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Nicole Kiriakopoulos

E: nicolek@pcecompanies.com

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Industry Trends

Construction Remains Resilient Through Economic Uncertainty

There has been a shift in the construction industry, with post-CHIPS Act mega-projects driving a 200% increase in manufacturing starts since August of last year, boosting overall spending. The industry, facing challenges from high Federal interest rates and rising costs, is adapting through closer collaboration among construction teams amid economic uncertainties. The subcontractors impacted by these rising input costs for materials and labor, as highlighted in the DPR source, primarily affect commercial construction subcontractors.1

New Construction Grows Despite Rising Costs

U.S. lumber prices fell by 23% year over year in November, while overall residential reconstruction costs saw a marginal rise, below 2%. Diverse material costs influenced reconstruction expenses, with insulation, carpet, doors, concrete, and steel decks becoming more expensive, while copper wire, lumber, and plywood saw price drops, leading to a cost increase of 1.35%. Most increases fell on subcontractors, who were unable to offset costs with 57% in the space reporting decreased profitability.2 3

Anticipated Slowdown and Housing Downturn to Come in 2024

The construction sector experienced significant employment growth in 2023, ending the year with 8.056 million jobs in December. Year-over-year, the construction industry added 197,000 jobs, a 2.5% increase in the industry's employment levels. Looking at the end of 2023, the construction sector experienced a notable surge in employment growth, driven by a factory-building boom and a partial rebound in housing. The outlook for 2024 remains uncertain, with expectations of a cooldown in the housing market limiting job growth.4 5

New Mandate Requires Project Labor Agreements on Federal Projects

Effective December 18, 2023, the Biden Administration issued an executive order requiring Project Labor Agreements (PLAs) on federal projects exceeding $35 million. This mandate, replacing a previous non-mandatory rule, aims to prompt pre-project negotiations among contractors, unions, and labor groups. While supporters anticipate enhanced worker wages, critics argue it may reduce competition and elevate project costs. The shift signals a change in federal construction project practices, impacting large-scale endeavors under the new PLA mandate.6

Largest Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Westinghouse Electric Company LLC
  • Brookfield Corporation; Cameco Corporation; Brookfield Renewable Partners L.P.
  • $8,300.00
  • Regional Enterprises LLC
  • Champion Home Builders, Inc.; Champion Retail Housing, Inc.
  • $478.00
  • Roofing Corp. of America, Inc.
  • FirstService Corporation
  • $413.00
  • Certain West Coast Cement Operations of Martin Marietta Materials, Inc.
  • UNACEM Corp S.A.A.
  • $317.00
  • Bradley Corporation
  • Watts Regulator Company
  • $303.00
  • Fleetwood Aluminum Products, Inc.
  • Masonite Corporation
  • $285.00

Other Financial Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Outsource Utility Contractor, LLC
  • Jumana Capital
  • n/a
  • Rone Engineering Services, Ltd.
  • RMA Group, Inc.
  • n/a
  • S&N Communications Inc.
  • Tower Arch Capital, L.P.
  • n/a
  • Arredondo, Zepeda & Brunz, LLC
  • Ardurra Group, Inc.
  • n/a
  • Polargy, Inc.
  • GEF Capital Partners, LLC
  • n/a
  • Tietjen Technologies, Inc.
  • Norlee Investments LLC
  • n/a
  • R.K. Electric, Inc.
  • Huron Capital Partners, LLC
  • n/a
  • Inwood Consulting Engineers, Inc.
  • Ardurra Group, Inc.
  • n/a
  • Total Services HVAC and Appliances Company, LLC
  • Total Services HVAC and Appliances Company, LLC
  • n/a

Other Strategic Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Memphis Stone & Gravel Company/Lehman-Roberts Company
  • Granite Construction Incorporated
  • $278.00
  • Professional Plumbers Group, Incorporated
  • Sterling Infrastructure, Inc. 
  • $50.00
  • Mountz, Inc.
  • Snap-on Incorporated
  • $40.00
  • Rosewood Communities, Inc.
  • United Homes Group, Inc. 
  • $23.00
  • Three Hot-Mix Asphalt Plants in North and South Carolina
  • Construction Partners, Inc.
  • $16.00
  • Charlotte-Rock Hill Area assets of Reeves Construction Co., Inc.
  • Construction Partners, Inc.
  • $16.00
  • United Fiberglass Of America, Inc.
  • Creative Composites Group
  • $14.00
  • United Granite LLC
  • United Granite LLC
  • $7.90
  • Dennis Corporation
  • Bowman Consulting Group Ltd.
  • $3.70
  • Excellence Engineering, LLC
  • Bowman Consulting Group Ltd. 
  • $1.10

 

Source S&P Capital IQ as of 1/16/2024 and PCE Proprietary Data

PCE Transactions

Contacts

Nicole Kiriakopoulos

Chicago Office

224-520-1068 |

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Michael Poole

Orlando Office

407-621-2112 |

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Will Stewart

Orlando Office

407-621-2124 |

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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:

  1. 1. “Q4 2023 Market Conditions Report.” DPR Construction.
  2. 2. Team, Insurance. “Quarterly Construction Insights - Q4 2023.” CoreLogic®, 7 Dec. 2023.
  3. 3. “Market Report: Subcontractors Bear the Brunt of Rising Materials, Labor Costs.” Contractor, 19 Apr. 2023.
  4. 4. “Employment Situation Summary”, U.S. Bureau of Labor Statistics, 5 Jan. 2024.
  5. 5. Caldwell, Preston. “Why We Expect the Job Market’s Slowdown to Renew in 2024.” Morningstar, Inc., 3 Jan. 2024.
  6. 6. Scalisi, Tom. "Construction Industry Trends: December 2023 Roundup." Viewpoint Blog, 8 Jan. 2024.
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