Industrial and Construction Services Newsletter - Q1 2021

TKO Miller Market Analysis 

• Construction activity continues to increase, and many contractors are expected to hire additional workers despite the industry still operating below pre-COVID-19 levels.
• This increase in activity comes as industrial maintenance and construction backlogs are once again beginning to rise, driven at least in part by starts for capital projects that were delayed in 2020 due to the COVID-19 pandemic.
• While construction input prices are still up significantly from February 2020, end customers are bearing the brunt of high material prices in most cases, and demand for residential housing (and commercial buildings to a lesser extent) remains high, allowing suppliers and contractors to pass high material prices through to customers and maintain their margins.
• All of these signs point to a likely return to pre-COVID operating levels, and like almost every market TKO Miller follows, valuations in the industrial and construction services industry are up almost 1-2 times annual cash flow as a result.
• There is continued speculation on what form President Biden’s proposed $2 trillion infrastructure plan will ultimately take, and all eyes are on the construction and industrial service industries, which are gearing up for what could be a major boon to both maintenance and new construction contractors.
• This recent attention on infrastructure is allowing sellers to market forward-looking revenue and cash flow because buyers believe that the market will be robust through the current administration, and TKO Miller is even seeing private equity, which has traditionally shied away from construction, beginning to play on the edges of the industry.
• A frothy market is a forgiving market, meaning good companies are trading higher than ever, and even companies with some issues are trading at reasonable multiples.

Industrial and Construction Services Transactions

March 2021– Huron Capital’s Sunland Asphalt Acquires ACE Asphalt

Huron Capital Partners, a lower-middle market private equity firm has acquired ACE Asphalt, a provider of parking lot maintenance and repair and comprehensive site development services for paved and concrete surfaces in five southwestern states. Huron Capital plans to merge the company with its infrastructure services platform Sunland Asphalt & Construction, Inc. The combination of the two companies provides greater market stability and expands Sunland's presence into two new states.

By Timothy Oleszczuk on Apr 22, 2021 1:29:50 PM