Maximizing Growth Opportunities in the E&C Industry Through Strategic M&A
Over the past few years, our analysis shows that the engineering and construction (E&C) industry has grown steadily by about 5 percent per annum. This number is expected to accelerate to 6 to 7 percent by 2030 in response to a confluence of tailwinds, including continued growth in emerging markets, such as Asia and the Middle East; government infrastructure programs and megaprojects in Europe and North America; pent-up demand for housing; and the need for critical infrastructure in high-growth areas, such as data centers and renewable energy.
One instrument to capture this growth is M&A, which has surged since the outbreak of COVID-19. In the post-pandemic era, the average number of deals per year increased by approximately 60 percent—from approximately 1,100 transactions between 2014 and 2019 to about 1,800 transactions between 2020 and 2024—with more than 80 percent of deal activity concentrated in Europe and North America. Furthermore, reported deal value grew by about 55 percent during the same period, and our projections indicate continued momentum in M&A in E&C.
How M&A can help capture growth opportunities
E&C firms have historically used M&A as an instrument to meet specialization and regional expansion needs, and recent data suggest it has become increasingly relevant in the past few years. As in other sectors, market share consolidation and cost-synergy benefits have been a major driver of M&A, but E&C companies have also used M&A to expand their service-offering portfolios and to enter adjacent markets with acquisitions that offer in-house expertise or strong positioning in desired segments.
This trend will continue over the next decade. M&A will be a critical enabler for E&C firms to transform their business models and capture growth opportunities in regions and end markets where they are concentrated. As the sector benefits from a series of major tailwinds, industry players will leverage M&A to capitalize on them through a variety of investment theses—from entering high-growth markets to gaining new capabilities, technology, expertise, and service offerings that would otherwise be hard to build in-house from scratch.
Key Industry Trends
- Skilled-labor shortages
- Decarbonization and the energy transition
- AI, automation, and data analytics
- Modular and prefabricated construction
- Smart infrastructure and electric-vehicle (EV) charging
- Circular economy and waste reduction
Conclusion
As the E&C industry continues to grow and evolve, strategic M&A will play a crucial role in helping companies capture new opportunities, expand their capabilities, and enter high-growth markets. By following a systematic approach to M&A, including setting a clear M&A blueprint, evaluating targets beyond traditional due diligence, and executing integrations with discipline and focus on cultural alignment, E&C firms can maximize the potential for success in a competitive and dynamic landscape.
FAQ
What are the key drivers of growth in the E&C industry?
Key drivers of growth in the E&C industry include continued growth in emerging markets, government infrastructure programs, pent-up demand for housing, and the need for critical infrastructure in high-growth areas such as data centers and renewable energy.
How can E&C companies leverage M&A for growth?
E&C companies can leverage M&A to meet specialization and regional expansion needs, expand service-offering portfolios, enter adjacent markets, and gain new capabilities, technology, expertise, and service offerings.
What are the challenges of M&A in the E&C industry?
Challenges of M&A in the E&C industry include integration risks, high valuation expectations, and the complexity of estimating revenue and cost synergies.
