10 Reasons to Buy a Construction Company
Updated: 36 minutes ago
Why Would Anyone Want to Buy a Construction Company?
If you are thinking of business for sale in Ontario, you may want to consider buying a construction business for sale. However, running a company requires certain skills, especially if it's a construction company. You may want to consider mergers and acquisitions when trying to grow your company. This is the mechanism by which you either merge your business into one that already exists to create a new and bigger business – a merger – or buy out another business and incorporate it into your own business – an acquisition.
Mergers and acquisitions are especially good ways to grow construction companies, especially given how the construction market operates and the impact that Covid-19 has had on the market.
Following the pandemic, many construction projects were put on hold, some even being put off indefinitely. There were also many shortages in skilled workers and raw materials needed for construction. This, combined with project delays and cancellations, meant that many construction companies struggled to keep afloat.
As soon as the economy picked up again, there was a marked increase in construction company acquisitions. Those companies that had managed to come out of the pandemic strong were able to buy off the smaller or weaker companies. Buying other construction companies was a great business move for construction company owners.
10 Reasons to Buy a Construction Company
In this article, we will talk about growing a construction company by buying an already existing one. You might wonder why anyone wants to buy or acquire a construction company. Well, there are various reasons why this might be a good business move for a business owner.
Not only can it lead to growth and expansion, but it also helps in accumulating assets and consolidating the competition in an area. Let's take a closer look at ten reasons why anyone might want to buy a construction company:
Growth is usually the number one objective for most companies and businesses. As the owner of a construction company with growth as one of your key objectives, an acquisition is one of the fastest ways to achieve it. Regarding the construction companies' market, over a hundred companies compete in even the smallest areas.
With such high competition, growth can be quite difficult without an acquisition. By buying a construction company, you can use already existing resources, work on new projects, increase your workforce, and more with just one move. Acquisitions are one of the most efficient ways to grow your construction company, especially in a market with so much competition.
If you own a general contractor company, there must have been many instances in which you had to work with other companies, such as HVAC companies or electrical companies, in order to get a project done. If you were to buy HVAC or electrical or plumbing or building supplies company, you would not need to work with outside companies for certain projects, which could greatly improve your profits. Diversification is a key objective for construction companies.
Many clients prefer it when one company can handle most, if not all, aspects of a construction job. By acquiring other companies in the construction field, you can make use of the market opportunities in different segments of the field. Diversification also helps you better understand how the entire field works and increase your customer base.
3. Organizational Development
While any construction company would be lost without its field workers and construction workers, it would be amiss not to acknowledge the importance of managers and higher leadership. There are two ways in which buying a construction company would help an already existing company with its organizational development. In the first case, a company might have more managers than are needed.
Instead of letting go of these qualified managers, an acquisition can help create roles for them to take on while helping your company grow. The second case would be if a construction company had fewer than needed managerial leaders. Acquiring another company that has great managers would help you secure management from the company you buy.
4. Workforce Enhancement
When a market is very concentrated, and there are a lot of competing companies, it can be very difficult to find reliable, well-trained, and qualified workers. Such is the case for the construction market. With hundreds of new companies cropping up every year, there is a serious shortage of construction workers. It is also important to note that a construction company relies heavily on its construction workers as they are the ones that help build the company's reputation. It is their direct work that clients see and interact with.
As such, if you are the owner of a construction company and are looking to grow or enhance your workforce, you may have difficulty finding workers willing to leave their jobs to start new jobs with you. Buying a construction company that already exists is a viable way for you to enhance your workforce.
5. Customer Demand
It can be difficult to find good customers and clients to work for. Once you do find a client, it is very important to hold onto them. However, if your construction company is unable to meet all of the client's demands, the client has many other companies to turn to, leading to major lost opportunities for you. As a construction company that is competing with many other companies, it is important to be able to meet customer demands.
Similarly to how we talked about diversification, buying a construction company to take under your own company can help you increase the kinds of services you can provide and add on additional skills and resources. An acquisition is a very viable strategy for securing the resources, skills, and ability to provide services that your customers might need. This will also reduce the need for your company to share projects with other companies in the market, helping you secure customers and customer loyalty.
6. Geographical Expansion
Geographical expansion through acquisition is a great way to expand your company into new areas without having to build up the company from scratch. If you own a construction company that operates in just one area, there is the risk of a downturn in the area, resulting in a loss of business, projects, and revenue. Expanding to different locations reduces this risk. However, starting from scratch in a new area and competing with established companies can be very difficult and might even hinder your success.
In such an instance, buying an already established company with an existing customer base in the new area would be a good idea. This makes entry into a new market much quicker and increases the chances of successful expansion when you get instant participation. The existing company will also have more of a hook in how construction works in that area and better understand what clients there are looking for.
7. Asset Accumulation
Post Covid-19, there was a shortage of skilled workers, construction resources, and other assets. To grow your construction company, you must constantly acquire new assets and increase your holdings. But how do you do this when there are no assets to be bought since they are all already owned by competing companies?
The only option available is to buy one of those companies. Before making any acquisition deals, it is very important to correctly evaluate the assets owned by the company you are buying. You could fall into a major loss if they do not have enough assets to make the acquisition worthwhile. However, if a company for sale has a large stock of accumulated assets, it can be valuable to your company. Overall, when it comes to asset accumulation, it can be a great idea to buy a construction company.
8. Customer Base
Earlier in the article, we have spoken briefly about increasing the customer base and meeting client demands. However, let's discuss this factor now in a bit more detail. As a company working in the service industry, there is hardly anything as important as having a large and loyal customer base. Whether you want to keep your existing customers happy and satisfied, gain new customers in a different market segment or a different geographical location, or pull in customers from competing companies, all of these things can be achieved by acquiring another company.
When you buy a construction company, you would have to continue their existing projects with their existing customers, who will then become incorporated into your own customer base, whether that company was located in a different geographical location or just working in a different market segment.
9. Competition Consolidation
A market like the construction industry has a lot of competition. There are usually about a hundred different companies for customers to choose from in even a small city or town. As such, it can be very difficult to secure projects and keep up with the competition while still making a profit. Instead of a company setting unreasonably low rates that they can't keep up with, buying a competing company is a much better choice.
Not only does this provide you with a whole host of advantages for your company, but it also reduces the market competition that you need to keep up with. You can also benefit from reduced overhead costs when you combine the acquired company with your own.
10. Vertical Integration
Vertical integration can be considered a defensive acquisition. If you own a construction company and buy a company that supplies building material, construction material, hvac supplies, plumbing supplies, electrical supplies or certain other raw materials, you have guaranteed access to those raw materials and won't have to suffer through market
shortages. In another instance, if you buy a company of clients, you always have clients to work jobs for. In the long run, vertical integration can be a great move for growing and establishing your construction company.
The Bottom Line
The construction industry is rapidly growing, and there is increasing demand for construction work. As such, there is a very high number of companies in the market, which leaves a lot of competition.
If you are the owner of a construction company, you need to keep up with market competition and ensure your company grows, has enough workforce, a sound and reliable customer base, enough accumulated assets, and more. All of this can be done by buying another construction company. An acquisition can be a great business move, and when done right, it can really help you solidify your company as one of the biggest and most impactful companies in the market in a specific area.
N3 Business Advisors - Construction Industry Mergers & Acquisition Advisors
If you are the owner of a construction company – be it a general contractor company, an HVAC company, mechanical, electrical, or building material supplier – and are looking to take part in a merger or acquisition, N3 Business Advisors can help you in reaching that goal.
Whether you need help with company growth, valuing your existing construction company, acquiring, merging, or any other goal, we have a qualified and diverse team ready to help. With over 30 years of experience in the industry, our team of lawyers, valuation experts, financial and business advisors, and other professionals can help you cover all the bases.
If you are looking for a construction business for sale in Toronto or business for sale in Ontario, you can get in touch with N3 Business Advisors now to schedule a confidential consultation. We along with our team of professional continue to maintain an ongoing inventory of construction companies for sale
At the same time, if you considering to sell business in the Construction industry, please check our hand selected pool of buyers by clicking the link here.
Visit our website for more information, or call us at 647 967 4222. You're just one step away from getting your construction company to where you want it to be! We are based in Ontario, and our office is at 55 Village Centre Place, Suite 200, Mississauga, ON L4Z 1V9.