Executives in the building and construction industry face many strategic questions in 2015. To help them navigate the road ahead, L.E.K. Consulting shares its views on three key areas: 1) the state of the M&A market; 2) key challenges for channels and 3) effects of the hourglass economy on the industry.
What is the State of M&A Market Conditions?
Expectations for strong growth remain favorable within the building products sector causing high transaction multiples (with some transactions approaching or exceeding 12-13x EBITDA for top-performing companies) and continuing to attract quality assets to the M&A market. Though commercial market M&A has lagged residential activity to date, we expect to see it rebound in the coming years. Distribution assets continue to be very hot.
The pace of new (and expensive) capital entering the sector through high-multiple transactions creates a number of questions that executives at incumbent competitors in this industry segment should consider:
- Would you sell at this multiple? If not, how could you create a growth strategy to justify a similarly high multiple for your business in order to boost shareholder value? Failure to create such a strategy would be detrimental to shareholder value.
- How have new capital and ownership coming into the sector affected your business and the industry as a whole? How will this impact investment and capacity, channels, additional consolidation and pricing? How do these disruptions create opportunity for (or pose risk to) your business?
Download the full Executive Insights' "State of the Industry" report to read more about the current state of the industry and burning issues that senior executives are facing: Full Report.