Built Environment: Opportunities for mid-market PE in Construction Tech
“The construction sector is crucial to the world economy, contributing 9% to EU GDP alone. But despite significant investment and the development of new technologies, globally, the sector still remains inefficient and unproductive” (FT Future of Construction Summit, 23 May 2019).
Are current stresses and a subsequent recovery in underlying markets going to drive adoption of construction tech, or is it still an answer waiting for a question? Below, we review some of the key issues and questions facing mid-market PE considering investment in the sector;
- What segments does the underlying tech focus on (e.g. residential, commercial, infrastructure; back-office or on-site)? And what functional elements? Is it pro-cyclical (e.g. with a focus on project management/ERP for new-build), or counter-cyclical (e.g. lifetime building or tenant/revenue management, ongoing certification).
- What size of end-users does the tech focus on, and how developed are the sales channels for these end-users? How does the company benefit from, and overcome the inertia in tech adoption/switching in the sector? Is the sales force tech-led or construction-led?
- What underlying platforms are used for the tech, and how do these tie-in with software and systems currently used by construction firms (e.g. Sage, Microsoft)?
- How strong are relationships with underlying platform providers, what lead generation do these relationships provide, can the target company position itself as a key construction specialist with the platform provider?
- How practical are proposed expansion plans (e.g. by geography, sub-sector, size of end-user, functionality)? How developed is the tech roadmap, and how does this map onto likely future requirements?
Armstrong has answered these questions for many investors over the past decade, most recently for Westbridge’s investment in Eque2. For a more detailed discussion please contact either;
Peter CooksonEmail Peter
Mike CallowEmail Mike