Building Products Market Update – March 2025

Financial Buyers Propel Building Products Market M&A in 2024 Amid Sector Strength

Capstone’s latest Building Products Sector Update reports that robust construction activity throughout 2024 helped keep demand for Building Products market merger & acquisitions (M&A) elevated, particularly as macroeconomic pressures moderated and project financing conditions continued to improve. Additional improvements to the inflationary environment alongside interest rate cuts will likely continue spurring deal activity across the Building Products market into 2025.

Notably, construction spending continued to accelerate in 2024 despite project delays and muted construction activity in the Residential and Commercial end markets as elevated interest rates deterred new project financing and homebuying. Healthy construction activity and elevated project backlog levels in the Infrastructure, Manufacturing, Power, and Datacenter verticals counteracted these macroeconomic pressures. Of note, federal support for manufacturing initiatives, clean energy investments, and infrastructure upgrades through the Infrastructure Investment and Jobs Act (IIJA), Inflation Reduction Act (IRA), and the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act kept these project backlog levels elevated and underpinned construction spending growth in the U.S. in 2024. As technology requirements and the use of advanced technology, like artificial intelligence, continues to grow, demand for data center construction is expected to remain elevated in the near-term. The Building Products sector is expected to benefit from further interest rate cuts that will likely reignite residential and commercial construction activity amid pent up demand for affordable housing and cheaper project financing.

Building Products market M&A activity accelerated for the second consecutive year in 2024 amid healthy construction activity and interest rate cuts, rising 22.5% year-over-year (YOY) with 392 transactions announced or closed. The easing cost of capital environment invigorated financial buyers, whose increased M&A interest in building products businesses underpinned elevated activity across the sector in 2024. Financial buyer volumes accelerated 45.4% YOY across the Building Products sector in 2024. Of note, sponsor-backed transactions saw the largest gains, rising 59.5% YOY with 118 deals announced or closed as private equity groups bolstered existing assets in an effort to capitalize on sector tailwinds driving healthy construction activity. Targets with strong customer portfolios and scalable growth potential continued capture buyer interest and strong valuations in 2024, especially those serving clients with elevated project backlog levels. Between 2023 and 2024, Building Products sector M&A multiples averaged a robust 1.6x EV/Revenue and 9.7x EV/EBITDA. Capstone anticipates that sector M&A conditions will likely remain attractive as interest rates continue to fall and elevated construction activity persists in 2025.

Also included in this report:

• An analysis on the Lumber market and related deal activity in 2024.
• A progress update on Home Depot’s acquisition of SRS Distribution (June 2024, $18.3 billion, or 1.8x EV/Revenue and 16.6x EV/EBITDA).
• A look into the building products growth capital environment and highlights on notable transactions.

Capstone Partners’ Building Products & Construction Services Investment Banking Team provides M&A, capital formation, and financial advisory services to the owners of middle market businesses in the building products & construction services industries. Our team partners with leading mid-to-large sized building and construction businesses that serve growing end-markets. We ultimately look to work with companies that manufacture highly engineered products and differentiated services with an entrenched competitive position.

For more information on the Building Products Market Update featured in this report or to speak with one of our Buildings Products & Construction Services M&A Team members about how to grow, value, and/or sell your company, we are here to help. Contact us today to start a conversation.