Sell a construction company now? In the middle of the construction boom? Throughout Germany, construction companies and craftsmen are profiting massively from the good economic situation. Thanks to the many orders from house builders, industry and commerce as well as the public sector, turnover and earnings are good. This is, after all, a perfect starting point for the sale of construction companies. The following reasons speak for this.
Table of contents
1. which are the attractive construction companies for sale?
Basics webinar presented by Nils Koerber
Company sale (M&A) without risk and loss of value
2. a shortage of skilled workers is putting the brakes on the economy
3. who would buy a construction company?
4. how are prices developing?
5. what makes it difficult to sell a construction company?
1. which are the attractive construction companies for sale?
Attractive construction companies did their homework: Because these companies have a special unique selling proposition. This can be special know-how with which they successfully occupy niche markets.
Well-established companies in the attractive conurbations and economic centres are also in demand. Many companies are looking for reinforcement in the area of digitalisation of construction planning or in the area of new industrial process technologies.
Technologies that streamline and accelerate processes and make them more cost-effective are also interesting. Buyers tend to value these companies more highly.
| Tip1: Create a unique selling proposition that makes you stand out in the market. |
2. a shortage of skilled workers is putting the brakes on the economy
Many companies have well-filled order books well into the coming year. But good staff is currently scarce in the construction industry. Due to the good economic situation, there are hardly any workers left for the German market in Eastern Europe either.
The shortage of skilled workers is thus a growing problem. As a result, many companies today no longer know how to manage the work. For this reason the purchase of a construction company the opportunity to take over well-established teams.
A solid employee base is accordingly one of the essential factors motivating companies to take over construction firms. However, the employees of smaller companies in particular are often comparatively old, which makes a planned succession more difficult.
Before you start your Sell company company bosses should do everything they canThe aim is to rejuvenate the workforce in a targeted manner.
| Tip 2: Create a solid employee base. |
Shortage of entrepreneurs in construction clearly noticeable
The heads of family-run construction companies tend to be older. Thus, the shortage of skilled workers is already leading to a shortage of entrepreneurs. This is because young and well-trained construction specialists prefer to work as employees rather than follow entrepreneurial ambitions. The shortage of skilled workers in the sector is now being followed by a shortage of entrepreneurs.
In 2017, the chamber district of the Osnabrück Chamber of Commerce and Industry more than 800 medium-sized construction companies in front of the Company sale. According to our regional study on business succession, this number will increase by more than 60 percent to over 1,300 companies by 2022.
We estimate that significantly less than half of the companies facing generational change will pass in the family. As a result, the number of construction companies for sale is likely to increase significantly in the coming years.
3. who would buy a construction company?
Consider the following buyer groups for the sale of construction companies:
- Construction groups: As strategic investors, large construction groups are constantly on the lookout for acquisitions. Often, only medium-sized construction companies with a turnover of five or ten million are considered.
- Medium-sized construction companies: Especially when selling a smaller construction company, it is worthwhile to approach the many established medium-sized companies. After all, it is comparatively easy for these companies to open up new regions or expand their product range through acquisitions. Often the trigger for the search is also a contract in a new region. As a result, many SMEs subsequently search specifically for construction companies for sale.
- Financial investors: Private equity investors or family offices are also on the lookout for construction companies for sale. Many of these investors often hold shares in construction companies, which they gradually add smaller companies to as part of a buy-and-build strategy.
Thus, the construction sector is experiencing the consolidation of small and medium-sized enterprises familiar from the skilled trades and other sectors. - Management buy-ins (MBIs): Construction companies with a turnover of between two and five million euros are particularly interesting for MBIs with experience in the sector. This is because many of these MBIs often successfully finance such company successions with their equity capital. f
| Tip 3:Get a clear picture of demand |
4. how are prices developing?
Times are still good for the sale of construction companies. This is because the medium-sized companies in particular are achieving good prices in a long-term comparison.
However, the construction industry is more strongly influenced by the economy than other industries. Economic downturns, rising construction interest rates or even just a decline in incoming orders worsen sales prospects. As a result, company valuations often decrease as well.
| Tip 4:Keep an eye on the economy and its impact on company value |
5. what makes it difficult to sell a construction company?
Essential for a successful Company sale are sustainably generated profits and a sustainable business concept with clear unique selling points. However, the following points make the sale of construction companies more difficult:
| Tip 5:Identify risks and take precautions |
Lack of a second level of management
Industry observers expect further consolidation, especially for small and medium-sized construction companies. This is because family businesses with turnovers in the single-digit millions often have another challenge to overcome.
The structures of these companies are often tailored to the owner. Many of these companies simply lack a second level of management to keep the company going without the boss.
The establishment of a second management level or the hiring of a non-family managing director is advisable here.
High average age of employees and machines
Dependencies on a few major customers, an outdated machine park or a higher average age of the workforce make the sale of construction companies even more difficult.
Geographical location influences investment
Particularly when selling construction companies or craft businesses, we find that geographical location plays a major role for acquirers. Larger investors often look for locations with good transport links. Ideally, these are close to conurbations and allow projects up to 100 kilometres away.
Unfavourable peripheral, border and island locations quickly have an impact on the success of the project or the achievable purchase price. MBIs that have a special personal relationship to the region often come into play here.
For MBIs, the geographical location of the company plays an even greater role. After all, very few individual prospective buyers want to move together with their family for a business purchase. As a result, the commuting time is usually reduced to a maximum of one hour.
Inadequately prepared transaction process
Good preparation of the handover process always pays off for the seller. This is because prospective buyers expect meaningful documents that present the business model and a resilient and, above all, adjusted set of figures before an initial meeting. That is why an expert should Calculate enterprise value and, if necessary, have it appraised by an auditor.
Particularly in the craft and construction sector, we are currently noticing insufficient focus on the part of the buyer side. This has a lot to do with the currently good construction industry.
Because of the many operational requirements of current construction projects, strategic growth projects quickly fall out of focus, especially for medium-sized construction companies.
As a result, the intervals between the individual steps are sometimes extended by several weeks and thus the total duration of the projects is significantly longer.
Are you wondering whether it might be worthwhile for you to sell your construction company? Then feel free to take advantage of our business sale advice or call me now on 05461 80 92 840.
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Interview: Preparing the succession within the family well
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Photo: ©11066063 / pixabay (CCO)
The focus of investors is clearly on Construction companies in conurbations or in attractive economic centres. Clear Unique selling points or specialisation, special technological competence in project management or the digitalisation of construction planning make construction companies for sale more interesting for investors. Often sought after at present are also Specialists for broadband expansion.
Construction groups and smaller medium-sized companies are classic strategic investors. As part of their growth strategy, these are often looking for construction companies for sale as new locations. Other interest groups are traditional financial investors or also industry-experienced Management buy-in-candidates. The latter are particularly interesting for family-run construction companies that are too small for financial investors and strategists due to their turnover size.
1. dependence on a few large customers and low-return business models.
2. dependence of management on individuals. Lack of a second level of management.
3. high age of employees, machinery and equipment.
4. an insufficiently prepared transaction process.
5. inconveniently located sites.
