The residential construction software market has seen its share of M&A (merger and acquisition) activity and perhaps one of the biggest this year took place quietly just before those of us here in the U.S. celebrated the Fourth of July holiday, as ECI Software Solutions scooped up two residential home construction software business units from MiTek.
Before we look at this one specific acquisition and what it means for the construction industry going forward, let’s back up for a minute and look at the residential construction market as a whole during the past two decades—because much has changed and perhaps much has stayed the same when we consider the technology companies and construction industry.
The History of Residential M&As
Journey back more than two decades to the year 2001. I am guessing some of you were not even in the industry. It’s had been very interesting to watch a company like BuildNet prove to be a classic example of a company that attempted to assemble a completely integrated electronic supply-chain network through acquisition. At the time, the residential tech giant had amassed 12 software companies including UniLink, NxTrend, HomeStyles, TomSystems, FAST, Lloyd’s, and TrueLine, among others. BuildNet had intentions to go public but was forced to withdraw its IPO (initial public offering) after the dot.com bubble burst.
Much has changed since that time, and deals are done differently today. It used to be that you could buy a software company with seller debt, so the seller is taking on the debt and value of their company. BuildNet had a very good revenue stream, but it just had so many seller debt obligations and when the IPO didn’t go through, those shares did not convert to equity.
BuildNet attempted to salvage its investments by entering into an agreement to merge with HomeSphere, but HomeSphere rescinded the offer to merge in 2001, eventually forcing BuildNet into a defensive posture of bankruptcy to protect the value of the core software products.
The companies BuildNet had acquired were then divided up and sold to the highest bidder. HomeSphere was one of the bidders, purchasing BuildSoft and Builder360 from BuildNet. In 2006, HomeSphere divested all of its backoffice software, selling those two particular products to Constellation HomeBuilder Systems, in an effort to focus on supply-chain services.
Residential M&A Activity Today
Constellation HomeBuilder Systems, a division of Constellation Software, has long been one of the big acquiring players in the residential construction market, having swept up the likes of NEWSTAR, FAST, Builder1440, and BuildTopia, just to name a few.
Another company that has made a lot of big moves in the residential construction market is ECI Software Solutions, which has acquired MarkSystems, BOLT Software, and BuildTools, just to name a few. MiTek has also made a number of acquisitions of its own, perhaps two of the most notable ones being BuilderMT, a workflow management suite, and Sales Simplicity, a CRM (customer-relationship management) and sales automation software.
On July 2, ECI Software Solutions announced it has completed the acquisition of two residential home construction software business units from MiTek. Those two business units are none other than BuilderMT and Sales Simplicity. Terms of the deal were not disclosed, and ECI says BuilderMT and Sales Simplicity will not replace any existing ECI products.
Why Acquire?
There are many reasons why a software company may choose the route of acquisition to build out a portfolio of products. Some could include: to build out a customer base, to acquire a specific technology, to piece together an integrated product, to get rid of a competitor, and to gain more momentum if the acquired company is running out of steam. The potential reasons for an acquisition run the gamut.
In the case of ECI and MiTek, ECI says the acquisition aims to help customers improve operations. BuilderMT and Sales Simplicity ultimately help to expand ECI’s residential construction software portfolio, giving existing customers new opportunities.
What’s Next?
The number of M&As in recent months could be a sign of a healthy market, as investors are looking to capitalize in the construction market. As M&As continues in the months ahead—because they will—construction companies may want to ask key strategic questions of their providers such as:
- Was it acquired or merged?
- What is the underlying reason for the acquisition?
- What were the motivations?
- What is coming next?
- What is the roadmap for the product that has been acquired?
- What is the longer-term strategy that the company is looking to accomplish?
All of these questions, and more, will be critical as acquisitions continue to unfold in the days ahead. Personally, I invite Scott Duman, president of ECI residential and the marketing team to consider a spot on my radio show to tell the construction acquisition story at some time. I am certain construction companies and potential customers would like to hear the real story and what lies ahead. Let’s be honest, construction companies must prepare for the inevitable changes that will continue. The pace of change is going to only pick up and companies need to buckle up. Let’s make sure our businesses are ready to handle what comes next. For some the road might be tricky for sure.
Want to tweet about this article? Use hashtags #construction #IoT #sustainability #AI #5G #cloud #edge #futureofwork #infrastructure