Last Updated: December 12, 2024
Our research team recently conducted a study on the state of valuation multiples for private construction companies entering into an M&A process as of Q4 2024. The study aggregated data from M&A and investment banking reports and was supplemented by interviews with M&A advisors, private equity GPs, and other investors. (Sources)
The results of our study are shown in the tables below, which list EBITDA and revenue multiples for construction companies. The data is broken down by construction specialty and level of earnings.
Q4 2024 Private Construction Company EBITDA Multiples
| Company Type | EBITDA Range | ||
| $0-1M | $1-3M | $3-5M | |
| Architecture | 6.4x | 8.2x | 10.7x |
| Building Materials | 5.4x | 7.3x | 9.8x |
| Civil Engineering | 6.8x | 8.7x | 11.9x |
| Electrical | 6.1x | 8.5x | 11.4x |
| Home Builders | 56x | 8x | 10.8x |
| Painting | 5.5x | 7.7x | 11x |
| Plumbing | 6.3x | 8.5x | 11.1x |
| PropTech | 6.5x | 8.2x | 11.6x |
| Surveying | 5.8x | 7.5x | 10.7x |
| Real Estate | 6.1x | 8.6x | 11.2x |
| Roofing | 5.9x | 8.4x | 11.1x |
Q2 2024 Private Construction Company Revenue Multiples
| Company Type | Revenue Range | ||
| $1-5M | $6-10M | $10-75M | |
| Architecture | 4.2x | 5.5x | 6.9x |
| Building Materials | 4.2x | 5x | 6.6x |
| Civil Engineering | 4.4x | 5.6x | 7.2x |
| Electrical | 3.8x | 4.7x | 6.1x |
| Home Builders | 3.6x | 4.6x | 6.1x |
| Painting | 3.7x | 4.3x | 6x |
| Plumbing | 3.8x | 4.8x | 6.4x |
| PropTech | 4.5x | 5.9x | 7.7x |
| Surveying | 4.4x | 5x | 6.7x |
| Real Estate | 4.3x | 5.3x | 7x |
| Roofing | 4.2x | 5.3x | 7.2x |
Below is a high-level analysis of the M&A market as of Q4 2024, which provides context for the figures listed above in addition to key takeaways for business owners seeking to begin the M&A process.
The Current State of the M&A Market for Construction Companies
As we head into 2025, the construction sector continues relatively steady growth with a few serious hurdles that may affect valuations in the coming years. First, the industry is experiencing a serious labor shortage – there are an estimated half a million positions that need to be filled within the industry before it is able to comfortably handle the wave of new building projects coming in, especially with the recent rise in megaprojects over H2 2024.
In addition, global geopolitical conflicts involving Iran, Russia, and China have the potential to compromise the importation of essential construction materials (e.g., timber, rare earth metals, and natural gas) which may cause disruptions within the industry.
With these obstacles in mind, there are reasons to celebrate. The construction industry has seen considerable growth in the last year, growing 3.7% overall since 2022 and a whopping 7.5% increase in nominal value. The industry itself has grown 3.5% since 2022. The primary force behind this growth is smaller contractors—who averaged a growth rate of 25%. The influence of small companies in construction M&A is vastly different from tech-related industries, like SaaS, which saw most of its industry-wide growth from enterprise companies.
If your construction company is a small business and seeking an acquisition in the next 6-12 months, you will be faced with few unique hurdles:
- Sub-$25M construction companies are becoming more attractive to PE buyers as they search for new solutions to increased interest rates. This is likely to change when rates eventually drop (current projections are September of this year) but delays could prolong this advantage.
- Specialized contract types (e.g., 3P, design-build) mean there will likely be extra diligence conducted by industry experts brought in by the acquirer
- Construction companies have more moving parts to consider within their everyday operations – e.g., subcontractor relationships and disparate material suppliers – compared to other industries, which can attract lower multiples than traditional services businesses due to investor conservatism
Considering these factors, construction companies that prioritize documentation and delegation are more likely to earn a higher multiple. Also, as in other M&A sectors, construction firms that specialize in a niche and are known to be leaders in that space will command higher valuations.
PE Firms Are More Likely to Offer Better Deals for Small Companies
The disproportionate growth of small construction companies over the last several years will likely make them a prime target for PE firms, since the goal of private equity is to grow a company’s value over time before reselling it. Larger construction companies, on the other hand, are more likely to benefit from working with a strategic buyer since PE will be less interested in them.
(Related: Selling to Private Equity vs a Strategic Buyer: An Analysis)
Reducing Owner Dependance Can Result in Higher Multiples
Sellers are less likely to express interest in a company that depends on the input of a single person who will not be there anymore once the deal has been closed. Companies in this situation should seriously consider taking steps to decrease the company’s dependence on their owner.
- Hire a capable management team
- Delegate important tasks where possible
- Document key data and history
Having the Right Team Will Ensure the Best Possible Deal
Business owners often make the mistake of attempting to use their own in-house team to navigate the tricky world of M&A transactions, but this often leaves blind spots that result in missed opportunities and losses that might have been avoided using an outside partner.
The best course of action is to start a deal process with an M&A firm experienced in your industry.
Construction company owners, particularly with smaller companies, are in a unique position to capitalize on their last few years’ growth today. However, the uncertainty that comes with a turbulent but expanding market combined with the many factors influencing the sale of construction firms makes it difficult to know what to do next.
If you have any questions, I’m available to chat. As an owner who has sold multiple companies, I’m happy to share my experience with other owners. You can reach me via the contact information provided below or using the contact page of this website.
