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Mike Rosendahl

E: mrosendahl@pcecompanies.com

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Industry Trends

Housing Starts Rebound in Q2 of 2023

In May 2023, the single-family and multi-family housing markets resurged, as indicated by a rise in building permits and housing starts. Total housing starts increased 21.7% since April to 1.63 million units. Building permits rose by 5.2% to reach 1.49 million units but are still down by 12.7% since May 2022. Limited labor resources have deterred builders from taking on new projects, instead focusing on the current backlog.1 2

Construction Demand Outpaces Labor Supply

The construction industry faces a labor shortage as worker demand exceeds supply. JLL, a commercial real estate and research company, reports that 70% of contractors lack sufficient staff relative to their backlogs, requiring an additional 320,000 employees to reach pre-pandemic delivery capacity. JLL predicts a 5-7% rise in construction labor costs in 2023 as companies attempt to incentivize workers. Companies are adopting pragmatic strategies to mitigate costs, to strengthen client relationships, enhance predictability, and minimize risks.3

Construction Input Prices Cool, for Now

U.S. construction input prices declined by 0.6% in May compared to the previous month, currently 3.7% lower than a year ago. While energy, steel, and softwood lumber prices have declined, other categories, such as concrete and construction machinery, among other materials, have spiked. May's double-digit growth in housing starts suggests a robust beginning to the summer construction season, potentially driving prices to 2022 levels if demand stays high.4

Construction Technology Remains a Strong Investment Focus

Construction technology has become a prime acquisition focus for many strategic and financial buyers over the past year. In 2022, Masonite acquired Endura Products to enhance door technology, while Dodge Construction Network purchased Principia Consulting for data and analytics. Collaboration tools and digital solutions are in demand for faster design ideas and pricing. Industry buyers indicate that companies investing in technology to improve data collection and operational efficiencies will stand out as prime acquisition targets in 2023.5

Largest Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Emtek and Schaub Door And Cabinet Hardware and U.S. And Canadian Home Locks Business of ASSA ABLOY
  • Fortune Brands Innovations, Inc.
  • $800.00
  • i3 Product Development, Inc.
  • Helios Technologies, Inc.
  • $45.20
  • Richter & Associates, Inc.
  • Bowman Consulting Group Ltd.
  • $5.40
  • Huntsville and Alabama operations of Southern Site Contractors
  • Construction Partners, Inc.
  • $1.10
  • TrendMark, Inc.
  • Evil Empire Designs, Inc.
  • $1.08
  • Sky Scape Industries, LLC
  • Volatus Aerospace Corp.
  • $0.59

Other Financial Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • SPS Mechanical Inc./JF Plumbing & Heating
  • Watchtower Capital Partners
  • n/a
  • ES Solar LLC
  • Applied Value LLC
  • n/a
  • Carlisle Wide Plank Floors, Inc.
  • Switchback Capital LLC
  • n/a

Other Strategic Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Accelerated Communications and Construction, LLC
  • GridSource Incorporated, LLC
  • n/a
  • Fayette Air Conditioning & Sheet Metal, Inc.
  • Lovett, Inc.
  • n/a
  • Tarpy Plumbing, Heating & Air
  • American Residential Services L.L.C.
  • n/a
  • Eland Engineering, LLC
  • GAI Consultants, Inc.
  • n/a
  • B&D Properties North, Inc.
  • Cody Pools, Inc.
  • n/a

 

Source S&P Capital IQ as of 7/5/2023 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. Wesbury, Brian S., et al. "May Housing Starts." First Trust Advisors L.P., 20 June, 2023.
  2. 2. "Monthly New Residential Construction, May 2023." Census.gov, 20 June 2023, CB23-98.
  3. 3. Caulfield, John “JLL’s 2023 Construction Outlook foresees growth tempered by cost increases” Building Design and Construction Network, 6 April 2023.
  4. 4. “Monthly Construction Input Prices Decrease, Says ABC” Construction Superintendent, 14 June, 2023.
  5. 5. Diakantonis, Demitri “How Technology will drive construction deals” The Middle Market, 3 April, 2023.
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