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M&A And The Construction Materials Industry

Posted on October 26, 2019 By

The construction materials industry is comprised of suppliers of the raw materials used by builders in both commercial and residential construction. This wide array of materials are both natural and man-made:

  • Limestone, granite, sand, clay, gypsum
  • Cement, gravel and crushed stone
  • Bricks, mortar, concrete, asphalt, and other materials
  • Wood, timber, plywood and veneer
  • Glass, plastics, ceramics and foam
  • Steel, copper and aluminum                                                                                                                        

Mergers and acquisitions in this space are highly dependent on market predictability. This particular sector is susceptible to various factors that dictate its economic health and prosperity. These include:

  • GDP growth
  • Trade and tariff issues
  • Interest rates
  • The strength of the housing markets
  • Labor shortages
  • The cyclical demand imposed by seasonality and the weather

The top three global markets that lead the way and have the most potential for growth in the building materials industry are Asia-Pacific, the Middle East and Africa, and the United States. Population growth and sprawling urbanization increase the demand for construction, and therefore increases the demand for construction materials.

 

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Market Overview

The construction materials sector is quite fragmented with relatively low concentrations of market share, low barriers to entry, and high availability of alternate manufacturing capabilities (such as in hardware and cabinetry). As industry leaders typically concentrate on high-demand markets, access to substitutes creates opportunities for smaller players, allowing them to serve niche and lower-demand markets.

In contrast, some sub-sectors are more integrated because they depend greatly on one or a few key materials, so industry leaders often occupy a major portion of the market (such as insulation or countertops).

Key Drivers of M&A

In the construction materials industry, key drivers for M&A activity include:

  • Large project backlogs with healthy margins
  • A need for revenue growth in a sector where organic growth is challenging to achieve
  • The availability of low-cost debt financing
  • Improved supply channels
  • The level of demand for housing

Strategic buyers seek acquisitions in this space in order to:

  • Strengthen their market positions by adding competitors and niche companies
  • Develop a technological advantage and build a stronger brand
  • Expand globally and take advantage of established distribution networks
  • Fuel growth and improve margins through economies of scale
  • Integrate customer bases and create barriers to entry

An Untapped Opportunity

The global construction materials industry is one of the least digitized industries in the modern world. It already faces plenty of inherent challenges, and paperwork slows down processes. New operational tools can offer better ways to evaluate performance and allow real-time views into inventory, transit, and fleet operations. 

There is an opportunity for all stakeholders to benefit substantially from digitization and automation within this particular industry. These improvements include better productivity, greater cost savings, enhanced customer service, and a powerful competitive edge. Adaptation of new technologies in this industry can also unlock new opportunities for M&A transactions as companies look for easier paths to accessing innovation.

 

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The Advent of New Materials

Technology is changing more than the way construction material companies do business. It is also changing the materials themselves. As the world looks to more sustainable and environmentally friendly construction projects, builders will look to new materials, and the suppliers of construction materials must be prepared to keep pace. New innovations in materials include:

  • The recycling of plastic to build roads
  • Carbon dioxide-infused concrete to improve durability
  • Self-healing concrete
  • 3D-printed materials
  • Translucent wood as a low cost resource
  • Hydroceramics (temperature-reducing bricks)
  • Light-generating cement
  • Aerographite
  • Modular bamboo
  • Aluminum foam
  • Bricks that absorb pollution and filter air
  • Algae-infused energy-producing wall panels

The construction industry serves almost every other industry, and is the single largest worldwide consumer of resources and raw materials. It is also a massive generator of waste due to demolition. There can be great value in exploring changes in the way buildings are constructed and the materials that are used. Even small changes have the ability to produce substantial benefits for society simply because of the sheer magnitude of the industry. Project owners and investors can play an important part in propelling the industry forward.

Contact Us

At Benchmark International, our M&A specialists are on standby, just waiting for you to enlist their partnership in selling your business or growing your company. Let us put our exceptional strategies, proprietary technologies and global connections to work for you.

Schedule A Call

 

Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkCorporate.com

Europe: Carl Settle at +44 (0) 161 359 4400 / Settle@BenchmarkCorporate.com

Africa: Anthony McCardle at +27 21 300 2055 / McCardle@BenchmarkCorporate.com 

ABOUT BENCHMARK INTERNATIONAL

Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $6B across various industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 12 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.

Website: http://www.benchmarkcorporate.com
Blog: http://blog.benchmarkcorporate.comConstruction_material_industry_social

 

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