Industrial and Construction Services Newsletter - Q2 2021

TKO Miller Market Analysis 

• As the country is moving back to pre-pandemic economic trends, states are returning to ordinary employment levels, and parts of the country are poised to outperform national economic growth
  • In particular, the Industrial and Construction Services industry is projected to reach record levels as industrial maintenance and construction backlogs are once again in full swing in an attempt to make up for lost time during COVID-19
• However, this pent-up demand has been met with increased direct costs for key input materials such as lumber and steel in addition to limited access to labor, creating a short-term bottleneck on industry growth, pushing out backlog timelines, and in some cases, pricing end-users out of the market entirely
• The commercial construction market is expected to be a driving force behind the increased industrial growth throughout the United States
  • As populations return to dense urban cities, high demand, low rates, and decreased inventories will drive both new construction as well as existing building renovations and additions
  • The increase in natural disasters that have occurred in the last 5 years in addition to the Miami-area condo collapse has put a renewed spotlight on building safety and regulations, and have resulted in higher demand for inspection and repair work
• In an attempt to further stimulate the economy post-COVID-19, the House is set to allocate $343B for roads and bridges, and the infrastructure legislation processes are continuing to move forward, which would provide $1.2T in infrastructure investments over eight years
• These factors, in tandem with a frothy M&A marketplace, have resulted in increased valuation multiples across the board (evidenced by the index below)
• TKO Miller has seen a significant increase in interested sellers in the industrial and construction services sector largely due to the positive factors in both the economic and M&A environments and expects continued M&A activity throughout the latter half of 2021 to close out potentially one of the most active M&A years on record

By Timothy Oleszczuk on Jul 27, 2021 3:16:11 PM