Window of Emerging Opportunity
The tide is turning in building products M&A in 2024, offering investors attractive end market dynamics after 18+ months of uncertainty (2H 2022 – 2023). Though the adjustment to higher interest rates has taken time, the industry has found its footing as the calendar turns to a new year. While there are differing growth rates depending on the market, certain product categories are demonstrating more resilience than others. The potential for the Federal Reserve to lower rates in 2024 could boost residential construction, and fuel M&A activity in the building products space.
Strategic and financial buyers will be well positioned to exploit these end-market trends to identify M&A opportunities.
| Low Inventory: The magnitude of housing undersupply is debated, but most forecasters believe the national housing deficit is at least 1.5 million units, setting the stage for sustained longer-term new construction growth. |
| Aging Demographics: Millennials, a large and growing demographic segment, are entering prime homeownership years, driving demand for new housing units. |
| Mortgage Rates: While interest rates have fluctuated, historically low long-term averages suggest rates may stabilize and potentially even decrease in the future, making homeownership more accessible. |
Despite a near-record level of ‘work in progress’ entering 2023, multi-family starts still grew 7% higher in 2024, reaching approximately 1 million units underway. The short-term slowdown in new starts reflects the absorption of existing projects. In the long term, the multi-family sector is expected to benefit from continued urbanization trends and a growing rental market.
Buyers that are comfortable underwriting new construction opportunities will find ample opportunities across manufacturing, distribution and residential services to deploy capital.
A Time for M&A
This period of transition presents a unique opportunity for M&A activity. We have observed strategic acquisitions by companies expanding into new product categories and geographies in their search for growth. Private equity firms with significant committed funds are also ready to invest. Sellers should be prepared for a potentially crowded M&A landscape later in the year, which could be exacerbated by lower interest rates. Early preparation, including financial housekeeping and due diligence, will be crucial for capitalizing on the uptick in M&A activity.
| If you are a strategic or financial investor interested in exploring M&A opportunities in the building products sector, please contact the Lincoln building products team below to discuss your specific goals and how we can assist you in achieving them. |
Contributors
Meet Professionals with Complementary Expertise in Building Products
I strive to deliver value-added advice, leveraging deep industry knowledge and extensive industry relationships.
Guillaume Suizdak
Managing Director & Co-Head of Industrials, Europe
Paris
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