- Key insight: Uncover how private equity investors are targeting the construction clients of independent accounting firms.
- What's at stake: Generational construction owners lacking succession plans must decide whether to sell to outside investors.
- Expert quote: "Private equity perhaps didn't really understand progress billings..." — Mike Reynolds, Bennett Thrasher
Accounting firms that have been wooed by private equity investors are starting to see PE firms now wooing their construction industry clients.
Bennett Thrasher, a Top 75 Firm based in Atlanta that has so far
"As of late, we've seen a heavy uptick in M&A activity as a whole in anything project based and construction based," said Connor Gibson, director of transaction advisory services at Bennett Thrasher. "We're seeing private equity and other investors come into this and get a little bit more comfortable with it."
PE firms have grown more accustomed to the way construction companies handle billing and are increasingly willing to buy up businesses with aging owners who are looking to retire.
"Private equity perhaps didn't really understand progress billings, and had maybe gotten burned by it or were scared off by that," said Mike Reynolds, a partner in Bennett Thrasher's financial reporting and assurance practice. "Now they have a little bit more of an understanding around it, or are looking for different avenues to put capital to work. But it's really changed, and I have to imagine a lot of the activity we're seeing now is with all these generational companies approaching retirement at the leadership level, and likely not necessarily having that succession plan buttoned up with the next generation. Right now they're probably two or three generations in, and the generation that would take over was far removed from what it took to build that in the first place, and may not have any interest in doing that. A lot of things are coming together to drive a lot of this activity, from what I'm seeing on the audit side, with all the relationships that I have with the current owners of these construction companies."
While Bennett Thrasher has
"Various funds and platforms have their thesis of what they want to invest in, and that could be any vertical: software, manufacturing, distribution, niche automotive aftermarket resale, construction, etc.," said Gibson. "We work a lot at Bennett Thrasher with the construction industry, and we have seen a big turn in M&A activity in this specific vertical, with a lot more outside capital investment compared to what we saw outside of the last three to five years."
The firm helps construction company owners with retirement and succession planning.
"We're having touchpoints throughout the year between the different phases of the audit cycle," said Reynolds. "We're talking to our owner-operators about their plans, and as they are approaching that time where they're looking to hang up their hard hat or take a little bit of chips off the table, or maybe monetize the value that they've built, or get out all together and hand it off to somebody else to build on where they've gotten it this far. We can start to really have strategic discussions with them about getting them ready for what that process is going to look like."
He assists his construction clients with analyzing their businesses. "It's really about the financial health of the company in a lot of respects because that's what's going to drive value," said Reynolds. "But I think there's other pieces of the operations, whether it's coming up with more institutionalized approaches, or really solidifying the back office and the controls. A lot of what goes into construction is on the estimation side, so helping them come up with better ways to figure out more accurate and predictable estimates. What a buyer is going to look for is predictability and transparency and a lot of those enterprise-level processes, procedures, controls. They're going to want to have that as part of their operation."
Construction companies need to be ready for the sale to happen. "It's going to be a whole lot more valuable if all of that's already taken place and they're ready to pass the keys over and it's a turnkey experience so the next buyer can focus on growth and driving value," said Reynolds. "Whether it's a roll-up strategy or whether it's building out vertically or attacking different geographic markets, all of those things really need to be there in order to be a platform for that to happen to scale quickly and strategically like they want."
Gibson anticipates plenty of PE-driven mergers and acquisitions in the construction industry in the year ahead. "I expect construction M&A activity to remain strong in 2027, with private equity continuing to be a major source of capital," he said. "The focus will increasingly shift toward consolidation of existing platforms, particularly in specialty contracting, power infrastructure, utility services and data center-related construction. Buyers will remain active, but they'll be more selective, placing a premium on businesses with strong management teams, reliable reporting and strong backlog."
The research firm
"We're seeing private equity's interest in construction evolve from a general consolidation story into a targeted investment thesis around infrastructure, data centers, power and specialty trades," said Gibson. "Deals such as MasTec's acquisition of Superior Group and the record volume of private equity investment in electrical, HVAC and other specialty contractors demonstrate that investors are actively positioning themselves around the long-term demand created by AI infrastructure, electrification and grid modernization."
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