European Construction Monitor

Construction markets throughout Europe are in recovery resulting in an increasing interest of private equity firms. Yet, the construction industry is facing supply chain pressure mainly in Northern European construction markets. These are the main trends reported in the fifth edition of the European Construction Monitor, which comprises the latest trends and issues in merger & acquisitions (M&A) in the European construction industry.

Since 2013, the Deloitte Real Estate team has increasingly reported signs of recovery in most of the local European construction markets. Market recovery is also reflected in the drop of insolvencies in the construction sector. Although the number of deals in the European construction market has been relatively stable over the last years, the share of cross-border deals has increased to approximately 55%. This reflects the ongoing trend of European construction companies striving for international growth. Further analysis of the cross-border deals shows US-based private equity and Real Estate management companies to be the most dominant inbound intercontinental bidders.

A second trend in the recovering European construction market is the pricing pressure on labor and materials. In 2014, supply chain pressure was most evident in the UK and Ireland. In 2015, signs of supply chain pressure were picked up in Germany and the Netherlands as well. Anticipating increased labor costs and tougher competition, construction companies may seek to integrate their supply chain and might even abandon their model of subcontracted labor for a model of traditional employed labor. In Germany the strategy of supply chain integration is evident in the M&A activity.

The European Construction Monitor analyses the market trends in the European construction sector by looking back on last year’s M&A activity and market developments. Deloitte has combined these analyses with the in-depth, local knowledge of its European member firms on M&A, real estate, construction and infrastructure to produce this outlook.