Investment Firms Actively Looking to Fund Companies in the Construction and Construction Products Industries
Why the demand? The investors are very clear about the reason and it inculdes spray foam insulation.
Chestnut Hill, MA - September 29, 2009 - Yes, investment firms are actively looking to fund companies in the construction and construction products industries. According to Pieter VanderWerf, President of Building Works, Inc., “We are aware of several billion dollars in investor funds expressly earmarked for construction-related companies. And the investors are very clear about the reason. Because they think the industry has hit bottom, certain select investors view construction as a growth industry for the next four to five years.”
The greatest interest is in buying into “middle market” companies—companies with 30-200 million dollars in sales. Investors also look for the company to have positive profits and cash flow (at least 10 percent of sales). “There are a few private equity firms that invest in so-called distressed companies, but most investors still prefer sound companies with some profits and capable management,” says VanderWerf. Most investment companies do not want to get involved in day-to-day management or have to replace the top people, so they strongly prefer companies that have good senior personnel already.
Companies that meet this profile are said to look very attractive to investors indeed. The problem can be making contact with the right investors, and then convincing them that one’s company is a solid investment. The investment industry still works largely by personal contact, relying heavily on referral agents like VanderWerf to find promising companies and introduce them.
Taking an investment means selling at least a partial stake in one’s company, which can make great sense for some but not for all. Most of the companies that follow this route fall into one of a few categories. Some have owners who are looking to exit the business in the next few years, usually because they are older and have no one else to take it over. Others have ambitious growth plans that require substantial capital to fund. For example, they might be trying to take advantage of the down market by buying competitors or complementary product lines. If they use the investment funds to grow the company, they find themselves much better off because a reduced stake in a larger company can be worth much more than a large stake of a smaller business. A third group is the basically sound company forced to cut back by the recession. Once a company has cut the fat, it may make sense to sell a share of the business to get money that will help preserve the muscle and bone of the operation. This keeps it healthy and in better shape to take advantage of the recovery.
If a company has an attractive profile and is motivated to take investment, it still has to reach interested investors. But the investment industry relies heavily on personal contact and referrals. Without help, there is a strong risk of a company not finding any investment firms very interested in a corporation with its particular characteristics. The result is that one receives only low offers or none at all. This has led many companies to work with referral agents who have established contact with many different investor organizations and understand each one’s preferences.
For construction and construction products companies, money is starting to flow again. Regardless of the reasons for taking investment, the good news is that the funds are there if you know how to find them.
Building Works, LLC has offices in Massachusetts and Pennsylvania and actively assists companies to find private funding. They work actively with several private equity firms who are looking to make acquisitions in the construction products and/or spray foam industry. If you represent a company that fits the profile above, and has interest in seeking additional funding or acquisition, contact Pieter VanderWerf, of Building Works, Inc. today.
Building Works, Inc.
167 Reservoir Road
Chestnut Hill, MA 02467