Building Products & Construction Q1 2023

Industry Trends

Housing Starts Rebound In Q1 Of 2023

In February 2023, the single-family and multi-family housing markets resurged, as indicated by a rise in building permits and housing starts. The total housing starts surged by 9.8%, reaching 1.45 million units, surpassing expectations. Multi-family housing starts experienced a significant increase of 24.1%, the highest since the second quarter of 2022, and permits increased by 24.3%, contributing to the overall permit growth of 13.8%.¹

Labor Costs To Rise Above Inflation In Many Major U.S. Cities

According to Skanska USA predictions, construction costs are expected to increase by 3-5% for many U.S. cities over the next six to twelve months. Labor costs in Orlando and Phoenix are expected to rise the most due to significant labor shortages in both cities. Major labor cost increases in Dallas, Seattle, and San Francisco are also expected. Contractors are advised to prepare for these ongoing cost increases by adjusting their budgets and schedules to meet their expected earnings forecasts.²

Construction Input Prices Continue To Rise

Construction and nonresidential input prices reportedly increased by 0.4% in February. Although specific input prices such as energy fell sharply, materials price inflation and supply chain issues persist, posing a risk of recession. Construction input prices remained 2.6% higher YoY and nonresidential input prices rose by 2.8%. Contractors outside public and industrial megaprojects may be threatened by high capital costs and tightening financial conditions for future projects.³

Construction Companies Cut Costs By Adopting Semi-Autonomous Machinery

Teleo, a robotics firm retrofitting heavy equipment to make it semi-autonomous, partnered with three construction firms in California, Florida, and Ontario to deploy remote-operated machinery. Teleo's semi-autonomous platform allows one worker to operate multiple heavy machinery units across different job sites via remote control, cutting labor and time spent on the project. Additionally, using autonomous equipment in construction can aid in addressing the industry's increasing labor scarcity.⁴

Largest Transactions Closed

Target
Buyer
Value($mm)

Duro-Last, Inc.
Holcim Ltd
$1,293.00
Jackson Generation, LLC
Gulf Energy USA, LLC
$409.60
Endura Products, Inc.
Masonite Corporation
$375.00
Molekule, Inc.
Molekule Group, Inc.
$43.56
PERC Water Corporation
Consolidated Water Co. Ltd.
$7.80
Walker Brothers Machinery Moving, Inc.
Omega Morgan, Inc.
n/a
Arboles NC Incorporated
The Oxford Group Investments, Ltd.
n/a
Tradewinds Mechanical, LLC
Sound Partners., LLC; Calico Group
n/a
Carolina Comfort Heating & Air Conditioning Service, Inc.
SEM Holdings, LLC
n/a
Tuscano-Maher Roofing Inc.
Tecta America Corporation
n/a

Other Financial Buyer Transactions Closed

Target
Buyer
Value($mm)

Solamerica Energy Holdings LLC
AB CarVal Investors LP
n/a
America's Best Carpet & Tile
Great Range Capital, LLC
n/a
C. I. Banker Wire And Iron Works, Inc.
Lincolnshire Management, Inc.
n/a
Island Pump & Tank Corp.
Hidden Harbor Capital Partners, LLC
n/a
TileBar LLC
AEA Investors LP
n/a
Advanced Fire Protection Systems, LLC
The Riverside Company
n/a
Klear Enterprises, Ltd
Greensburg Investment Group, LLC
n/a
Northpoint Roofing Systems LLC
Halmos Capital Partners
n/a
Sterling Site Access Solutions, LLC
Blue Wolf Capital Partners LLC
n/a
Ardurra Group, Inc.
Littlejohn & Co., LLC
n/a

Other Strategic Buyer Transactions Closed

Target
Buyer
Value($mm)

Safemark Systems, L.P.
ASSA ABLOY AB
n/a
Final Draft CAD, LLC
Haley Ward, Inc
n/a
Pro Door Doctor, LLC
A1 Garage Door Service LLC
n/a
Kordt Engineering Group, LLC
Read Jones Christoffersen Ltd.
n/a
Wise Connect, Inc.
GridSource Incorporated, LLC
n/a
The Blueline Group, LLC
Atwell, LLC
n/a
CES Engineering, Inc.
S.E. Minor & Company, Inc.
n/a
Tendon Systems, LLC
Commercial Metals Company
n/a
DBI Construction Consultants, LLC
Cor Partners Inc.
n/a
L.D. Tebben Company, Inc.
Patuxent Roofing & Contracting, Inc.
n/a

Served as advisor to Clune Construction Company on their sale to the Clune Construction Company ESOP Trust

Served as advisor to Midwest Drywall Co., Inc. as they became 100% ESOP Owned

Served as advisor to Del-Air on their $45 million debt financing

Served as advisor to Consolidated Minerals, Inc. on their sale to the CMI ESOP Trust

Served as advisor to MMC Corp on their acquisition of Building Central Services, Inc.

Served as advisor to Williams Electric Co., Inc. on their sale to Parsons

Served as advisor to Energy Air, Inc. on their sale to the Energy Air, Inc. ESOP Trust

Served as advisor to American Builders Supply, Inc. on their acquisition by Bluewolf Capital Partners, LLC

Served as advisor to Tri-City Electrical Contractors as they transferred an interest to Tri-City ESOP Trust

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:

Mutikani, L. “U.S. single-family housing starts, building permits rebound in February.” Reuters, 16 March, 2023.
Phillips, Z. “Skanska predicts construction costs will rise above inflation in many US cities.” Construction Dive, 14 March, 2023.
Obando, S. “Materials prices inch up slightly” Construction Dive, 12 March, 2023.
Thibault, M. “Equipment makers roll out autonomous machinery at ConExpo” Construction Dive, 15 March, 2023.

Building Products & Construction Q1 2023

Industry Trends

Housing Starts Rebound In Q1 Of 2023

Labor Costs To Rise Above Inflation In Many Major U.S. Cities

Construction Input Prices Continue To Rise

Construction Companies Cut Costs By Adopting Semi-Autonomous Machinery

Largest Transactions Closed

Other Financial Buyer Transactions Closed

Other Strategic Buyer Transactions Closed

PCE Transactions

Contacts

Michael Poole

Michael Rosendahl

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Building Products & Construction Q1 2023

Industry Trends

Housing Starts Rebound In Q1 Of 2023

Labor Costs To Rise Above Inflation In Many Major U.S. Cities

Construction Input Prices Continue To Rise

Construction Companies Cut Costs By Adopting Semi-Autonomous Machinery

Largest Transactions Closed

Other Financial Buyer Transactions Closed

Other Strategic Buyer Transactions Closed

PCE Transactions

Contacts

Michael Poole

Michael Rosendahl

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