Like the construction industry in general, M&As (mergers and acquisitions) in the construction-technology space are often cyclical, coming in waves, sometimes faster than others. But it seems like the pace of change continues to roll faster than it ever has in the past, especially in construction digital transformation. To illustrate the impact on the construction sector let’s take a closer look into three case studies today.
Sage Centers on SMBs
Arguably some of the biggest construction-technology acquisitions Sage has made are Intuit, Contractor Anywhere, and Peachtree, stapling the software provider as one of the big players in accounting for construction for decades. Many of these came in the late 1990s or early 2000s. The acquisition of Intacct came much later in 2017. And of course, these are just a sample of the acquisition moves the company has made.
This past month, Sage has made another large acquisition move that narrows in even further on the SMB (small and medium-sized business) market in construction. Sage inked a deal with Corecon, which is a preconstruction and project-management solution. This particular acquisition extends Sage’s reach much further than accounting and financials and provides a solution to efficiently manage projects.
“While specific objectives may vary depending on the acquisition, our focus is always on how our product portfolio can best serve our customers and the industry,” says Dustin Stephens, VP of construction and real estate, Sage. “For example, through our recent acquisition of Corecon, a cloud native preconstruction and project management solution, small and mid-sized construction firms will be able to manage projects more efficiently from bid to close out in the cloud.”
Corecon’s preconstruction and project management solution remains technology agnostic and will integrate with third-party ERP (enterprise-resource planning) and accounting systems, as well as Sage Intacct Construction, Sage 300 Construction and Real Estate, and Sage 100 Contractor. With the Corecon acquisition, Sage has brought 12 new colleagues into the Sage Intacct organization.
Still, this begs the question: what steps does the company take internally to bring the two companies together? Stephens suggests community plays an integral role.
“We’ve been doing this for more than 50 years and are committed to delivering trust and innovation to our ecosystem. We are backed by the largest partner network and most loyal and active customer base in the industry,” he says.
At the end of the day, while there are certainly hurdles, there are also advantages when one company acquires another. Stephens says acquisitions can help fill in gaps in the market by providing construction businesses with more options and can ultimately lead to greater innovation by combining resources and experiences and accelerating product development.
“At Sage, we strongly believe in the power of choice. While we offer a number of industry-leading solutions, the reality is that most businesses are using multiple solutions from different vendors. We believe it’s important to give all vendors a seat at the table, which is why we have an open API (application programming interface) and partner with a growing number of vendors through the Sage Intacct Marketplace,” he explains. “We want to make it as easy as possible for our solutions to integrate with other industry offerings, so customers have the flexibility to choose the right mix of solutions that best address their unique business needs.”
JDM Eyes Acquisitions
JDM Technology Group buys vertical market software companies and employs a buy and build strategy to grow marketshare. Some of its companies include Explorer Software, Computer Guidance Corp., Integrity Software, ConEst Software Systems, JOBPOWER, and Maestro Technologies, just to name a few.
What makes JDM a little bit different from some others is its model does not merge the acquired company into the another. When JDM purchases a company, it is purchasing their brand and reputation and it wants that to continue. The term it uses is business as usual, as it wants the clients to know that they will be dealing with the same people and that the business will still be here for them.
The big difference is the acquired company now has the strength of a parent company to help move the software and company along faster than they could on their own.
When acquiring a company, JDM spends a lot of time and effort on the financial aspects of the business, while also ensuring the software fits into the business model of the lifecycle of a construction project. JDM also has a director of acquisitions whose job it is to make the transition as smooth and easy as possible.
“We spend quite a bit of time on-site explaining our processes and the expectations we have for the business,” says Mark Liss, chief commercial officer of JDM Technology Group.
As acquisitions take place, new businesses arise, continuing to offer innovation in the marketplace. Still, companies acquire for various reasons. Liss says companies that acquire others may do so to acquire new technology that can help some of their other businesses to move their products along at a faster rate.
“They can also offer expertise for the acquired companies that will benefit both their customers and team,” says Liss. “Ultimately the construction industry will benefit as acquisitions take place as innovation will take place faster than if each company stood alone.”
The Nemetschek Group Invests Globally
With an international reach, the Nemetschek Group has spent millions on investments in construction technology and facility management technology. Some of its large acquisitions include Axxerion, MCS Solutions, Bluebeam, Solibri, and Graphisoft, just to name a few.
“As a strategic buyer in the construction industry, our primary objectives when pursuing an acquisition revolve around expanding our overall story for the AECO (architecture, engineering, construction, and owner) lifecycle,” says Matt Wheelis, SVP of strategy, build & construct division at the Nemetschek Group. “We seek companies that are a natural fit and offer positive synergies, where 1+1 is far greater than 2 or, said differently, the combination of our strengths exceeds the sum of its parts.”
While the specific objective may vary based on the acquisition, Nemetschek has broad overall themes guiding the decisionmaking process, which include digitalization of construction, the adoption of open standards, increasing sustainability within the AECO industry, and achieving a comprehensive digital twin across the design, build, and operation phases.
Bringing two companies together has its hurdles, namely culture. Each company has a unique culture and many acquisitions struggle because of vastly different cultures. Ensuring cultural compatibility is essential for a successful acquisition, says Wheelis.
“When merging two companies, our primary focus is on fostering a cohesive culture that unites employees from both the acquired company and our existing business unit,” Wheelis says. “Building a strong team dynamic is crucial for effectively addressing common challenges and working towards shared goals. Additionally, we invest time in understanding the unique qualities that make the acquired company special, including its leadership, products, and go-to-market strategies.”
At the end of the day, an acquisition can have a long-lasting impact on the construction industry. Wheelis says the hope would be to contribute to a more connected future within the construction industry—which would ultimately mean more time, money, and resources saved, impacting personal lives and the environment. At the same time, acquisitions can help accelerate new innovations on a broader user base by leveraging established platforms and reallocating capital to make it available for funding new rounds of innovation.
“The impact of acquisitions on innovation can vary,” Wheelis explains. “For some founders, the prospect of a future exit through acquisition can serve as a motivator for innovation. However, it can also be argued that in certain cases, acquisitions may slow down innovation. Ultimately, the driving force behind innovation lies with entrepreneurial individuals who are passionate about solving important problems, whether as part of a strategic acquirer or independently.”
Looking to the days ahead, we can expect the acquisition activity in the construction industry to continue to accelerate, according to Wheelis. As new innovation and tech-savvy startups will be bound to emerge, there will certainly be a growing desire to acquire these to millions of users at a faster speed. If you are using construction technology today, proceed with the assumption there is always the chance it will in fact be snatched up by the biggest bidder. The real question you must ponder now is who is worthy enough to be acquired?
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