BDO’s Building Products & Services Mergers & Acquisitions (“M&A”) team has conducted a detailed analysis of 2,000 UK Building Products & Services companies within a range of sub-sectors.
There has been an upwards trend in the price multiple that Building Products & Services companies can command. In 2013 the average multiple was 5.0x EBITDA and that has steadily increased to 6.6x today. We believe that companies in this sector continue to make attractive acquisition targets, and have identified five key trends which are impacting the market: regulation and new policy, consumer tastes, distributors and manufacturers are converging, diversification of companies and smart technology.
The continued level of growth in M&A activity and the number of companies wishing to make acquisitions reinforces the increasing confidence in the sector. Private equity is becoming increasingly interested in opportunities in this area with over 29% of transactions in 2015 having private equity involvement. There is also a healthy appetite from international companies with 115 Building Products & Services transactions being cross-border, representing 32% of global deals in 2015.
The Building Products & Services sector is inextricably linked to the construction sector which is forecast to grow by 3.6 % during 2016. It is anticipated that there will be slower house building growth, but this will be compensated by growth in commercial and infrastructure construction. The outcome of the EU Referendum may of course have some impact on this but it is too early to say and much will depend on the terms of the exit arrangements.
John Stephan, M&A Partner at BDO and Co-Head of the national Building Products & Services team, believes “the fundamentals of the sector are sound and support growth and value.”
Mithun Patel, Sector Co-Head comments that “it is an exciting time for the Building Products & Services market, with buoyancy and confidence reflected in all of our measures and that BDO expect the feel good factor to continue in 2016.”