Startups and investors in the construction sector are continuously trying to understand what are the chances for a company selling digital solutions in the construction sector to be acquired. Entrepreneurs look for investors and potential exit strategies and investors need to make sure that the level of risk is acceptable for their risk appetite. In this short post we briefly mention some interesting facts about the activity in this sector.
Exit strategies look promising in the construction sector for companies building digital tools. Let me just explore different promising alternatives:
Acquisition by large software corporations: M&A activity of large software corporations in recent years has been intense related to acquisition of software companies offering tools for the construction sector [1]. For instance, Autodesk acquired Plangrid in 2018 for 875M $, Oracle acquired Aconex in 2017 and Textura in 2016, for 1.2B $ and 665M $, respectively. For instance, Aconex was a software company focused on connecting teams in construction and engineering projects through their cloud solution. This establishes a dynamic and promising environment for companies growing businesses around the creation of digital tools for the construction sector.
Acquisition by software companies specialized in the construction sector: Many software companies offering products to the construction sector for 20-30 years use M&A strategies to renew their portfolio. A good example is inEight. They decided to renew their portfolio through the strategic acquisition of QA Software in March 2018 (offering a cloud documentation control solution) and Basis Planning in October 2018 (AI-based engine for automatic and smart planning).
Acquisition by large construction companies: The use of tools and technologies to support planning is becoming a competitive advantage and this will be reflected in the M&A activity in the upcoming months and even the launch of venture funds, to add these productivity-enhancing digital capabilities [2]. The digital strategy of the most influential construction corporations in the European Union is precisely focused on the creation of internal start-ups or the creation of independent start-ups in collaboration with the innovation ecosystem [3], observable in the annual reports of these corporations. According to the same report from Deloitte, companies like Vinci have already implemented a strategy based on M&A transactions focused on digitization and technology. According to experts, most of the European construction companies are adapting their departments to speed up these processes and achieve their strategic goals related to digitization. It is expected that many other companies will soon follow Vinci’s example.
[1] https://news.crunchbase.com/news/by-acquiring-construction-startups-big-tech-aims-to-help-build-more-than-software/
[2] 2020 engineering and construction industry Outlook. Deloitte. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/energy-resources/us-2020-engineering-construction-outlook.pdf
[3] European Construction Monitor 2017–2018: A looming new construction crisis? Deloitte. https://www2.deloitte.com/content/dam/Deloitte/pl/Documents/Reports/pl_European_Construction_Monitor_2017-2018.PDF