Q3 2018 Building Products & Materials M&A Market Update

September 2018

This issue of the Building Products & Materials (BP&M) newsletter highlights the macroeconomic drivers supporting the momentum in mergers and acquisitions (M&A) activity in the sector and strong valuation multiples. Bolstered by the implementation of the new, corporation-friendly tax policy and the continued strength of the U.S. economy, M&A activity in the BP&M sector rebounded in the first half of 2018 after a slow second half of 2017. Industry participants expect strong M&A activity to continue through the remainder of 2018 driven by robust balance sheets and the continued availability of low-cost debt financing. In particular, optimism surrounding the non-residential construction market continues to strengthen as highlighted by the AIA Architecture Billings Index exceeding 50 in each month during 2018, and May 2018 setting an all-time record for non-residential construction put in place ($754 billion). Investors will be watching residential housing starts closely through the remainder of the year to see if recent performance is a short-term anomaly or a long-term plateauing of residential construction activity.

Based on our own announced transactions and other potential deals in the pipeline, we expect strong momentum in M&A activity across the building products sector through the remainder of 2018. 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.