Trends and challenges in the construction industry

What significance do the current trends have for the construction industry?

The German construction and construction supply industry is facing perhaps the biggest upheavals in its history. While value creation, distribution channels and processes have barely changed in the last 100 years, several trends are now leading to a pressure to transform that is akin to a slowed-down asteroid impact in the industry. Although the shortage of skilled workers, climate change and the digitalisation of the building envelope are not new developments, their full impact will be felt in the 2020s. A key driver of these developments is the convergence of trades, i.e. the merging of individual trades in the building trade. This is becoming increasingly necessary as the complexity of construction processes on the one hand and the complexity of buildings and therefore installations and products on the other are constantly increasing.

What challenges do the craft trade and manufacturers face?

The already strong pressure to consolidate in the industry will become even more noticeable as a result of the ever-increasing demands placed on trade businesses. As construction projects are becoming ever larger and more complex, the proportion of simpler installations is decreasing accordingly. Increasingly more extensive skills are required, particularly in the trades, which in most cases can only be provided by larger players. For manufacturers, this means that the customer environment is changing: from a very fragmented customer landscape with many "important" customers to a more concentrated customer landscape with fewer, but higher-volume customers. This results in new requirements along the value chain. Market cultivation must be thought of more in terms of push & pull via omni-channel approaches and price protection, service is becoming increasingly important, development cooperations and new product portfolios are required.

What role does the topic of "mergers & acquisitions" play in this?

In order to be able to respond to the aforementioned changes, we believe it is necessary to significantly reduce complexity in companies and to fundamentally scrutinise the requirements for the business model of the future. This also includes M&A measures. Many of the required skills take a long time to develop, and then there is the extensive market development. There are many specialists on the market who can be bought in to strategically supplement your own profile. Less than a third of manufacturers currently utilise M&A. 36% of the companies we surveyed that have used M&A measures in the past stated that the integration did not work, while 27% did not achieve the intended effects of the takeover. It is therefore essential to derive clear M&A objectives from the strategy and to have a structured process that weighs up the opportunities and risks of the transaction in advance.