M&A in building products and services: Will growth replace resilience?

The construction sector is typically seen as the bellwether of economic health and, during downturns or recessions, is almost always the industry to record the highest levels of financial distress and insolvency. As such, the sector is subject to an intense amount of scrutiny, debate and analysis – something that has only intensified during the turbulence seen across the UK economy in recent years.

But what of the sector that is most closely connected with construction? The building products and services (BP&S) sector is comprised of a wide range of businesses that manufacture, distribute and supply materials for the construction sector, as well as servicing products and assets in the built environment.

These may include manufacturers of products such as doors and windows, light fittings and kitchen and bathroom fixtures, or companies providing design, build, repair and servicing of things such as heating, ventilation and air conditioning (HVAC) systems or energy supply infrastructure.

BP&S is a sector that is, of course, very closely linked to the construction sector and, as such, faces many of the same headwinds. However, the UK BP&S industry has remained largely resilient in spite of these challenges, underpinned by strong long-term demand and order books.

Amid a global downturn in M&A last year, the sector also held relatively firm, with BDO reporting that BP&S registered a 2.4 per cent decline in M&A activity across international markets in 2023, compared to a 25 per cent overall decline in deal volume.

With UK political and economic instability having eased over recent months, there are also the underlying conditions for a recovery in M&A activity, something that is bolstered further by growing interest among private equity buyers, a resurgent appetite for deals, financial investors deploying more capital to the sector due to its latent resilience and an overall reduced level of buyer uncertainty.

In the face of headwinds, resilience defines 2023 dealmaking
In 2023, the UK saw a fairly significant decline in M&A activity in the BP&S sector, outstripping the 2.4 per cent decline seen globally. According to BDO, UK BP&S M&A deal volumes fell by 10.5 per cent last year, reflecting a wider trend of suppressed dealmaking as the country continued to contend with high inflation, interest rates and other issues.

However, this decline was lower than that seen across the rest of Europe, with the region as a whole seeing a 13.5 per cent drop in deal volumes. Overall, the 319 BP&S deals completed in the UK last year (down from 348 in 2022) meant it registered well over half of the 579 deals registered in Europe last year – with the rest of the region seeing just 260 deals in comparison.

Broadly speaking, 2023 represented a year of withdrawal in the UK BP&S market, with acquisitions by the vital private equity (34 per cent of all deals) and cross-border (17 per cent) buyer segments both down on their 2022 levels, as buyers contended with higher interest rates and prevailing uncertainty.

Deals backed by financial investors also declined steeply, dropping by 17.6 per cent from their 2022 levels, while there were also significant declines in deals for manufacturing and services businesses.

However, the sector fared better than many others (overall UK M&A was down 12 per cent) and there were promising signs in terms of resilient activity among trade buyers – who accounted for around two-thirds of activity – and strong demand in certain sub-sectors, such as HVAC and plumbing supplies (which had the highest deal volume among sub-sectors), electrical distribution and energy saving solutions and windows and doors.

While manufacturing and services both saw declines in activity, the distribution segment recorded nearly a 21 per cent increase in deals, with BDO reporting that the 105 deals in the distribution market was the highest on record.

Another reason for optimism in the sector was the fact that valuations proved more resilient than activity in 2023. According to BDO’s report, average EV/EBITDA multiples for deals in the BP&S sector last year was 6.9x, the same figure recorded in 2022.

While private equity activity was slower than in 2022, multiples remained steady at 7.2x for deals with PE involvement (compared to 7.3x in 2022) and outstripped average multiples for trade deals, which stood at 6.8x.
Matthew Goodliffe, BDO Director Building Products & Services M&A, commented: “There has been some softening of valuations, but they are still in line with the longer-term norms. We had a post-COVID boom in activity and valuations, but sellers are now readjusting their expectations.”

“Additionally, there appears to be a reduced level of uncertainty in buyers’ minds and greater clarity of underlying levels of profitability, following years where underlying trading could be obscured by COVID, supply chain issues and high inflation.”

Overall, BDO found that valuations held firm across nine of the 11 sub-sectors tracked in the report, with two sub-sectors (windows and doors and security and access), seeing increases in average EV/EBITDA deal multiples.

The sub-sectors driving UK activity

HVAC & Plumbing
The HVAC and plumbing sub-sector was the most active dealmaking area in the UK BP&S market last year, accounting for 17 per cent of all deals. There were 67 deals in the sub-sector, up 12 per cent from 2022, while average deal valuations also held steady at 6.7x EV/EBITDA.

BDO highlights a number of key attributes that have continued to attract buyers to the HVAC and plumbing sub-sector, even amid significant M&A headwinds. These include: repeatable revenues, opportunities for value growth through sustainability drives and changing regulations, as well as the strong integration of technology.

These aspects are seemingly particularly attractive to the otherwise reticent private equity buyer class, with the HVAC and plumbing sub-sector seeing the highest levels of PE investment last year.


One significant private equity deal last year saw PE firm HIG Capital create a new building services group through the double acquisition HVAC, electrical, refrigeration and air conditioning services provider Synecore and security and entrance control systems firm Meesons.

Backed by HIG, the new group, Andwis Group, is planning to grow through acquisitions in the technical building services area, with HIG Capital Managing Director John Harper said that the merging of Synecore and Meesons would create “a leading provider of critical technical building services.”

Harper continued: “The Andwis Group will be able to provide a competitive offering in a sector that has significant long-term growth opportunities driven by decarbonisation, changing regulation, new technology, and ageing building stock."

As well as resilient private equity activity, the HVAC and plumbing sector has also continued to attract strong interest from trade buyers during 2023, while the sector has also seen significant activity involving manufacturing businesses (despite the overall decline in manufacturing M&A in the broader BP&S industry).


The Carver Group is an international developer, manufacturer and distributor of industrial and commercial HVAC systems. Last year, the company completed a deal for HVAC firm Powrmatic, which has operations in Dublin and Somerset, in a deal that added a fourth production plant to Carver’s manufacturing capacity.

Discussing the acquisition, Carver Group CEO Aidan Killeen said that Powrmatic’s product portfolio offered “considerable business synergies” and that it would afford Carver Group customers “a greater product offer and solution.”

PKF partner Darren Hodson, who worked on the deal, said that it would help the group “to build more scale, capabilities and footprint for the next stage of growth."

The deal represented Carver’s strategy of investing in growing HVAC businesses across the European and North American markets. Following the Powrmatic acquisition, the group reiterated its commitment to acquisitive growth in both regions, with Aidan Killeen saying that the deal not only strengthens its market positions, but also leaves it well placed “to take advantage of future growth opportunities in both home and wider export markets.”

This level of interest from trade buyers is something that BDO’s Associate Director, Building Products & Services M&A, Susannah Perkins expects to continue during 2024.


Continuing interest from trade buyers in the HVAC industry was demonstrated earlier this year with the acquisition of HVAC distributor Oceanair UK Limited by leading UK independent builders’ merchant MKM.

The acquisition represented a strategic move into the growing HVAC sector for MKM. Founded in 2002 and operating from sites in Mansfield and Crawley, Oceanair has established itself as a prominent specialist HVAC distributor across the UK, with clients including major brands such as Panasonic and Fujitsu. The company’s expansion has also seen it make a successful transition into the air and water markets.

MKM Business Development Director Rob Barnes, who led the deal, expressed his confidence in Oceanair’s ongoing growth potential and added that the deal “fits perfectly with MKM's plans for expansion, allowing us to branch out further into the HVAC industry.”

Building materials
The building materials sub-sector claimed a 14 per cent share of dealmaking in the UK BP&S market last year and, with an 8 per cent increase in activity, was one of the few sectors to record a growth in deal volume – with 56 deals ultimately being completed during 2023.

Businesses sold within the sub-sector also saw strong valuations, with the average EV/EBITDA multiple of 7.1x outstripping the industry average and remaining steady against figures recorded in 2022.

The sub-sector's activity was boosted by several firms that made multiple acquisitions, including Aggregate Industries – which acquired four companies as part of a push into recycled and sustainable building materials – and Sigmaroc – which made five acquisitions, including its £1 billion acquisition of CRH’s UK and European lime operations.

Sigmaroc’s significant M&A activity during 2023 came after it said earlier in the year that it had raised around £30 million in funding to finance a growth strategy that included a significant pipeline of strategic acquisitions.

At the time, the company said it had a pipeline of up to ten near-term strategic acquisitions that would reflect a total consideration of around £39 million, with Chief Executive Max Vermorken commenting: "We have identified a strong pipeline of acquisitions as well as organic growth opportunities that this funding will help us to deliver”.

The company has continued its M&A-driven growth in 2024, with its recent transactions including a deal to acquire zero-concrete brand Cemfree out of administration, following the collapse of parent company Pudlo Products Limited.

BDO also noted that building materials was another sub-sector in which the decline in manufacturing M&A was less apparent, with the report stating that sustainability-focused operations had been key in attracting PE investment into the sub-sector.

As mentioned above, Aggregate Industries was particularly active in deals with a sustainability-related angle. Notable deals included the takeover of Eco-Readymix, a leading supplier of sustainable ready-mix concrete, and the acquisition of precast materials supplier Besblock, both of which were acquired through Aggregate Industries subsidiary Holcim.

Electrics & Lighting
While sub-sectors such as HVAC & plumbing and building materials saw solid growth and demonstrated resilience against prevailing headwinds, few sub-sectors within the BP&S market recorded truly significant growth during 2023.

A notable exception in this regard was the electrics and lighting sub-sector. During 2023, M&A activity in the sub-sector increased 39 per cent to 46 deals. This meant that the industry was the fourth-highest for dealmaking across BP&S, registering 12 per cent of all deals.

Activity in the sub-sector far outstripped the 15-year average of less than 20 deals, while valuations held firm at an average of 6.1x EV/EBITDA. Given the sector’s newfound attractiveness, multiples may begin to increase.

Dealmaking in electrics and lighting derived a significant boost from the move towards solar and battery systems, with strong demand for businesses supporting the energy transition, such as energy efficient lighting providers and manufacturers and installers of solar panels and batteries.

These trends, which tap into the growing importance of ESG-related concerns to investors, meant that dealmaking in electrics and lighting also benefited from relatively strong activity among private equity buyers, despite their current reticence in the face of ongoing economic uncertainty.


A significant private-equity deal in the electrics and lighting sector saw Freshstream invest in Burton-upon-Trent-based solar and renewable energy service provider Project Better Energy.

Project Better Energy began in 2011 in the residential solar market and has since expanded its product range to include electric vehicle (EV) chargers, infrared heaters, off-peak power storage and air-sourced hot water cylinders, with the company providing a wide range of sustainable solutions to both the residential and commercial property markets.

The company has experienced significant growth since its formation, with approximately £100 million in annual sales, a more than 300-strong workforce and, as of October 2023, close to 40,000 solar energy systems sold and installed through its Project Solar UK division.

Project Better Energy CEO Simon Peat said that the company would work with Freshstream to pursue its growth strategy, with the PE firm’s investment and expertise enabling the company “to further accelerate our expansion plans, both organically and through acquisitions.”

Commenting on the investment, Freshstream director Gilles Gradassi said: “Following a series of legislative and policy commitments by governments in recent months and years to mitigate the impact of global climate change, there has never been a more important time to invest in solutions aimed at expanding clean power availability and energy efficiency.”

Gradassi added that Freshstream’s investment in the company “demonstrates our commitment to supporting innovative, entrepreneurial companies solving complex issues, including the decarbonisation of the economy.”

Will private equity activity increase?
Investments by private equity firms in high-growth areas such as HVAC and plumbing and electrics and lighting indicate that investors retain a significant degree of confidence in the wider BP&S sector, despite the many economic headwinds and the caution that many PE firms have demonstrated over the past two years.

Overall, BDO describes the state of PE activity in the BP&S sector during 2023 as “nuanced”. The report points out that the drop in PE-backed deals – from 37 per cent of 2022’s total to 34 per cent of 2023’s - was “not vast considering the quantity of transactions involved” and that the level of PE dealmaking seen in BP&S last year matched the five year average.

Broadly speaking, the figures seen in 2022 and 2023 represent a return to normal levels of PE involvement (following a post-COVID surge in activity in 2021). These solid levels of PE dealmaking, even during such economic uncertainty, indicate that the sector is seen as something of a safe haven for investors.

Indeed, BDO notes that the sector lacks “the frothy growth potential of, say, the tech sector”, but that it remains attractive even in tough economic conditions and that the stability on offer means it will continue to attract a certain type of PE buyer.

Looking forward, BDO’s Director of Private Equity Coverage Sarah Ziegler says that PE activity is expected to increase as inflation falls, but adds that “it won’t be long before the money starts chasing high-growth markets such as technology.”

Also quoted in the report was David Bains, a partner at private equity firm LDC, who struck a similar tone in describing the BP&S sector as “a resilient market”.

This may mean that, as an economic recovery begins to take shape, there may be a spike in private equity activity in the sector as investors seek to re-enter the M&A market in a stable industry. Long-term, though, it appears that there is unlikely to be a major, ongoing increase in PE dealmaking in the overall BP&S sector.

However, with the increased focus on environmental and sustainability-related concerns in construction and building services, combined with the growing importance of ESG to investors, there may be some sub-sector-specific areas of BP&S that will continue to see growing PE involvement over the coming years.

Perhaps chief among these, as demonstrated by BDO’s figures for 2023, is the electrics and lighting market, which is at the forefront of the push towards sustainability in the BP&S sector and saw a massive surge in dealmaking last year.

Other potential areas where the ongoing integration of new technology could continue to drive investment from private equity firms include security and access and HVAC and plumbing. Over the coming months and years, these faster-moving sub-sectors may see heightened levels of PE-backed M&A, while other areas, such as windows and doors and building materials, may see less dramatic increases in PE activity compared to the last two years.

Overall, however, the resilience of PE investment in the BP&S sector during a time when investment in other industries has dropped sharply shows a widespread degree of confidence in the sector. With that in mind, it seems only logical to assume that there will be a broad increase in PE dealmaking in BP&S as and when the UK’s economic recovery begins to take shape, even if this may be significantly more pronounced in certain areas than others.

Further tailwinds could emerge
Despite 2023 being a story of resilience for much of the BP&S sector and showing significant cause for optimism, there is also no doubting the challenges the sector has faced and continues to face so far in 2023.

The Construction Products Association has forecast declining activity across much of the construction industry during 2024, with a decline of five per cent forecast in private housing work (following a 13.6 per cent decline last year) and a four per cent drop expected in private housing repair, maintenance and improvement (RM&I).

However, recovery is expected during 2025, with the UK economy forecast to improve and the recent general election having finally delivered a modicum of political stability following years of uncertainty.

This gradual recovery may mean that 2024, like 2023, is defined by resilience rather than true growth, but there are significant signs that tailwinds are beginning to emerge that could drive a genuine recovery and spur further investment and dealmaking.

Fundamentally, the results of the recent general election could deliver a significant boost to the industry. Sir Keir Starmer set out five core missions prior to the 2024 election, with one of them being to “back the builders, not the blockers”, by encouraging a wave of development and building around 1.5 million new homes over the next five years.

Of course, there is a difference between pre-election rhetoric and the reality of determining concrete policy as a new government and much of the immediate pre-election (when it appeared all but certain that Labour would indeed win) and post-election periods has been defined by caution regarding the state of public finances and emphasis on the need for strict fiscal policy and sensible spending.

However, infrastructure and new housing were such key priorities for the party during the election campaign that it seems likely that the new government will persist with this as an area of focus – potentially meaning that the BP&S sector will be one of the major beneficiaries of the election result.

Indeed, a recent poll of construction contractors by Gleeds found that nearly 70 per cent felt that construction and real estate would be among the new government’s top priorities, while 57 per cent felt that plans to merge the National Infrastructure Commission and Infrastructure & Project Authority would result in improved project delivery.

It should also be stated, though, that fewer than half of the respondents felt that the new Labour government would be demonstrably better for the construction industry than the previous government, with Gleeds chair Richard Steer pointing out that “timelines for the commencement of big-ticket plans like those to deliver 1.5 million new homes remain unclear”.

Aside from the higher levels of investment and private equity interest that could result from increasing economic and political stability and greater infrastructure spending, there are also a handful of other factors that could drive consolidation within the BP&S market.

The growing importance of ESG should continue to drive dealmaking as investors continue to target assets with a focus on sustainability and trade buyers seek to rapidly build their green credentials through M&A in order to improve their chances of attracting investment of their own.

The other major deal driver that could result from ESG, however, is the burden that it might place on smaller businesses. The increasing rules and regulations around things such as the drive towards net zero may be difficult and costly for small companies in the BP&S sector to keep up with, potentially making them more open to being acquired by a bigger company that can centralise some of these operations.

Quoted in the BDO report, Iain Brown, Chief Financial Officer of UK housebuilder Elvia Homes, commented: “There’s more regulation and customer codes – the whole move to net zero requires you to do more things. It’s harder and harder for the smaller guys to keep going. The trend is towards fewer but bigger players, because they’re the only ones who’ve got the infrastructure to keep abreast of all the changes and have the cash to invest.”

Regulatory factors could drive dealmaking elsewhere in the BP&S market, which is facing a wave of new regulations in the wake of the Grenfell Tower disaster. The UK Building Safety Act 2022, which was introduced in response to the disaster, has delivered significant legal reforms and legislation that will have a significant bearing on much of the BP&S industry.

Fundamentally, these may prove something of a hinderance to M&A, adding a new level of complexity to the due diligence process as buyers assess the compliance (or ability to achieve compliance) of potential targets.

On the other hand, as with ESG-related regulations, the new legislation may prove too much of a burden for many smaller companies to deal with on their own, potentially driving a wave of consolidation at the lower end of the market.


Summing up the issue, the Construction Products Association wrote: “The Building Safety Act has the potential to change the whole way that construction is done, focusing on the responsibility to do the right thing and transparency to show that the whole supply construction supply chain does the right thing.”

“Some firms understand the importance of it and are trying to build it into everything they do when bidding for contracts. However, some smaller firms down the supply chain still don’t work on large residential towers and don’t realise yet that it will have large implications for them as it applies to all construction.”

“Whether all clients understand that there are also responsibilities for them – and that they will need to pay for the additional cost – is another matter.”

One market that, understandably, could see the most dealmaking as a result of regulatory changes is the fire safety sub-sector. Compliance with new post-Grenfell regulations is low in the UK’s existing housing stock, meaning that companies within the sub-sector are unlikely to face a shortage of work over the coming years.

This will make businesses in the market attractive acquisition targets for outside investors, but, potentially more pertinently, enable consolidators to emerge within what remains a highly-fragmented industry.

According to BDO, the top five fire safety suppliers in the UK currently own under 60 per cent of the existing market, with the remainder comprised of “thousands of national, regional and local specialists.”

This means that there is significant scope for consolidators to emerge within the industry, rapidly build market share through a scaled-up acquisition strategy and take advantage of the deluge of work that fire safety firms could be set to see over the coming years – particularly if they are able to attract funding such as private equity backing.

The bottom line – M&A delivers returns for BP&S companies
As we approach the final quarter of 2024, it seems like underlying dealmaking conditions are favourable, helped by the sector’s resilience against the economic headwinds the UK has faced over the past two years.

This means there should be ample acquisition opportunities for businesses with the means to execute deals. Trade buyers, in particular, may benefit from a current lack of competition, with activity levels lower among buyers such as private equity and venture capital firms.

However, as pointed out in a recent Bain & Company report, the persistence of economic uncertainty means that there is still a degree of anxiety within the sector – presenting fertile ground to companies who are willing to be bold and make acquisitions.

As we have emphasised in previous insights, making acquisitions during times of economic uncertainty (while not without risk) is one of the most reliable ways for businesses to generate growth and position themselves to capitalise on a subsequent economic recovery.

As demonstrated in Bain & Company’s report, building products companies that make “frequent and large acquisitions” outperform less active and inactive counterparts by a significant margin.

According to Bain & Co’s research, building products firms that make frequent, high-value acquisitions generate total shareholder returns of 9.6 per cent, while companies that make frequent, smaller acquisitions generate returns of 9.1 per cent.

By comparison, companies making fewer than one acquisition per year generate returns of between 5.3 and 6.5 per cent. Inactive companies, meanwhile, generate returns of just 2.7 per cent.

While these may not provide a direct correlation with M&A activity among private, mid-market UK M&A businesses, the basic fact that companies operating with well-thought-out strategy acquisition plans perform better remains valid.


Fundamentally, the conditions are suitable for BP&S businesses to pursue acquisitions and capitalise on the growth opportunities that could lie ahead, with the sector likely poised to benefit from growing economic stability and greater investment.

Fast-growing sub-sectors such as fire safety, electric and lighting and HVAC and plumbing appear to be ripe for consolidation, while areas with a strong ESG focus or with high potential for technology integration could see dealmaking levels spurred on by investor interest.

The resilience of M&A in the sector during the tough dealmaking conditions underline its status as a safe haven for investors and trade buyers alike. While this steadiness may mean that BP&S is unlikely to be a major M&A hub during times of true economic growth, the industry should continue to see strong levels of dealmaking across its numerous sub-sectors, while pockets of innovation and disruption suggest scope for significant investment and the possibility for major M&A-driven growth.

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