Year-end review

Hard to believe it’s December already. Another year coming to a close, and what a year it’s been. The construction materials industry might have proved its mettle in 2020, but it proved its might in 2021, notching success after success in a year unlike any other.

Building on the momentum established in Q4-2020, the industry began this year with widespread optimism and a belief that organic growth would continue.  That certainly proved to be the case, as virtually every corner of the industry has seen volumes, revenues, and earnings rise, with full-year EBITDA growth forecast to top 12%, on average, in 2021.

But it was an explosion of acquisition and development activity that truly revealed the positive sentiment pervading the industry. Of course, the large transformative deals grabbed all the headlines, including Holcim’s purchase of Firestone Building Products, Martin Marietta’s acquisition of the Lehigh-Hanson west coast business, and Vulcan’s buyout of U.S. Concrete.

Still, the year’s acquisition and development activity was much broader than these few deals. Arcosa, CRH, and Knife River quietly deployed a collective $2+ billion this year, skillfully executing multiple platform acquisitions and/or bolt-on transactions. Smyrna Ready Mix, Luck Stone, and Construction Partners were among the many mid-sized players that completed acquisitions in 2021, expanding their footprints, increasing vertical integration, and strengthening their already formidable positions.

2021 also became the year of the greenfield. Continuing consolidation and double-digit acquisition multiples became the catalyst for a flurry of greenfield activity, with new quarry development reaching previously unheard-of levels. Even now, dozens of new projects are under construction or in development across the nation, with Summit accounting for as many as ten of those.

And then there’s the infrastructure bill. Long overdue and desperately needed, this bipartisan commitment to restore the nation’s critical infrastructure ensures the industry will flourish for the foreseeable future.

Of course, a bounty this plentiful usually attracts attention, and this has been no exception. Investor interest in construction materials has never been higher. Private equity groups, family offices, independent sponsors, and companies large and small are all actively hunting for opportunities to invest a seemingly limitless supply of capital in the sector. For incumbents seeking an exit, this expansive universe of buyers and investors may deliver the strongest seller’s market in a generation.

As we leave 2021 behind with record earnings, a booming economy, unprecedented levels of public funding, and an ocean of capital awash in the industry, we’re reminded of the many blessings the year has brought us. And as we look forward to the new year with the wind at our backs, we’d like to wish you and your families a safe and happy holiday season and a prosperous new year.

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About the author:

Gregory DaykoGregory Dayko is founder of Inlet Capital Group and is responsible for its M&A and strategy consulting practices. He can be reached at gdayko@inletcapitalgroup.com or 561-529-5569.

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