Construction deal volumes fall since the Pandemic began – but quality of deals improves

The Pandemic has impacted UK construction in many ways.

It is generally thought that the construction sector has fared better than many parts of retail, hospitality and leisure, and that many construction sites have been continually open except for the first few weeks of the UK Lockdown. This has been supported by anecdotal data from the majority of our MHA clients.

Recent analysis of UK construction M&A deals based on the year before and after the start of the first lockdown show that whilst the Pandemic has been very bad for volumes in the UK Construction sector, the deals that are being done after the impact of Covid 19 include a higher level of goodwill.


The analysis has been based on MarketIQ data for reported deals of UK Construction companies (as per their SIC Codes) for the two years ended 31 March 2021; and the impact on deal volumes, average deal size and average levels of goodwill have been calculated.

Since the Pandemic began, UK Construction reported M&A deal volumes have decreased 85% and the average deal size has fallen 35% to £12.3m. The average size of the target companies being acquired reported net assets of around £4m which means that, typically, goodwill represented over 2/3rds of the actual deal size.

Goodwill is measured as the difference between the assets being acquired and the value of the deal and represents that are not value on the balance sheet of the acquired company, such as the value of its brand, its contracts, its intellectual property, its intangible assets and future profitability.

The observation that the level of average goodwill is increasing suggests a couple of factors:

  • Buyers are being more choosey – their due diligence process during the deal process may identify problems and risks at the target company which mean they are unable to complete a deal acceptable to the sellers.
  • Buyers only want to acquire companies that have a niche trading position and during the Pandemic there has been a “flight to quality” – only strong businesses are being sought after and so only deals with these better quality, niche target companies are completing.

(Or it may simply be that only the better quality deals are being reported – in fact only about 1 in 8 deals were reported – but there is no real evidence of this.)

Five tips

So if you are the owner of a UK Construction company how do you increase your levels of goodwill and hence your attractiveness to a buyer? In short here are five quick tips:

  • Increase your quality of profits: in particular your recurring profits which can be identified by your ongoing contracts, the length of time remaining on those contracts and to a lesser extent the longevity of your recurring customer base;
  • Increase your pipeline and order book: this gives the buyer greater confidence in the future;
  • Protect your intellectual property: with patents, systems or know-how;
  • Protect your reputation: especially for quality, health and safety and customer service; and
  • Maintain excellent Management Information: to demonstrate that the detailed financial records and decision making evidence that you are a well run company.

As we start to come out of the lockdowns and return to the “new normality”, it will be interesting to see how quickly construction deal volumes return or whether the focus on quality will continue for more years.

Contact us

For further information or advice, please contact our Corporate Finance Partner, Steve Plaskitt, on
0191 226 8352 or email