Overall M&A deal volume in the construction industry 1 declined roughly 29 in 2019 compared to 2018 Although M&A activity has been slowing in the industry, competition remains robust for quality construction materials and building products distribution businesses Within the contractor space, restoration, roofing, fire protection, paving as a service and residential plumbing companies have been particularly attractive General Contractors, on the other hand, have traded infrequently due to challenged margins, the perception of key man risk, and higher bonding requirements
Due to the privately held nature of the construction industry, transactions typically do not disclose financial terms As a result, all available private equity transaction multiples, across industries, are used here as a proxy for demand for assets of various sizes, over time These multiples are an average and are not indicative of a what a business would potentially fetch in the market In fact, the market values different sectors of the broader construction industry quite differently The data does support the argument that the shift in volume towards smaller deals has reduced the premium larger companies receive compared to smaller companies For example, the premium paid for companies valued between 100 mm 250 mm over those valued between 10 mm 25 mm fell from 2 9 x EBITDA in 2018 to 2 1 x EBITDA in 2019
