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A brief informal update of the status of the construction merger and acquisition market or business brokerage market as of the Spring or Summer of 2011. We conclude that the business brokerage or business sale market for construction companies, including engineering firms, electrical, plumbing, and mechanical contractors, is improving but still slow. Read for details.
This is the 1st in a series of short articles and updates about the construction and housing markets that we will be writing. We have two goals: 1/ provide a summary of industry happenings and 2/ describe the impact these changes have had/are having on business owners who are selling or “exiting” their businesses. We would love to hear your thoughts, comments or questions. We want this to be both light and informative, and we appreciate your feedback. Thanks.
Let’s get started. Our top-10 comments and observations are as follows:
- The housing market is (still) “stuck.” New starts for 2011 are 44% below the 2000 levels;
- 1st Qtr 2011 sales are flat, and housing inventory, expressed in number of months on hand, has increased;
- Regional/small builders face fierce competition from national builders;
- Homeowners have less cash to spend on home improvements and expect contractors to “do the same work for less money;”
- Contractors saw signs of recovery during the 1st Qtr of 2011, but are concerned with some leading indicators showing the momentum could fade by the 4th Qtr;
- Some optimism that new regulations for “green” applications could drive a large part of the recovery;
- Acquisition Advisors Outlook reported that business owners selling their businesses during 2008-2010 got caught in a “sluggish” market (some of the owners we talked to described it differently…). Deal activity in 2009 was less than 2008's results with some uptick in activity noted during the 4th Qtr of 2009;
- For the 6 months ranging from 11/10 – 4/11, stats published by MergerNetwork indicated that, based on the number of active buyers and sellers looking for deals, we could be returning to a more stable buy/sell market;
- A survey of construction owners reported that 40% believed there would be an increase in buy/sell activity in 2010 and 2011; and
- Buyers with capital (i.e., “financial buyers”) are aggressively hunting for acquisition opportunities.
Click to see details of the housing data we have reviewed to form our thoughts above. Additionally we have reviewed data from the American Institute of Architects and from the Associated Builders and Contractors. Sign up for our RSS feed in order to get this information sent to you as we post it over the next month or two.