Industry Insights: Building Products & Services – 2023
Mezzo’s Building Products & Services Industry Insights examines evolving M&A trends and valuation dynamics across the sector, as companies navigate shifting demand, rising interest rates, and continued divergence between new construction and renovation activity.
The building products and services industry is a crucial component of the construction and renovation sector, and it encompasses a wide range of products (e.g. materials, flooring, insulation, windows) and services (e.g. product installation, electrical, plumbing, HVAC, fire protection). The industry has experienced volatility in recent years, driven by factors such as COVID lockdowns, supply chain issues, and rising interest rates. In this report, we will be taking a closer look at the current trends, challenges, and opportunities in this sector.
Market Trends & Valuations
Overall, valuations in the building products and services segments have softened since 2021 and have been impacted by softening demand and an uncertain outlook after record growth across the segments in late 2020, 2021, and the first half of 2022. Although housing inventory continues to lag behind, fundamentals around new construction have softened since summer 2022. Businesses more reliant on new construction (re: Builders) have been hit the hardest on valuation, while operators focused on remodel and renovation remain bullish of continued activity in 2023. The average EV/EBITDA valuation multiples for building services are currently trading at 11.55x, a 9.6% premium over building products companies, which are trading at 10.55x.
Mezzo was previously known as Mazzone & Associates.