European construction sector so interesting?
A private equity perspective. Construction sector in CE – a private equity perspective
These materials and the information contained herein are provided by Deloitte Business Consulting S.A. and are intended to provide general information on a particular subject or subjects and are not an exhaustive treatment of such subject(s).
Accordingly, the information in these materials is not intended to constitute accounting, tax, legal, investment, consulting, or other professional advice or services. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business. Before making any decision or taking any action that might affect your personal finances or business, you should consult a qualified professional adviser. These materials and the information contained therein are provided as is, and Deloitte Business Consulting S.A. makes no express or implied representations or warranties regarding these materials or the information contained therein. Without limiting the foregoing, Deloitte Business Consulting S.A. does not warrant that the materials or information contained therein will be error-free or will meet any particular criteria of performance or quality. Deloitte Business Consulting S.A. expressly disclaims all implied warranties, including, without limitation, warranties of merchantability, title, fitness for a particular purpose, noninfringement, compatibility, security, and accuracy.
Your use of these materials and information contained therein is at your own risk, and you assume full responsibility and risk of loss resulting from the use thereof. Deloitte Business
Consulting S.A. will not be liable for any special, indirect, incidental, consequential, or punitive damages or any other damages whatsoever, whether in an action of contract, statute, tort (including, without limitation, negligence), or otherwise, relating to the use of these materials or the information contained therein.
Construction sector in CE – a private equity perspective
Analysis of market drivers indicates that the growth prospects for CE construction industry are promising.
All types of targets in the construction sector need to consider specific success factors and will face certain risks.
• Companies focusing on residential segment construction will continue to benefit from the deficit of modern apartments in CE (constructed after 1989) as well as the development of the mortgage loans market. • Targets involved in the commercial building segment will enjoy high demand for modern office and retail space; growing numbers of tourists will fuel the growth of the hotel segment and the dynamic growth of transit and trade between Eastern and
Western Europe will boost the demand for industrial and logistics facilities.
• Companies involved in Civil Engineering will benefit from EU funding flows and PPP projects related to largely underdeveloped civil infrastructure in CE (roads, highways, airports, railroad transport).
For segment specific market drivers and issues please see pages 2 – 3.
• Real estate developers will face rising costs of materials and services, growing land prices and building permit issues.
• Construction companies will have to cope with cash flow instability, growing costs of materials and labour as well as the threat of underbids in order to remain competitive.
• Building products manufacturers will have to secure access to cheap raw materials and energy sources along with the necessity to deal with environmental costs.
For analysis of Key Success Factors and risks specific for respective types of targets please see pages 4 – 5.
Private Equity can play a consolidation game in several highly fragmented segments of the CE construction market.