Building Products & Construction Q1 2021

Industry Trends

New Home Sales Take A Hit as Builders Deal with Delays and Costs

Sales of newly built homes posted an 18% monthly drop in February, which is the slowest monthly pace since last May, according to the U.S. Census. The drop is due to material shortages. The combination of higher interest rates, material shortages, and rising material costs led the median price of new homes to increase by 5% as of February. The shortage of new homes has caused an increase in the number of homes sold pre-construction by 20% year over year.¹

Workforce Challenges in Key Construction Industry Segments

The construction industry will be challenged during 2021 as companies look to increase their workforce to keep up with demand. As more companies adopt more work from home policies, the decreased need to be near city/working centers will drive residential construction growth. This will increase demand for construction field managers and land development managers. Commercial projects that were delayed in 2020 will be resumed in 2021, which will increase the need for general contractors and builders, which are already in short supply.²

Construction Sees Double-Digit Decline in Hiring and Projects

Hiring and pending projects were down 25-30% in 2020 as the pandemic brought uncertainty to the industry. As the pandemic wanes in 2021, the pressure to complete stalled construction projects will flood the labor market, particularly skilled laborers. Along with the labor issues, increased competition in the bidding process has suppressed profit margins for construction companies.³

Biden’s Infrastructure Plan Provides Opportunity for Construction Industry

One of the key drivers for construction in 2021 will be whether President Biden’s “Build Back Better” plan can be approved. The plan is expected to include investments for infrastructure projects in the U.S., which would help with the industry’s path to recovery. The plan would provide a long-term funding source for roadway, bridge, and manufacturing projects and aid in funding new labor in the industry.^{4 5}

Record-High Lumber Prices Add $24K to the Price of a New Home

The price of lumber has soared more than 180% in the last year, causing the price of an average new single-family home to increase by $24,386 since April 17, 2020, according to NAHB. In February, the price of framing lumber was $975 per thousand board feet, compared to $350 a year ago. Multi-family homes have not increased in price as heavily as single-family homes, suggesting a higher demand for that type of home.⁶

C02-Infused Cement Mixes Could Dramatically Reduce Global Emissions

Cement production accounts for roughly 7% of total global carbon dioxide emissions and is one of the most used resources on earth. Given the industry's size and its effect on the global climate, technologies that can reinvent concrete can have a profound impact on carbon dioxide emissions. One of these emerging technologies is C02-infused concrete that locks the greenhouse gas and could be stronger and bendable. C02-infused concrete can be used for general buildings, water, and energy infrastructure, as well transportation infrastructure. The industry is ripe for change, especially after the Biden administration’s plan to invest in infrastructure to reduce U.S emissions. ⁷

Steel and Lumber Prices Rising and Threaten to Slow Construction Projects

While Lumber prices are getting all the attention with a massive increase in price from last year, steel is also seeing a significant increase in price in recent months. According to Associated Builders analysis, steel prices have risen by about 8.2% from December of last year to January. This increase has impacted construction on many levels, including concrete and roofing jobs, as prices for rebar and metal panels have soared. According to the Producer Price Index, even iron and steel scrap metal has increased 50.8% in the past year. These increases in building materials caused the average cost of construction projects to rise by roughly 20%.⁸

Largest Transactions Closed

Target
Buyer
Value($mm)

BMC Stock Holdings, Inc.
Builders FirstSource, Inc.
$3,038.92
Foundation Building Materials, Inc.
American Securities, LLC
$1,441.26
Interior Products Business & Insulation Business of Beacon Sales Acquisition, Inc.
Foundation Building Materials, Inc.
$850.00
Future Infrastructure, Inc.
Primoris Services Corporation
$620.00
General Tools & Instruments, LLC
Worthington Industries, Inc.
$120.60
Eco Window Systems, LLC/Eco Glass Production Inc/Unity Windows
PGT Innovations, Inc.
$108.00
Cornerstone Construction, LLC
Solar Integrated Roofing Corporation
$62.40
Scotbilt Homes, Inc.
Champion Home Builders, Inc.
$53.00
Industrial Business of Gibraltar Industries, Inc.
Pacific Avenue Capital Partners, LLC
$38.00
Century Homes Florida, LLC
Dream Finders Homes, LLC
$28.90

Data Assumptions

This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.

Glossary

EBIT - Earnings Before Interest and Taxes
EBITDA - Earnings Before Interest, Taxes, Depreciation, Amortization
LTM - Last Twelve Months
TEV - Total Enterprise Value

Sources:

Olick, Diana. “New Home Sales Take a Hit as Builders Grapple with Big Delays and Bigger Costs.” CNBC, CNBC, 23 Mar. 2021.
Jones, Patrick. “What Workforce Challenges Are Ahead for Key Construction Industry Segments in 2021?” For Construction Pros, 1 Mar. 2021.
Schultz, Becky. “Construction Saw Double-Digit Declines in Hiring and Projects in Q4 and Full-Year 2020.” For Construction Pros, 25 Mar. 2021.
Bloom, Mark. “Biden Administration Builds Opportunities for Construction Industry.” JD Supra, 5 Feb. 2021.
Johnson, Patrick. “COVID-19, A New President and Economic Uncertainty: What to Expect in the Construction Industry in 2021.” JD Supra, 2 Feb. 2021.
“Record-High Lumber Prices Add $24K to the Price of a New Home.” NAHB Now | The News Blog of the National Association of Home Builders | NAHB Now | The News Blog of the National Association of Home Builders, 22 Feb. 2021.
Lucca Henrion. “Perspective | Bendable Concrete, Other CO2-Infused Cement Mixes Could Dramatically Cut Global Emissions.” The Washington Post, WP Company, 28 Feb. 2021 .
Bousquin, Joe. “Skyrocketing Steel, Lumber Costs Threaten to Slow Construction Jobs.” Construction Dive, 17 Feb. 2021.

Building Products & Construction Q1 2021

M&A Transaction Trends

Industry Trends

New Home Sales Take A Hit as Builders Deal with Delays and Costs

Workforce Challenges in Key Construction Industry Segments

Construction Sees Double-Digit Decline in Hiring and Projects

Biden’s Infrastructure Plan Provides Opportunity for Construction Industry

Record-High Lumber Prices Add $24K to the Price of a New Home

C02-Infused Cement Mixes Could Dramatically Reduce Global Emissions

Steel and Lumber Prices Rising and Threaten to Slow Construction Projects

Largest Transactions Closed

Additional Resources

Contacts

Michael Poole

Michael Rosendahl

David Jasmund

Eric Zaleski

Melissa Ritter

Michael Rosendahl

Will Stewart

Woody Whitcomb

Michael Poole

Paul Vogt

Mackenzie Moran

Isabel Carta

Philipp Seubert

Rachel Pearl

Richard Winston

Thomas Harrington

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Building Products & Construction Q1 2021

M&A Transaction Trends

Industry Trends

New Home Sales Take A Hit as Builders Deal with Delays and Costs

Workforce Challenges in Key Construction Industry Segments

Construction Sees Double-Digit Decline in Hiring and Projects

Biden’s Infrastructure Plan Provides Opportunity for Construction Industry

Record-High Lumber Prices Add $24K to the Price of a New Home

C02-Infused Cement Mixes Could Dramatically Reduce Global Emissions

Steel and Lumber Prices Rising and Threaten to Slow Construction Projects

Largest Transactions Closed

Additional Resources

Contacts

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