Industrial and Construction Services News

2018 Construction Industry Economic Outlook

Ken Simonson from the Associated General Contractors of America (AGC) forecasts an increase of 3.0% to 5.0% for construction spending at year end 2017. The American Institute of Architects (AIA) forecasts construction spending on nonresidential buildings to rise by 3.8% over the same time period. Construction spending through the first three quarters of 2017 has totaled $917.0 billion, increasing 4.3% YoY during the same time period in 2016. Commercial construction starts are expected to grow 12.4% in 2018.

The State of the Construction Industry

What the Latest Rental Forecast Means to Your Business: 3 takeaways to help guide rental decisions in your sector

The American Rental Association recently released their updated five-year forecast calling for solid industry gains through 2021. Rental revenue is expected to grow 4.7% in 2017, 5.0% in 2018, 5.8% in 2019, 4.4% in 2020, and 3.9% in 2021. National U.S. construction growth is projected at 5.9% for year end 2017. Current political factors could impact the rental industry significantly, with tax cuts and even modest increases in infrastructure spending projected to drive up to 10.5% increased growth in highway and street investment.

Key Rental Forecast Takeaways

Global Mining Equipment Market Overview 2016-2017 & Forecasts to 2022

The 2017 U.S. mining equipment market is projected to be $107.3 billion, growing approximately 7.3% YoY and is expected to grow robustly through 2022, at a CAGR of 7.9%, crossing the $150.0 billion line in 2022. The largest share is expected to be surface mining and is slated to account for $42.0 billion in 2017, with parts and attachments following behind as the second largest segment. Increased metal production, spurred by new projects and heavy demand from Asia, South America, the Middle East, and Africa, seems to be driving this firm growth within the mining equipment market. Overall mining activity, strongly correlated with mining equipment demand, has recently increased worldwide.

Worldwide Market for Mining Equipment 

Industrial and Construction Services Transactions

October 2017 – PSC completes acquisition of HydroChem

Houston-based PSC has acquired Deer Park, TX-based HyrdoChem, giving it one of the top positions in the North American industrial cleaning and environmental services industry. The Company will be called “HydroChem PSC” after the merger and is a portfolio company of Connecticut-based private equity firm Littlejohn & Co. Littlejohn focuses primarily on the middle market and has a niche within distressed assets, carve outs, and turnarounds.

October 2017 – American Industrial Partners acquires The Brock Group

American Industrial Partners (AIP), a New York City-based operationally focused private equity firm, has acquired The Brock Group, a Houston-based scaffolding and industrial service provider to the refining, petrochemical, and power generation industries. Brock had recently been struggling financially but with injected capital from AIP is now in its strongest financial position in recent memory. Brock is one of the only substantial competitors to BrandSafway at this time.

November 2017 – PE-backed AXIOS Industrial Group buys Sky Industrial Services 

AXIOS Industrial Group, backed by White Deer Energy, an oil and gas exploration, production, oilfield service, and equipment manufacturing focused PE firm, has acquired Sky Industrial Services (SIS). SIS is an Augusta, Georgia-based insulation and scaffolding company that is noted as “the first of a series of upcoming acquisitions for AXIOS.” The terms of the deal were not disclosed.

TKO Miller Market Analysis

The robust middle-market M&A environment within the industrial service and construction sectors is expected to continue, as demand from private equity and strategic buyers continues.

• TKO Miller has continued to see frothy M&A conditions within the industrial services market, featuring increased demand among both financial and strategic buyers for quality middle and lower middle market companies.
• Financial buyer interest in middle market companies across all sectors remains high, due to a strong demand for returns and historically high levels of private equity dry powder causing a continued trend of increased pressure to place capital. TKO Miller expects current market conditions (robust demand and elevated valuations) to persist for the next three to five quarters with the potential for increased activity in the middle market if the proposed federal tax cuts take effect.
• U.S. oil markets are at near historic output levels of 9.71 million barrels per day, up 11.6% YoY. OPEC’s cuts have helped to buoy oil prices, sending WTI and Brent to their highest points in 2017, before recent reversals in the market, and are still above previous annual highs through Q3 2017. Due to a larger than normal WTI-Brent spread, U.S. oil markets have experienced consistent demand coupled with growth in production, due at least in part to the lifted ban on oil exports. Oil exports have tripled since the ban was lifted, sending almost 1.5 million barrels per day across the border during the last monthly reading (September). With OPEC’s cuts extended through 2018 and oil demand expected to grow worldwide, U.S. producers should see strong growth with all related services experiencing parallel growth.
• Construction and rebuilding efforts from various disasters in the U.S. (California wildfires, Hurricanes Irma and Harvey, etc.) are likely to have a positive effect on the national construction market after the immediate effects from the disasters subside. The increased demand should arise from the reconstruction and repair of multifamily, commercial, and industrial structures in the effected areas and their respective construction markets (Texas and California).

Middle Market Valuation Multiples

Industrial and Construction Services Valuation Index