Construction is a sector people either understand or avoid. The margins are thinner than most, the working capital swings are real, and a contract book can look very different once you read the contracts.
It also has genuine advantages for an acquirer: established relationships, a skills shortage that protects incumbents, and demand that does not disappear.
Here is the case for and against, from the buyer’s side.
Pro: Construction is a robust industry
Due to political, global, and economic factors ranging from Brexit to COVID, the construction industry has experienced some substantial difficulties over the last few years. However, it has weathered these external storms and continues to grow, suggesting a resilience that is sure to be appealing to would-be investors.
As things stand, the mood of the industry right now is one of optimism, with well-established businesses looking forward to better days to come. New-build housing is a particularly significant area of investment, with demand still high for new properties that are both sustainably built and high-quality.
As a result, this could be the ideal time to acquire a construction business to enhance your own service lines.
Con: There is a significant skills shortage
Although the number of apprentices entering the sector has risen for the first time in years, the fact remains that there is still a substantial shortage of skilled workers available to meet the sector’s demand.
At the same time, over sixty percent of the current workforce will be retiring from the industry over the course of the next ten years.
This poses a worrying problem for the construction world, which needs to take steps to address the lack of interest among younger workers in entering the sector. Currently, construction suffers from a negative image among younger employees, who view it as being poorly paid and characterised by long, tiring hours and tenuous job security.
Efforts must be made to encourage the youth of today to enter the industry, via methods such as the creation of more apprenticeship programs, mentoring, and greater investment in employees’ skills.
Pro: There is the potential for high ROI
Whether you’re thinking of acquiring a small business that specialises in renovations, or a large construction company responsible for new builds, there is an opportunity to enjoy a large return on your investment over time. Demand for new builds remains very high, but there is also a growing need for the retrofitting and renovation of older properties as the UK strives to meet its net zero goal.
On the other hand, depending on how much capital you have available, you may wish to invest in more than one smaller business within the industry, thereby gaining access to a variety of different service lines. This diversification is another way to boost your income.
Con: The industry is heavily regulated
One of the main pitfalls of the construction industry is the way in which the regulations that govern it can change on a regular basis. These include not only global regulations, but also new legislation pushed forward by the many agencies and specialist groups that oversee compliance in this sector.
Because construction projects can be lengthy and time-consuming, there is a chance that new legislation can come through in the middle of the work. Unsurprisingly, this can cause all kinds of problems – not least, causing significant losses of time and money.
Pro: Technology can be used to cut costs and boost productivity
Although the construction industry has a reputation for being slow to adapt to new technologies, the fact is that there are several productivity-enhancing tech solutions to take advantage of. The key is to invest in their adoption and in the training of employees to use these solutions effectively.
Some of the technology that can be used to enhance construction projects includes 3D printing, virtual reality, drones, and specialised software to track and manage paperwork.
Con: It’s a dangerous business
Last but no means least, there is no escaping the fact that the construction industry is one of the most dangerous sectors in the UK, with the highest number of workplace deaths in 2023.
In fact, in 2024, it was reported that fatalities in the sector were 70% higher than in 2019. Not only that, but over a quarter of UK construction workers have had to take time off due to poor mental health.
Falls and accidents are significant causes of injury and death in the industry, and although significant efforts have been made to improve health and safety, it remains high-risk.
This is partly down to the dangerous working environment of a construction site, with heavy machinery and the requirement for a lot of manual handling. However, there are also substantial risks from the substances that workers can encounter daily, which can cause long-term health issues.
This is a serious factor to consider before investing in the construction industry, and, although the danger can be mitigated through training and stringent safety regulations, there is no escaping the innate dangers of the work involved
Finding the right construction business to acquire
As you can see, there are some substantial pros and cons to take into account before you decide to make the construction industry part of your M&A strategy.
However, if you are still keen to invest in this resilient sector, the good news is that finding the right business to acquire shouldn’t be a tough ask. There are so many types and sizes of business to consider within this industry, from small family firms to large companies generating millions of pounds in turnover each year.
Here at Harris Acquire, our friendly and experienced team can help you find the right business to invest in, whatever your acquisition budget. Not only that, but we can take you through the entire M&A process, from making first contact to negotiations and sealing the deal.
To find out more, give us a ring on 01926 757100 or send an email to Hello@harrisacquire.com.
If you are looking to acquire a business like this, our acquisition search service finds and approaches targets that fit your criteria, usually within 30 days.
