Q3 2017 Building Products & Materials M&A Market Update

This issue of the Building Products & Materials (BP&M) newsletter highlights the macroeconomic drivers supporting the ongoing resurgence in mergers and acquisitions (M&A) activity in the sector and rapidly rising valuations.  Optimistic buyers continue to aggressively seek deals due to strong economic fundamentals and robust construction activity. In particular, optimism surrounding the residential construction market continues to strengthen as housing starts in June increased 8.3 percent compared to May, and 2.1 percent compared to the same month a year ago, and the LIRA exceeded $300 billion for the first time in its history. Despite a slow down in public sector non-residential construction, private non-residential construction continues to expand, increasing 1.1 percent year over year in June, and investors view an expected jump in public sector construction spending as a potential upside opportunity across the BP&M industry.

Based on our own announced transactions and other potential deals in the pipeline, we expect the building products sector to build on a strong first half of the year, with announced deal volume up 21.6 percent compared to 1H16, and experience robust M&A activity during the remainder of 2017.  Strategic players are seeking to grow market share via acquisition and are looking to augment their brand portfolio and technological advantage while improving their supply channels and network.  Meanwhile, a large number of private equity firms continue to seek opportunities for new platforms and bolt-on acquisitions for existing portfolio companies.