skip to main content

Construction M&A Market Update

Construction M&A Market Update

Despite ongoing labor shortages, supply chain challenges, decades-high inflation, and a modest pullback in certain construction industry readings in the past couple of months, M&A continues to be on the radar for sector buyers as momentum in the industry remains strong. With total U.S. construction spending increasing +8% in June 2022 vs. last year (+1% for non-residential spending), a healthy U.S. construction backlog of 8.7 months in July 2022 (11+ months and +2.5% year-over-year for middle market companies), and a 55.2 Construction Confidence Index reading for sales expectations over the next 6 months, buyers continue to invest in the sector, even against the backdrop of uncertainty in the broader macroeconomic landscape.

M&A activity

The broader construction sector experienced a robust M&A recovery in 2021 following a modest pandemic-driven pullback in 2020, and that uptick in deal activity has carried into 2022. From a volume perspective, 2021 saw ~650 construction M&A deals close, representing a +70% recovery as compared to the ~380 deals closed in full-year 2020. Importantly, this is more than a story of pandemic recovery, as 2020 deal count was only down (16%) from 2019 levels, and in line with the average deal volume of ~415 deals closed annually from 2017 through 2019.

UHY believes the significant uptick in construction deal activity has primarily been driven by investors positioning themselves to capitalize on the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA) signed by President Biden on November 15, 2021. “The prospect of significant funding for infrastructure projects across the U.S. over the next 5+ years saw M&A in the construction sector jump from an average of ~100 deals/quarter going back to 2017 to nearly 200 deals per quarter since then, with a record 230 deals reached in Q3 2021 upon the initial passage of the bill by the House in June of that year,” explains Jeremy Falendysz, Managing Director, UHY Corporate Finance. “Even as broader U.S. M&A has declined nearly 40% to date in 2022 from record levels experienced in 2021, the ~425 construction transactions closed in the 2022-YTD period represent 4% growth from the same period in 2021, suggesting that opportunities still exist for both buyers and sellers in today’s construction M&A market.”

Another driver of the momentum in M&A activity in the construction sector has been an increasing appetite for acquisitions and investment in the sector among Private Equity funds.  While strategic acquirers historically dominated the buyer landscape, Private Equity has seen its market share increase markedly from acquiring ~20% of construction companies in 2017 to over 40% in 2021.  “Despite historical roadblocks for private equity funds evaluating investments in the construction space in years past, such as their lumpy, project-based revenue; highly cyclical end markets compared to PE’s shorter hold periods; and the people-based nature of the business, the extraordinary investment theme brought about by the IIJA has simply been too difficult to ignore,” suggests Wiley Lane of UHY Corporate Finance.


While general business valuations depend on a wide range of factors and tend to vary widely from company-to-company, valuations in the construction sector are particularly difficult to estimate given the cyclicality of end markets served and significant differences in value-driving performance metrics among players within the space. That said, valuations remain robust for well-positioned construction companies in today’s market, including stretch values being paid for specialty players with access to reliable labor, required equipment-in-place, and those serving end-markets well positioned to experience outsized growth from the IIJA.

Valuations can vary for any number of reasons, but in construction transactions, there are crucial components all buyers search for in a potential acquisition. Figure 1 includes an illustrative list of value drivers and considerations. 

FIGURE 1: Key Construction Company Value Drivers and Considerations:

Value Drivers

Value Considerations

Large Size / Geo. Diverse (Revenue, Employees, etc.)

Small Size / Geographic Concentration

Strong / Growing Backlog

Flat / Declining Backlog

Recurring Revenue

Project-Based Revenue

Strong / Continuing Management Team

Owner / Management Departing Post-Close

Diverse Customer Base

Customer Concentration (e.g., Top 2 = 50%+ of Rev.)

Talented Labor Pool; Access to Talent

Scarce Labor Market; High Turnover

Robust, Sustainable Profit and EBITDA Margins

Below-Industry, Volatile Profit and EBITDA Margins

Specialty Equipment / “Yellow Iron” In Place

Asset-Light Businesses; Equipment Shortages


That said, some of the key value drivers in today’s construction market that may result in stretch values for sellers include (i) the attractiveness of the customer base (e.g., high-growth customers/governmental entities with access to significant funding – e.g., state and local governments expecting to benefit from the IIJA); (ii) reliable access to labor and critical equipment (i.e., companies managing supply chain challenges effectively); (iii) predictability of revenue (i.e., strong, multi-year, contracted, hard backlogs) and sustainability of margins; and (iv) the quality, depth, and continuation of the leadership team.  “With over 50% of construction firms experiencing project delays due to labor shortages, and larger players over-committed on IIJA backlogs that they cannot execute without critical ‘yellow iron’ and acquisitions, there are opportunities for well-positioned sellers to see stretch values in today’s market,” according to John Gallo, leader of UHY’s National Construction Practice.

The challenge for owners looking to understand their company’s value (and driving for a premium value in a sale transaction) is that filling out a company’s “scorecard” on the points above is complicated. “These critical, qualitative points don’t simply jump off the page in your financial reports, and certain buyers will value the various aspects of your business differently. This is particularly challenging for smaller middle market construction companies,” says Lane. “Due to the significant differences between construction companies, and how they align relative to the value drivers outlined above, we are completing more pre-sale preparation processes and valuations for construction business owners than we have in the past several years.”

Based on recent deal activity and ongoing dialogue with strategic and financial buyers active in today’s construction M&A market, values for construction companies can vary widely in a range from 3.5x to 8.5x EBITDA. Figure 2, outlines some valuation ranges observed for certain construction sub-sectors, with private, middle market  (~$10 million of EBITDA or lower) general contractors (GC) typically seeing values in the 3.5x – 5.0x range, primarily due to GCs being relatively more exposed to project cost over-runs (i.e., margin volatility) and representing a more asset-light business model. On the other hand, private, middle market specialty highway, street, bridge, and underground construction companies tend to see values in the 6.5x – 8.5x range as they tend to offer more specialized services and offer critical, in-demand “yellow iron” to the marketplace. We note that these are simply starting points regarding value, as company-specific attributes can drive values above and below these ranges. 

FIGURE 2: Middle-Market Construction Valuation Multiples:

Construction Sub-Sector

Value Multiples (EV / EBITDA)

General Contractors

3.5x – 5.0x

Specialty: Heavy Construction, HVAC, Plumbing, Electrical

5.0x – 7.0x

Specialty: Civil Engineering, Highway, Street, Bridge, Underground

6.5x – 8.5x


These value ranges are “starting points” for buyers and sellers. The more that businesses align with key industry value drivers, as well provide access to next-gen digital technologies, offer connected construction capabilities, and/or integrated data and analytics, the more opportunity companies have to achieve values at or above the high end of these ranges. Investment banks are uniquely suited to drive exceptional valuations in this market. “A well-run, timeline-driven, competitive sale process targeting the right buyer universe allows owners to leverage the highly favorable dynamics present in today’s market to drive higher values, higher cash payouts at close, and an increased probability of a successful closing,” explains Falendysz. 

2022 Construction M&A Outlook

Despite a pullback in certain industry data for non-residential construction activity in the past couple of months, we believe that demand for acquisition-based growth in the construction industry will remain elevated for both strategic and financial buyers, particularly if the economy can avoid a recession in the next 12-18 months. “The inertia provided by $1.2 trillion of IIJA funding from the federal government over the next five years will attract buyers into this market despite modest volatility in the broader macro picture,” says Falendysz. “I fully expect deal activity in construction M&A to continue at an accelerated pace, and while selling at premium values may be more challenging in the months ahead depending on how the macro picture unfolds, businesses able to tell a compelling story to buyers will continue to be in high demand.”

For construction business owners looking toward a near-term liquidity event, now is still a great time to pursue a potential sale. The optimal time for selling any company is when deal activity is high and valuations are attractive, and with elevated construction M&A activity since Q3 2021 and industry-wide valuations +10% vs. pre-pandemic levels, the window remains open. For construction company buyers looking to grow beyond organic growth, invest alongside the $1.2 trillion spending bill, and generally access new customers, expand geographically, solve labor and equipment shortages, or otherwise bolster their current businesses, great opportunities exist in today’s market. “While hit-rates on a proactive buy-side search process are generally low, we have had to pause our outreach efforts on recent searches as business owners have been more willing to pick up the phone and entertain a potential sale in this market than in prior years,” according to Lane.  Buyers can benefit tremendously by identifying and acquiring businesses outside of a competitive sale process.

Capital markets have never been more flush with capital and the construction industry is in the spotlight with the continued roll-out of IIJA funds in the months and years ahead. Investors remain eager to put their cash to work, which should result in another strong year for construction M&A in 2022.

For more information on construction M&A, please reach out to the our team. Sign up for UHY’s Annual Construction Update at the Detroit Athletic Club on September 29, 2022, where our investment banking team will be sharing additional views on the construction M&A landscape.




Please complete this form to hear from one of our experienced construction professionals

Hide Firm Disclaimer


UHY LLP is a licensed independent CPA firm that performs attest services in an alternative practice structure with UHY Advisors, Inc., and its subsidiary entities. UHY Advisors, Inc.’s subsidiaries, including UHY Consulting, Inc., provide tax and business consulting services through wholly owned subsidiary entities that operate under the name of “UHY Advisors” and “UHY Consulting”. UHY Advisors, Inc., and its subsidiary entities are not licensed CPA firms. UHY LLP, UHY Advisors, Inc. and UHY Consulting are U.S. members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. “UHY” is the brand name for the UHY international network. Any services described herein are provided by UHY LLP, UHY Advisors and/or UHY Consulting (as the case may be) and not by UHY or any other member firm of UHY. Neither UHY nor any member of UHY has any liability for services provided by other members.

On this website, (i) the term "our firm", "we" and terms of similar import, denote the alternative practice structure conducted by UHY LLP and UHY Advisors, Inc. and its subsidiary entities, and (ii) the term "UHYI" denotes the UHY international network, in each case as more fully described in the preceding paragraph.