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    Home»Thought Leadership»Breaking Down the Deal Market And Identifying What’s Ahead
    Thought Leadership

    Breaking Down the Deal Market And Identifying What’s Ahead

    Updated:January 13, 2022No Comments4 Mins Read
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    Digitization has been transforming work across industries, and construction is no exception. As contractors, subs, and developers seek to keep projects on track, manage resources, and maintain health and safety, they are increasingly adopting new technologies that support such goals efficiently. As a result, the construction tech market is putting up numbers that reflect heightened interest and activity. As of August 2021, $1.9 billion has been invested and 144 deals have closed at an average valuation of $32.5 million, representing a 91.9% increase in average valuation from a year ago.

    Market outlook is trending positive

    The outlook for the construction tech market is trending positive, with ample opportunity given current macroeconomic conditions. In general, the M&A market is charging ahead, as PE firms and public corporations have substantial cash on the books. Organic growth can often only go so far and so quickly, while strategic acquisitions can provide a significant growth boost that, in turn, can generate returns for investors.

    Additionally, the pace of activity in the construction industry remains brisk and is expected to continue as such in the near term. So long as activity remains healthy, construction technology players should have a market not only amenable to considering new tools but also to adopting innovation as it happens.

    Buyers are gravitating toward efficiency and protection

    Construction tech companies that enable users to realize efficiencies in operations are attracting considerable attention from buyers. Much interest has been shown in platforms that unify costs and timesheets for both general contractors and subcontractors, providing a clear picture of project expenses in real-time and enabling managers to pivot as needed.

    Similarly, estimation software, though very niche, is garnering close inspection. Some of the most compelling offerings here can accommodate specialty contractors, such as electrical or plumbing, while incorporating their data into broader job estimation platforms. One of the keys is to have an open API to allow for communication with other vendor platforms to ensure seamless integration.

    The market is also intrigued by near-term and long-term prospects of tech that tracks high-value assets, from human resources to costly equipment. More platforms are emerging that can track tools, machinery, and even people in construction zones, with an aim toward protecting investments from theft as well as preventing accidents and injuries to maintain a safe and healthy workforce. Such platforms certainly have a place in construction, but their technology may be applied to other industries and, at some point, may be able to impact companies further in managing costs related to workers’ compensation.

    Threaded through all of these areas of focus is an emphasis on user experience. Construction tech companies must consider where their tools are being used and create an interface that is clear and intuitive no matter how or where it is being accessed — from a laptop, tablet, or cellphone. While the SaaS (software-as-a-service) model is critical, so is having native mobile apps that work wherever its users work.

    Getting positioned in a favorable environment

    To best position themselves for consideration among prospective buyers, companies must hone their investment theses to resonate with them, demonstrating how they can scale to provide returns investors seek. Firms that are more vertically focused are often challenged to attract PE dollars, but strategic buyers may find that such companies provide greater differentiation of their platforms and add value.

    At the same time, companies must develop a solid understanding of their own capital requirements and market opportunity, ensuring that valuations are fair and accurate. With due diligence, construction technology companies of all stripes can take advantage of the favorable backdrop created by the current combination of dry powder and robust activity.

    Chris Skubic

    About the Author

    Chris Skubic, is managing partner at Alkali Partners, a senior finance and operations executive offering expert insight on construction technology M&A. He can be reached at chris@alkalipartners.com 

    Alkali Partners Chris Skubic Construction M&A Market Trends Technology
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