Summary of UK Construction Sector Deals

The MHA Corporate Finance team have reviewed the UK construction sector deals. The analysis is based on the review of UK construction sector related corporate deals and based on companies UK SIC codes, namely:

  1. aDevelopment of building projects and construction of new buildings
  2. Civil Engineering
  3. Construction Services

UK Construction Deals

2017 saw a slight dip in the number of UK construction related deals, falling from 455 to 441, after steadily increasing since 2012 from 253 to 323 in 2015.

Note: UK construction deals include fundraising and company sales, mergers and acquisitions.

Since 2012, the number of reported deals in the whole UK construction sector has risen 74%. In 2012, the UK was still recovering from the recession and credit crunch, which hit the property sector and construction services hard.

Steady growth since 2012 was accelerated in 2016, in part due to a glut of dealmaking in the months following the EU Referendum. A slight fall of 3% in the number of deals completed in 2017 may suggest the UK construction deal market has reached a peak.

Growing Sectors

The increase in corporate dealmaking was led by companies involved in the electrical, plumbing and installation services sector, as shown by this sector analysis:

Companies involved in installation services include plasterers, joinery and floor and wall coverers, painters, glazers and air conditioning.

Companies involved in civil engineering and the construction of new buildings showed below average growth, although they still increased corporate activity significantly in the five years to 2017.

UK Building Projects

The number of deals involving the development of building projects soared in 2016. Deals involving construction of new buildings declined in the four years from 2012 to 2015, but have seen an upturn in 2016 and 2017.

This means companies involved in the development of new building projects saw extremely low levels of deal activity in 2012 at the end of the recession. The number of development deals in 2017 rose to broadly the same level as that for constructors of new buildings.

UK Regional Growth

Proportionally, UK regional growth was highest in the Midlands and Scotland. Midlands deals have grown from 13% of the UK deals in 2012 to 23% in 2017 and Scotland has seen an increase from 2% to 6%.

This regional rebalancing would appear to be at the expense of Wales, the South West and the South East, as their proportions decreased in the period. However, these regions grew their deal numbers in actual terms (from 12 to 18 in Wales and South West and from 13 to 17 in South East), as all UK regions enjoyed growth in construction dealmaking. London accounted for 28% of deals in 2017.

UK Deal Values

Reported deal values have increased dramatically. There has been a fourfold increase in 2017 dealmaking since 2012, increasing from £4bn to £17bn. This is despite a fall in 2015 due to a reduction in deal completions. Reported deal values showed no sign of slowing and recovered strongly in 2016, with a further 20% growth in 2017.

(Source: Market IQ and MHA Analysis)

The full article which goes into more detail and covers P/E Ratios, sources of funding and overseas buyers, can be found in our Construction & Real Estate newsletter, Real Estate Matters Issue 9.

If you have any questions or would like to discuss this in more detail, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our team.