Construction Tech M&A Update: Winter 2024
Published February 6, 2024
Key Insights:
- Construction Industry Spending Sees Continued Momentum
- Investment Drives Demand for Increased Efficiency Through Digital Technologies
- Key Technology Trends in the Construction Industry
- Market and Valuation Trends
Investment in Construction Tech is driven by several factors, including the deploying of technology to address the shortage of skilled labor positions, historical underinvestment in tech solutions compared to tangential industries (~1.7% IT budget as a percent of revenue compared to ~2.3% for energy and ~2.1% for manufacturing), supply chain management considerations, and lackluster productivity across the industry.
Construction Tech Activity and Trends
Construction Industry Spending Sees Continued Momentum
Construction industry spending in the United States has grown at a CAGR of ~6% from 2014 – 2022. The percentage of non-residential construction spending as a percent of the total, as of Nov 2023, has been driven by the influx of investment in infrastructure such as new roads, EV battery facilities, and chip manufacturing plants
Investment Drives Demand for Increased Efficiency Through Digital Technologies
- Investment in Construction Tech is driven by several factors, including the deploying of technology to address the shortage of skilled labor positions, historical underinvestment in tech solutions compared to tangential industries (~1.7% IT budget as a percent of revenue compared to ~2.3% for energy and ~2.1% for manufacturing), supply chain management considerations, and lackluster productivity across the industry
- Global demand for long-term construction remains strong, as evidenced by the signing of the United States’ $1.2T Infrastructure Investment and Jobs Act in 2021 and Europe’s NextGenerationEU in 2020
- Strategic acquirers such as Trimble, Procore, and Autodesk have been actively pursuing construction tech investments, highlighting a willingness and ability to pay a premium for high-quality businesses
The accelerated growth of AEC tech is reflected by the increased median deal size of AEC tech M&A transactions, which has increased 470% since 2015
Key Technology Trends in the Construction Industry
Augmented reality (AR) improving training and safety
AR combines interactive elements with real-world objects via technology such as a smartphone camera. AR can be used to improve the training process and increase safety and efficiency across jobsites
Wearable technology and connected workstreams to streamline processes
Connected jobsites have become the norm, with contractors implementing connected devices to assess worker safety, create worksite efficiencies, and be able to better manage jobsites
Virtual reality (VR) for risk mitigation
Contractors are able to view jobsites virtually before they physically exist, allowing contractors to identify key focus areas and drive on-the-job efficiency
Building information modeling (BIM) for planning and design
BIM tools can help identify potential conflicts and errors in the design phase, which mitigates the risk of rework during a project
Sources: PitchBook, Meridian Research, FRED Economic Data, ABC Supply, McKinsey, Deloitte
Construction Tech: M&A Trends and Key Takeaways
M&A Activity (Deal Count) – Construction Tech
Construction Tech Index1
Key Commentary: Market and Valuation Trends
Although M&A activity has been down compared to post-COVID highs, valuations in both the private and public markets continue to rise with Construction Tech public valuations increasing 37%since January 2020
Recent commitments to infrastructure development as seen in the US’s $1.2T Infrastructure Investment and Jobs Act and record levels of dry powder available to private equity firms will increase interest and speed up deal activity in the Construction Tech space in 2024
The Construction Tech market remains highly fragmented, with opportunities for platform creation via a buy-and-build strategy or through organic market share capture
Sources: PitchBook Data, Meridian Research, McKinsey
1. Illustrative of the public companies found on pg. 6
Construction Tech Selected M&A Activity
Highlighted Construction Software M&A Transaction
Pamlico Invests in Beck Technology
Nov 2023
Target Description: Beck Technology is the leading preconstruction platform for contractors. Beck develops a construction estimating software intended to fundamentally rework the commercial construction conceptual modeling and estimating process
Investment Rationale: This investment allows Pamlico, which has significant operating expertise with founder-owned software businesses, to assist Beck with its next phase of growth in the expansion of its product platform and build a best-in-class, integrated preconstruction solution
Highlighted Workplace Management Software M&A Transaction
Johnson Controls Acquires FM:Systems
July 2023
EV
$455M
Target Description: FM:Systems is an all-in-one developer of workspace management software intended for facilities and real estate buildings. The company’s cloud-based platform offers computer-aided facility management that improves the maintenance, leases, property reservation, and strategic planning
Investment Rationale: The acquisition adds a complementary cloud-based SaaS digital workplace management capability to Johnson Controls’ leading OpenBlue digital buildings software portfolio that will improve building efficiency and reduce operational costs
Highlighted Building Information Modeling M&A Transaction
Asite Acquires 3D Repo
April 2023
Target Description: 3D Repo is a SaaS platform for Building Information Modeling coordination. 3D Repo is transforming how construction projects are designed and delivered by mitigating risk and reducing complexity for architects, engineers, and contractors
Investment Rationale: This acquisition strengthens Asite’s position as a digital engineering market leader. Additionally, it is part of Asite’s ongoing expansion strategy and highlights its commitment to innovation and technology in the construction industry
Sources: PitchBook Data, Mergermarket, Company Press Releases, Meridian Research
Construction Tech Market Map
Public Company Valuations
| Company Name | Ticker | 01/25/2024 Share Price | Equity Market Cap | Debt | EV | Gross Margin % | LTM EBITDA % | LTM Revenue | EV / LTM EBITDA | EV / LTM Rev | EV / LTM EBITDA |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Schneider Electric | PAR: SU | $199 | $112,545 | $17,240 | $126,344 | 41% | 22% | $41,108 | $8,302 | 3.4x | 15.2x |
| Dassault Systemes | PAR: DSY | $52 | $69,367 | $3,165 | $68,967 | 84% | 40% | $7,055 | $2,520 | 11.0x | 27.4x |
| Roper Technologies | NAS: ROP | $552 | $59,161 | $6,878 | $65,739 | 70% | 46% | $6,658 | $2,736 | 10.9x | 24.0x |
| Autodesk | NAS: ADSK | $252 | $54,521 | $2,648 | $55,215 | 91% | 42% | $5,821 | $2,225 | 10.2x | 24.8x |
| Hexagon | STO: HEXA B | $11 | $29,811 | $4,526 | $33,847 | 65% | 41% | $6,282 | $2,366 | 5.8x | 14.3x |
| Ansys | NAS: ANSS | $339 | $29,655 | $854 | $29,869 | 88% | 52% | $2,483 | $1,129 | 13.8x | 26.5x |
| Fortive | NYS: FTV | $74 | $26,470 | $2,732 | $28,487 | 59% | 29% | $6,349 | $1,768 | 4.7x | 16.1x |
| Bentley Systems | NAS: BSY | $50 | $16,604 | $1,632 | $18,169 | 78% | 40% | $1,362 | $479 | 13.6x | 38.0x |
| Sage Group | LON: SGE | $15 | $15,408 | $1,534 | $16,093 | 93% | 29% | $3,085 | $764 | 5.9x | 21.1x |
| Trimble | NAS: TRMB | $52 | $12,867 | $3,158 | $15,808 | 61% | 28% | $3,844 | $1,027 | 4.2x | 15.4x |
| Nemetschek Group | ETR: NEM | $94 | $10,873 | $104 | $10,714 | 58% | 35% | $1,022 | $314 | 12.1x | 34.1x |
| Procore Technologies | NYS: PCOR | $70 | $9,834 | $85 | $9,293 | 81% | 14% | $1,126 | $122 | 10.6x | 76.2x |
| Altair Engineering | NAS: ALTR | $86 | $6,864 | $340 | $6,772 | 79% | 25% | $668 | $150 | 11.5x | 45.0x |
| Glodon | SHE: 002410 | $2 | $3,282 | $14 | $2,932 | 84% | 22% | $1,129 | $218 | 3.1x | 13.5x |
| Mean | $32,662 | $3,208 | $34,875 | 74% | 33% | $6,285 | $1,723 | 8.6x | 28.0x | ||
| Median | $21,537 | $2,140 | $23,328 | 79% | 32% | $3,465 | $1,078 | 10.4x | 24.4x |
($ in millions)
As of January 24, 2024
Source: PitchBook Data, Meridian Research
Select Construction Tech Transactions
| Date | Target | Acquirer | Target Description | EV / Value ($M) | EV / Revenue | EV / EBITDA |
|---|---|---|---|---|---|---|
| Dec-23 | Treetop | ECI Software Solutions | Developer of construction software designed to connect business processes | – | – | – |
| Dec-23 | busybusy | ToolWatch (The Riverside Company) | Developer of construction time tracking software | – | – | – |
| Nov-23 | Beck Technology | Pamlico Capital | Developer of construction estimating software | – | – | – |
| Oct-23 | 4PS Construction Solutions | Hilti | Developer of construction software | – | – | – |
| Sep-23 | Unearth | Procore | Operator of a cloud-based construction project management platform | – | – | – |
| Aug-23 | DataStreet | Clearstory | Developer and provider of project management software | – | – | – |
| Jul-23 | Buildup | TCQS Applications | Developer of construction communication platform | – | – | – |
| Jul-23 | FM:Systems | Johnson Controls | Digital workplace management and Internet of Things solutions provider | $455 | – | – |
| Jun-23 | Mobile-Punch | JDM Technology Group | Developer of time management application to manage projects in real-time | – | – | – |
| Jun-23 | Cityzenith | TwinUp | Developer of digital twin software for building projects | – | – | – |
| Jun-23 | ReACT Technologies | GDI Integrated Facility Services | Provider of productivity software to serve the construction industry | – | – | – |
| May-23 | AnchoRock Solutions | KPA (CIVC Partners) | Developer of mobile-first construction software application | – | – | – |
| May-23 | Data-Basics | Constellation Software | Provider of field services and construction management software | – | – | – |
| May-23 | Corecon Technologies | Sage | Construction software for small and mid-sized businesses | – | – | – |
| May-23 | Data-Basics | Constellation Software | Construction management software | – | – | – |
| May-23 | AboutTime Technologies | Foundation Software | Provider of mobile resource management for construction | – | – | – |
| Apr-23 | 3D Repo | Asite Solutions | Developer of a cloud-based digital platform for building information modeling | – | – | – |
| Mar-23 | UNIFI Labs | Autodesk | Provider of comprehensive BIM content life cycle solutions | – | – | – |
| Mar-23 | Vertical Market Software | Jonas Software | Enterprise software for construction and energy industries | – | – | – |
| Mar-23 | WorkflowMax | Xero | Developer of project management software | – | – | – |
| Feb-23 | SiteTrace | BuildCentrix | Developer of an online construction productivity platform | – | – | – |
| Jan-23 | Projectmates | Hexagon | Construction project management software | – | – | – |
| Jan-23 | Flexcavo | Trackunit | Construction management software | – | – | – |
| Dec-22 | COINS | The Access Group | Enterprise software for construction industry | – | – | – |
| Oct-22 | Avvir | Hexagon | Construction verification and progress monitoring | – | – | – |
| Oct-22 | SenseHawk | Reliance Industries | Infrastructure intelligence platform | $25 | 17.5x | – |
| Sep-22 | B2W Software | Trimble | Software for heavy civil construction | $332 | – | – |
| Dec-21 | SokoPro | IBinder | Cloud-based document management platform | $51 | 7.8x | – |
| Nov-21 | Fieldwire | Hilti | Jobsite management platform and mobile app | $300 | – | – |
| Median | $300 | 12.7x | – | |||
| Average | $233 | 12.7x | – |
Source: PitchBook Data, Mergermarket, Company Press Releases, Meridian Research
Meridian Capital's Architecture, Engineering, Construction & Building Products & Technology Transaction Experience
*Note: Includes transactions completed by Meridian bankers while at previous firms
