customer base of wholesalers,
may be able to pass on costs at the in the UK and France. The investment contractors and end users.
expense of smaller competitors. will support the business as it drives
Future trends will include ongoing innovation and growth.
adoption of LEDs in the UK market, and Red Arrow Trading Group, an importer
some eventual commodisation in the and distributor of lighting and electrical
market, alongside price competition from equipment to the electrical wholesale
online channels. industry acquired BLE Lighting & Power
The relatively low average valuation from Lowe & Fletcher, which had
for Electrics & Lighting reflects a identified it as a non-core subsidiary.
high proportion of targets operating
distribution-only business models. 30
Companies with IP, offering design-led
25
solutions are highly sought after and can
Number of transactions
command much higher valuations. 20
15
AVERAGE EV/EBITDA 10
MULTIPLE 5
2012-2018 5.6x 0
2012 2013 2014 2015 2016 2017 2018BDO MERGERS & ACQUISITIONS | BUILDING PRODUCTS & SERVICES 16
WINDOWS & DOORS
SECTOR COMMENTARY Prospects remain healthy in the Windows and Doors sector, which is
underpinned by strong demand from the housebuilding market. This,
A shifting preference towards highly
efficient products such as aluminium.
alongside product innovations and evolving consumer preference, is
Innovations in hardware components driving increasing levels of M&A activity and robust valuations.
and evolving aesthetics spurring
consumer demand. 2018 DEAL HIGHLIGHTS Strong interest from private equity, with
Off-site fabrication is impacting Tyman, a leading supplier of engineered Maven, CoBe Capital, Elaghmore Partners
the Windows & Doors sector and components to the door & window and Tosca Debt Capital all supporting
is an area of growth for a number industry acquired three businesses in MBOs in the Windows & Doors sector
of companies. the year: Ikon Hardware, which designs, during the year.
Large, international companies develops and distributes architectural Businesses also came out of investor
continue to have a strong interest hardware products; Zoo Hardware, a portfolios, for example Northedge-backed
in the UK market due to its strength designer and supplier of architectural DW3 Product was sold to Masonite in a
and the imbalance between supply hardware for £19m, representing an £70m deal.
and demand of new housing. EBITDA multiple of 6.8x; US-based
Ashland Hardware for $101m, which
brings to the Group an additional
engineered hardware product offering
for the North American residential
window and door market. This sizeable
deal will expand Tyman’s product
offering in the hung/sliding window 25
market which represents approximately
70% of all window openings in the US Number of transactions 20
residential market.
15
10
AVERAGE EV/EBITDA
MULTIPLE 5
2012-2018 6.7x 0
2012 2013 2014 2015 2016 201 7 201 817 BUILDING PRODUCTS & SERVICES | BDO MERGERS & ACQUISITIONS
INTERIORS & SURFACE FINISHING
SECTOR COMMENTARY The fashion-driven interiors market continues to attract interest
from a wide range of buyers and experienced an active year for
Highly competitive sector where the
B2B and B2C models are converging.
deals in 2018.
Price transparency from the B2C
model presents challenges and 2018 DEAL HIGHLIGHTS
therefore companies are trying to Fred Williamson & Sons, one of the North AkzoNobel confirmed its commitment
diversify vertically. Increasing routes East’s best known and long-standing to the Chinese market with the full
to market through specification is decorating supplies and interior design acquisition of its Joint Venture business
becoming more popular. business was acquired by South-East with UK-based Swire Industrial. The
Design/finishing sector is growing in based C Brewer & Sons, the largest business manufactures and distributes
popularity and an attractive area for independent supplier of decorating decorative paints in China, primarily
M&A growth as it allows companies materials in the country. The acquisition under the Dulux brand, and is aligned with
to provide an additional service/ provides entry to the North East market AkzoNobel’s ongoing transformation into
product to the same customer. This and supports ongoing evolution of a focused paints and coatings company.
has formed a key basis of M&A services to meet the contemporary
rationale in the past year. requirements of customers.
30
25
Number of transactions
20
15
AVERAGE EV/EBITDA 10
MULTIPLE
2012-2018 6.4x
5
0
2012 2013 2014 2015 2016 2017 201 8
KITCHEN & BATHROOM
SECTOR COMMENTARY Unlike other sectors, Kitchens & Bathrooms saw a decline in
the number of UK transactions in 2018, however this follows an
Historically, companies in this sector
have tended to focus their offerings
exceptional year of deals in 2017. Businesses operating in the
on either high-end or low-end. Kitchen & Bathroom sector continue to develop brand portfolios,
Companies are now increasingly aligning to consumer tastes and the recovering RMI market.
looking to serve more than one area of
the market as a way of growing sales.
2018 DEAL HIGHLIGHTS
The online market is becoming
increasingly important in this sector, PE-backed businesses have been active C P Hart, the UK’s leading premium
as customers widen their outlook from in 2018, including Promethean-backed bathroom retailer acquired European
traditional channels. Brickability, which had a busy year Bathrooms, adding showrooms in
completing 7 deals, amongst them Windsor and Amersham to its expanding
RMI is a key driver and recent data two providers of luxury towel rails network. The business continues to seek
highlights expects levels in the private and designer radiators: Towelrads and opportunities to further grow its reach in
housing sector to be sustained this Hamilton Heating. the niche premium bathroom segment.
year and to grow by 2% in 2020.
Lonsdale Capital Partners-backed Mobility
Group acquired Cassellie, a designer and 20
importer of bathroom products. The 18
acquisition is part of a wider strategy 16
Number of transactions
to create a bathroom supplier of 14
significant scale. Since Lonsdale’s initial 12
investment in 2016, the Mobility Group 10
has experienced five-fold growth, both
AVERAGE EV/EBITDA organically and through acquisition, and
8
6
MULTIPLE will achieve revenues of £60m this year.
2012-2018 6.5x
4
2
0
2012 2013 2014 2015 2016 2017 201 8BDO MERGERS & ACQUISITIONS | BUILDING PRODUCTS & SERVICES 18
SECURITY & ACCESS
SECTOR COMMENTARY Security & Access continues to be a sought-after sector, with
technological advancements and regulatory change driving interest
Similar to the HVAC sector with
technology acting as a key driver
in advanced businesses, particularly manufacturers with strong IP.
of growth.
Products with innovative features 2018 DEAL HIGHLIGHTS
such as sensors are experiencing Lock manufacturer Assa Abloy was Further deals in fire protection include:
high levels of growth, alongside very active in the year, completing 13 A&F Sprinklers’ acquisition of Hall Fire
capabilities that integrate with other acquisitions, including Exidor, Lorient, Protection from administration to create
building management systems. Dale Hardware and Excel Architectural one of the country’s largest independently-
Hardware in the UK. These deals owned fire sprinkler companies; ADT’s
Customers understand the strengthen the Group’s position through acquisition of Electronic Security Systems
importance of having adequate adding complementary products and and Fire Protection; Premier Technical
security and access products and solutions. Lorient has a strong position in Services Group’s acquisition of M&P Fire
therefore are keen to consider the fire protection market, extending the Protection, recently complemented with
advances that tighten security. Group’s door sealing portfolio. Trinity Fire & Security Systems for £10.8m.
Halma continued to build its fire protection
portfolio with the acquisition of Limotec, 30
a leading fire control panel designer and 25
manufacturer in the Belgian market.
Number of transactions
20
15
AVERAGE EV/EBITDA 10
MULTIPLE 5
2012-2018 7.1x 0
2012 2013 2014 2015 2016 201 7 201 8
FLOORING & CARPET
SECTOR COMMENTARY The Flooring & Carpet sector is seeing deals that broaden routes to
market, diversify product portfolios and align to emerging consumer
Consumer tastes, RMI and
construction activity are key drivers
trends. The sector has seen rising levels of interest for M&A over
of the sector. recent years.
The specification market has
increased in competitiveness which 2018 DEAL HIGHLIGHTS based in the Netherlands which increases
creates the need to explore further Victoria stayed true to its intention to focus the weight of the Group in the residential
routes to market. only on larger deals, acquiring Ceramica and commercial sectors.
Faces labour challenges, especially Saloni for €97m, a European manufacturer Shaw Industries, the largest carpet tile
with installation. Companies that do of mid to high-end ceramic and porcelain manufacturer in North America acquired
not outsource installation are better tiles, aimed primarily at new construction Scotland based Sanquhar Tile Services. The
placed to overcome this challenge. or commercial offices. Victoria, which combination positions Shaw as a global
specialises in floor carpets, aims to double carpet tile provider.
its turnover to £1bn by 2020, and would
next like to enter the market for luxury
vinyl tiles.
20
Headlam, Europe’s largest distributor of 18
floorcoverings acquired 5 further businesses 16
Number of transactions
in 2018: Garrod Bros, Ashmount and 14
Rackhams all consolidating the Group’s 12
position within the Greater London 10
area; CECO Flooring based near Belfast, 8
AVERAGE EV/EBITDA which will expand Headlam’s presence 6
MULTIPLE in North Ireland as well as increasing its 4
2012-2018 6.6x
specification-led sales channel; Dersimo 2
0
2012 2013 2014 2015 2016 201 7 201 819 BUILDING PRODUCTS & SERVICES | BDO MERGERS & ACQUISITIONS
PLANT HIRE
SECTOR COMMENTARY The Plant Hire sector is experiencing strong demand from the
infrastructure market, and has seen consolidation continue apace,
Private equity have long been
attracted to the plant, equipment with high interest from private equity and overseas players.
& tool hire sector, with its asset-
backed profile providing investment 2018 DEAL HIGHLIGHTS
security and EBITDA profile ensuring
attractive returns. BGF provided £4.7m investment to Loxam as a market leader for working at
heavy equipment rentals business height solutions.
International companies have a
strong interest in the sector, much of Plantforce Rentals.
Dutch business Boels Rental acquired UK
which is underpinned by the volume Elaghmore Partners acquired McPhee Bros, business Artisan Hire Centre and sister
and value of infrastructure projects. a provider of truck-mounted concrete company SAS which operate in the south-
New emissions legislation expected mixer units. west of England. These additions bring the
this year could force operators to
seek investment to upgrade their Recent secondary buy-outs include: Alinda total number of Boels branches in the UK to
equipment fleet. Capital’s acquisition of infrastructure- 38, building on the acquisitions of Already
focused Kelling Group from Elysian Hire earlier in the year and Supply UK Hire
Customers are increasingly
demanding more flexible rental Capital; The Carlyle Group’s acquisition of Shops in 2017. Boels, which had revenue
options and service, which is spurring EnerMech from Lime Rock Partners; Ashtead of €445m last year has set its sights on
the emergence of new business Technology’s buyout by a consortium of reaching €1bn within a few years.
models, including same-day delivery investors from Phoenix.
and brokerage. 25
Telematics are increasingly used in HSS Hire sold UK Platforms to Loxam
the sector to drive benefits, including for £60.5m, which, combined with its Number of transactions 20
operational improvements and Nationwide Hire business will position
increased flexibility. 15
10
AVERAGE EV/EBITDA
MULTIPLE 5
2012-2018 5.8x 0
2012 2013 2014 2015 2016 2017 201 8BDO MERGERS & ACQUISITIONS | BUILDING PRODUCTS & SERVICES 20
MERCHANTS / DISTRIBUTORS
SECTOR COMMENTARY In the UK, the merchant market remains highly fragmented, and a
number of businesses have been resolutely consolidating. We expect
High levels of consolidation continue
in the sector. Regional merchants
this to be an ongoing theme.
with less than ten branches are of
particular interest. 2018 DEAL HIGHLIGHTS
A number of large businesses in the Saint-Gobain, SIG, Travis Perkins, Ferguson presence, making it the UK’s largest
sector have come under margin and CRH have all progressed carve-outs independent builders merchants. Like
pressure in recent years and have and disposals of non-core businesses, with Huws Gray, Ridgeons has a strong focus
initiated strategic reviews to realign more expected going forwards. on the growing repair, improvement and
their businesses. maintenance segment, as well as a large
Huws Gray received investment from
Challenges come from the migration Inflexion in April 2018 and went on and diversified customer base of over
to online sales, however the UK has to acquire 7 business in six months. 16,000 clients.
strong loyalty to a branch-based These deals include: Penrith Building
operating model. Supplies, PH Timber, Armstrongs Builders
Merchants and Southport Timber, all 18
based in the North West; Audley Builders 16
Merchants, Wheelers Timber and Builders
Number of transactions
14
Merchants based in the Midlands. 12
In October, Huws Gray acquired Ridgeons, 10
an independently owned timber and 8
AVERAGE EV/EBITDA builders merchants trading from over 6
MULTIPLE 40 mixed branches in East Anglia. 4
2012-2018 6.8x
The transformational acquisition will 2
significantly increase Huws Gray’s store 0
base and broaden its national 2012 2013 2014 2015 2016 201 7 201 821 BUILDING PRODUCTS & SERVICES | BDO MERGERS & ACQUISITIONS
UK CONSTRUCTION FORECASTS
INFRASTRUCTURE PROJECTS SUSTAIN CONSTRUCTION OUTPUT
TOTAL CONSTRUCTION OUTPUT BY SECTOR
180,000 10%
160,000 8%
Total output, yoy change %
Construction output £'m
140,000 6%
120,000 4%
100,000 2%
80,000 0%
60,000 -2%
40,000 -4%
20,000 -6%
0 -8%
2012 2013 2014 2015 2016 2017 2018E 2019F 2020P
Private housing Public housing Public non-housing
Industrial Infrastructure Commercial
Private housing RM&I Public housing RM&I Private other R&M
Public other R&M Infrastructure R&M Construction output % change
Source: CPA
Mixed outlook for the construction sector with infrastructure activity being a key driver
UK construction output remained Investment Fund, which the Government RM&I market is expected to recover, with
resilient in 2018 in spite of rising political has increased from £31bn to £37bn, 2% growth projected in 2020, which will
uncertainty, with particularly strong growth and extended by one year to 2023/24. drive demand in many underlying Building
in the North West, Midlands and Yorkshire. Foreign investors see infrastructure as an Products & Services sectors.
5% growth in private housing was enough attractive prospect, especially following the
to counter a 2% decline in public housing, weakening of Sterling. The subdued outlook for growth in other
leading to 3.9% increase in housing output sub-sectors comes against a backdrop of
in the year. Growth in other sectors Output in the private housing sector sustained year-on-year growth to 2017.
was hampered by slower UK economic reached a record high in Q3 2017 and is In the commercial sector output rose
growth, and rising uncertainty around the expected to rise by 2% in 2019 and 1% by 7.6% in 2016 and by a further 7.8%
Brexit Withdrawal Agreement. This has in 2020, driven by new builds outside in 2017. As expected, the uncertainty
particularly impacted prime residential London and the incentive of the Help to following the EU Referendum means that
apartments in London, commercial offices Buy scheme. Help to Buy, which accounts major new investments have become
and industrial factories. But overall, 2018 for just under a third of private house increasingly difficult to justify, and this
output was sustained at the high levels building starts, has been extended to 2023 decline in new orders is now translating
seen in 2017. in England (2021 in Wales and Scotland), to lower commercial output. There are
and is expected to maintain demand for however bright spots in the forecasts,
Infrastructure activity is expected to be new build housing. The Government has set including pent-up demand for office
the key driver of growth over the next an annual housebuilding target of 300,000 space in Manchester and major office and
two years, as the Thames Tideway Tunnel new homes a year by the mid-2020s, which mixed-use developments in the pipeline,
project continues, work on HS2 accelerates has resulted in a raft of policy measures. including 12 large developments planned
and main work at Hinkley Point C gets The £5.5bn Housing Infrastructure Fund above Crossrail stations.
underway. By the end of the forecast was topped up with a further £500m in the
period, infrastructure output is projected 2018 Budget, and the Chancellor unveiled
to be £23.2bn, 18.2% higher than in 2017, a new £3bn scheme in his spring statement
and the highest level on record. This is to fund the building of 30,000 affordable
supported by the National Productivity homes. Alongside this, the private housingBDO MERGERS & ACQUISITIONS | BUILDING PRODUCTS & SERVICES 22
Data referenced from the CPA's Construction Industry Forecasts. The CPA is the leading voice to
promote and campaign for construction product manufacturers and suppliers.
PRIVATE AND PUBLIC STARTS / COMPLETIONS
200,000
160,000
120,000
80,000
40,000
-
2012 2013 2014 2015 2016 2017 2018E 2019F 2020P
Total housing starts Total housing completions
Source: CPA
CONSTRUCTION OUTPUT PRIVATE HOUSING INFRASTRUCTURE
TO REMAIN BROADLY FLAT STARTS TO RISE CONSTRUCTION TO RISE
IN 2019 AND RISE
1.6% IN 2020 2.0% IN1.0%2019IN AND
2020 8.8% IN7.7%2019IN 2020
AND23 BUILDING PRODUCTS & SERVICES | BDO MERGERS & ACQUISITIONS
OUTLOOK FROM EUROCONSTRUCT
CONSTRUCTION OUTPUT TO GROW BY 2% IN 2019 AND 1.6% IN 2020
INFRASTRUCTURE TO DRIVE GROWTH ACROSS EUROPE
Thanks to simultaneous construction some countries. In the short term, supply
EUROCONSTRUCT IS
EUROPE'S LEADING
output growth across the 19 Euroconstruct and policy drivers have a stronger impact CONSTRUCTION MARKET
countries, 2017 recorded a growth peak of on the residential markets. FORECASTING NETWORK
4.1% (volume). The construction market
is expected to grow by 2.8% in 2018 and As a whole, non-residential construction
slow down at a yearly average rate of output (new and renovation) is growing at
1.6% (in volume) over the forecast period a pace of 1.5% per year across 14 growing
(2019-2021) supported by smoothing countries over the 2019-2021 period. But it
but still positive GDP evolution. 2021 should be noted that public buildings and
construction market volumes are expected offices are reversing the non-residential
to be 15% behind 2007’s peak for the EC19 market in the UK and Germany. This is
countries, however when Ireland, Spain and mainly due to public budget allocation and
Portugal are excluded from the analysis, the anticipated effects of Brexit. An abrupt halt
sum of output levels across the remaining in activity is expected in the offices sector Euroconstruct, created in 1974 by 5
countries show recovery. in the UK. national establishments representing
the construction sector (BIPE (France),
In the very short term, confidence for Civil engineering is expected to become the CSTC (Belgium), IFO (Germany), EIB
households is reaching a peak in 2018 new driving force during the forecast period (The Netherlands) and NEDO (United
fuelling the new-residential sector. with annual growth rates between 2.5 and Kingdom)), has today members from
Collective housing progressively overrides 5% in volume. Civil engineering will benefit 19 European countries, representing
individual dwellings with 58% of collective from European Commission infrastructure’s almost the whole European zone.
vs. 42% of individual completions plans and from national plans, especially
highways and rail renovation. Euroconstruct’s members, whose
expected in 2021. The population across counselling services enable them
Euroconstruct countries is expected to to remain in constant contact
continue growing over the 3 next years In summary, although the outlook for
construction activity is mixed across with makers of national policy and
but at a slower pace than in the past. private companies, are experts on
Despite this dynamic, household growth the UK and Europe as a whole, there are
many bright spots in the forecasts, which public policies, company strategy
does not necessarily lead to housing and the main trends influencing the
completions growth, leading to an alongside the other drivers discussed in this
report, will continue to underpin robust construction market.
imbalance between supply and demand in
levels of M&A activity. Euroconstruct provides national-
level analysis and forecasts on the
construction sector.
EC19 - TOTAL CONSTRUCTION OUTPUT AND GDP (YOY CHANGE %)
PASCAL MARLIER
Le Bipe – BDO ADVISORY
3.0 4.5
Construction output yoy change %
4.0
2.5 3.5
GDP yoy change %
2.0 3.0
2.5
1.5
2.0
1.0 1.5
1.0
0.5
0.5
0.0 0.0
2015 2016 2017 2018 2019 2020 2021
GDP Total construction outputBDO MERGERS & ACQUISITIONS | BUILDING PRODUCTS & SERVICES 24
25 BUILDING PRODUCTS & SERVICES | BDO MERGERS & ACQUISITIONS
SECTOR THEMES
FACTORS DRIVING INVESTOR INTEREST IN BUILDING PRODUCTS & SERVICES
2018 was a year in which Construction hit the headlines for the wrong reasons. The collapse of
Carillion sent shockwaves through the sector and shed a spotlight on issues to be overcome if
necessary structural change is going to take place.
The skills shortage, the imbalance of power in the supply chain, and thin profit margins are all piling
on pressure on businesses operating in the sector, but innovations and opportunities do exist to
overcome these, to spur productivity, and position the sector to deliver the huge amount of building
required. These factors continue to drive attractive investments in the sector.
TECHNOLOGY
The Building Products & Services sector has been slow to
embrace innovation and change due to both cultural and OFF-SITE CONSTRUCTION
commercial pressures. There are a number of significant
opportunities that are driving benefits to improve The Government is pushing offsite construction as
productivity, including Building Information Modelling a means of tackling the £15bn productivity gap in
(BIM), cloud computing, the Internet of Things (IoT), construction.
automation and online distribution channels.
It is well-known that the residual value of a building is
Awareness and adoption of BIM are rising steadily. NBS little more than half the cost of its construction: around
estimate that adoption has risen from 10% in 2011 to 30% of building materials and 40% of working hours are
over 70% in 2018. The creation of identifiers for building wasted. The solution is not squeezing the supply chain,
products has been seen as the missing link in BIM, and a nor can there be compromise on the performance of the
key area that must be addressed to drive value from the assets, networks and systems. So efficiencies can only be
process. The CPA came together with the NBS and CBI achieved through a fundamental shift in process, where
to research and develop an Identifier for construction construction becomes much more like manufacturing,
products to feed into BIM, which led to the development and the use of raw materials is minimised, as is
of Digital Object Identifiers (DOIs). These have been processing and handling. This produces a new way
successfully piloted and are expected to bring significant of working, where integrated solutions use standard
benefits to the building lifecycle. components configured using standard processes to give
bespoke assets.
The growing potential of data analytics, Artificial
Intelligence (AI), machine-learning, IoT and integration While this all makes excellent sense, the reality is that the
with GIS platforms will broaden the possibilities beyond transition to off-site construction requires large upfront
BIM towards an increasingly diverse 21st century digital investment, is currently suitable for standardised projects
built environment where infrastructure, buildings, digital only and requires widespread participation.
media and systems must all converge if we are going to
For this reason the Government is putting the weight
create smarter cities and communities.
of its construction portfolio and its purchasing power
behind the drive for innovation. Five key government
organisations will adopt ‘a presumption in favour of
offsite construction’ by 2019, which is expected to renew
impetus.You can also read
