INDUSTRY FOCUS
CONSTRUCTION, TRADES & MATERIALS
OVERVIEW
The US construction industry comprises 3.3 million businesses providing employment to over 9.4 million Americans and generating a combined annual revenue of $2 trillion. Sectors within the industry include building construction (builders and contractors), heavy construction (infrastructure), and special trade contractors (plumbing, HVAC, painting, electrical, masonry, carpentry, roofing, concrete, water well drilling, structural, glasswork, excavation, and demolition).
The companies holding the largest market share in the industry include DR Horton Inc., Turner Construction Company, AECOM, Fluor Corporation, and EMCOR Group Inc.
The construction industry added more than $900 billion to the US economy in the first quarter of 2020—its highest level since the 2008 recession. It employed 7.64 million people in February 2020, also the highest levels since 2008. Then, COVID-19 reached the United States, causing the industry to lose $60.9 billion in GDP and decreasing total jobs to roughly 6.5 million, effectively wiping out two years of GDP gains and four years of job gains.
TRENDS & CHALLENGES
While construction costs (labor and material) have been continuously rising putting pressure on costs and prices, technology advancements in construction materials and methodologies are creating interesting opportunities for the industry.
This industry seems to be lagging behind others in digital strategy and maturity, creating pressure to increase the pace of digital investments. One approach is to identify ecosystem partners they can work with to enable connected construction together. This ecosystem approach can be a key enabler for adjusting to new market realities and better responding to disruptions.
FUTURE FORECAST
The different outlooks for residential and nonresidential segments may present various challenges for companies in 2021. Smaller firms with less balanced portfolios or a higher exposure to energy, travel, hospitality, or recreation end markets are likely to experience greater volatility in the coming year. Larger firms with more diversified exposure may absorb this impact better. As we move into 2021, more construction companies are expected to target different business models and targeted consolidation.
Connected technologies and an increase in associated investments may help firms realize new operational efficiencies. Construction and material companies are likely to help other industries unlock the future of workplace solutions.
INDUSTRY PERFORMANCE
3.2X
EBITDA MULTIPLE
0.45X
SALES MULTIPLE
Disclosure: These key performance indicators are based on industry averages for a company with $10 million in revenue. The KPIs are not specific to the operational performance of your company or your sub-sector.
The information contained has been obtained from different sources deemed reliable, including DealStats, Deloitte, Dun & Bradstreet, and Business Reference Guide. Pacifica Advisors does not make any representation or warranty as to the accuracy of the data. PA is a mergers and acquisitions (M&A) advisor and business broker.