M&A Report

M&A in Building Products and Technology: Deals to Shape the Future

Acquirers are focusing their attention on five critical capabilities.

Par Renato Jorio, Adrien Bron, Nate Anderson, et Shounak Gadre

First published on février 04, 2025
min


En Bref Companies are turning to M&A for capabilities that will address shifting profit pools. The top five capability imperatives are route to market, building automation, sustainability, industrialized construction, and technology. Building products companies are typically local businesses, which limits their opportunities for synergies across product categories and regions. Still, because local scale matters, companies are continuing to pursue rollups. This article is part of Bain's 2025 M&A Report. EXPLORE THE REPORT In the building products industry, the smart companies are looking down the road and devising ways to use M&A to buy the new capabilities that will define the industry’s future. In a trend that will only grow more important over the next decade, companies will acquire to meet mounting demands for faster, more sustainable, and cost-effective construction—and to get out ahead of shifting profit pools (see Figures 1 and 2). Figure 1 The deal mix in building products is increasingly dynamic as companies turn to deals with multiple theses for growth Notes: Analysis includes majority deals only; 2024 includes first quarter through third quarter only Sources: Dealogic; Bain analysis Figure 2 Profit pools will shift as the industry must meet demands for faster, more sustainable, and cost-effective construction Sources: S&P Capital IQ; Bain analysis Where the industry is headed Routes to market are changing rapidly, and the companies that take advantage of new sales and marketing approaches will outpace their peers. Home improvement retailer Home Depot acquired building products distributor SRS Distribution in 2024 to accelerate its growth with the residential professional customer. The acquisition gives Home Depot access to a range of capabilities—for example, direct connections with professional roofers, landscapers, and pool contractors. Similarly, Carrier acquired Viessmann Climate Solutions for access to the company's portfolio of heat pumps and other machines, yes, but especially for access to its direct relationships with installers throughout Germany. After years of disappointing talks about smart homes and buildings, building automation is finally becoming a reality. Connectivity and the Internet of Things enable lower-cost and more open automation technology platforms that can be installed in buildings and augmented flexibly by various AI-supported apps and add-ons. These advances will create a wave of deals as companies in areas such as HVAC and electrical systems turn to M&A to enhance their existing product lines. That’s why LG Electronics bought an 80% stake in Athom. LG will merge the smart home hardware developer and manufacturer’s connectivity capability (which links multiple appliances, sensors, and lighting devices) with the generative AI–enabled LG ThinQ platform. The plan: Create a smart home with optimal connectivity solutions by gaining a deeper understanding of the customer via AI. Sustainability is another big reason why more companies will pursue capability deals. Real estate construction and operations generate roughly 40% of global carbon emissions. Customer expectations and stricter regulations are creating an imperative for sustainable, circular construction. For European industries, especially carbon-heavy ones such as cement, sustainability is no longer an option. In 2024, Holcim bought Mark Desmedt and Cand-Landi Group, two companies active in the recycling of demolished building materials, to accelerate its decarbonization and circular construction initiatives. There’s less activity in other regions, with some notable exceptions. For example, US-based Owens Corning’s due diligence process now involves assessing how an acquisition target supports its sustainability goals or improves the target’s sustainability profile. Industrialized construction will grow via deals, too. Modular, off-site construction is gaining real traction with M&A intended to integrate and consolidate the fragmented value chain (see the Bain Brief “Breaking New Ground: The Efficiency Gains of Industrialized Design and Construction”). For example, in 2024, Renta Group acquired modular building specialist Caro Design. And for years, major lumber companies in the US, such as Builders FirstSource and US LBM, have been rolling up smaller, local truss manufacturers, moving downstream in the value chain to broaden their capabilities in off-site construction. Technology such as digital twins and interconnected systems will revolutionize the construction value chain. Although few large tech deals have closed in recent years, it is quickly becoming a priority for CEOs who hope to replicate the success of the Builders FirstSource acquisition of Paradigm in 2021. Paradigm specializes in technology and software that helps building products players boost sales and reduce costs. Its Paradigm Omni product makes configuring and quoting windows and doors fast and easy. We see such deals as the beginning of a new M&A era in building products that will be less about short-term synergies and more about acquirers securing the technology and tools that will define their future business. Meanwhile, as these deals expand capabilities for acquirers, some building products companies will continue to use M&A for growth—and in highly focused ways. Local scale and density still matter in this industry, which is why companies pursue roll-up plays in specific, fragmented markets. Even in bigger multiregional deals, value is typically created by multilocal integration efforts. Cross-regional synergies are minimal and usually come from shared infrastructure, such as IT or operations, rather than commercial gains. Even in bigger multiregional deals, value is typically created by multilocal integration efforts. In the US, distributors such as US LBM and ABC Supply continue to take the roll-up approach. In Europe, large private equity–owned distributors within the BME Group are pursuing the same type of rollups. But there is not a lot of hunting ground left in mature markets. In markets that are less mature, there are roll-up opportunities in categories with high weight-to-volume ratios, such as cement. For example, in 2024 India’s major cement players UltraTech Cement and Ambuja Cements acquired midsize regional competitors to capture market share. In any geography, such rollups work best for companies that have built their M&A strategy and a repeatable M&A capability to develop a robust pipeline of deals and extract deal value post-acquisition. But in 2025 and beyond, the big story will be scope deals that deliver the five needed capabilities that will redefine the building products landscape. This is new territory for most companies in the industry. How can they improve their ability to find the best deals and make them succeed? While scale deals follow a logic of consolidation, scope and capability deals follow a logic of expansion. Building products companies must develop a sharp thesis of customer needs and a thorough understanding of the competitive forces at play in these adjacencies. That starts by asking how an acquisition and integration will create value as well as whether consumers will be willing to buy more or pay more for expanded offerings or capabilities. Is it a developer or an owner looking for a better ROI on their building stock? Or are the engineer and specifier typically interested in respecting norms and ensuring build quality? Are the distributors looking for tighter ways to manage their categories? Or maybe it is those in construction trades or installers who will find ways to build faster, cheaper, and with less rework? Understanding how such M&A expansions will affect the overall complex buying patterns within construction is the best place to start. Read the Next Chapter M&A in Consumer Products: Carving Out to Grow Read our 2025 M&A Report Download the PDF EXPLORE THE REPORT Overview Looking Ahead to 2025: Preparing for What Comes Next Looking Back at M&A in 2024: Dealmakers Adapt as the Market Idles Generative AI in M&A: You’re Not Behind—Yet Where the Deals Are: 2024’s Top M&A Markets Ten Takeaways from Our M&A Executive Survey Industry Views Aerospace & Defense M&A Automotive & Mobility M&A Building Products & Technology M&A Consumer Products M&A Energy & Natural Resources M&A Financial Services M&A Healthcare & Life Sciences M&A Machinery & Equipment M&A Media & Entertainment M&A Retail M&A Technology M&A Telecommunications M&A

En Bref

Companies are turning to M&A for capabilities that will address shifting profit pools.
The top five capability imperatives are route to market, building automation, sustainability, industrialized construction, and technology.
Building products companies are typically local businesses, which limits their opportunities for synergies across product categories and regions.
Still, because local scale matters, companies are continuing to pursue rollups.

In the building products industry, the smart companies are looking down the road and devising ways to use M&A to buy the new capabilities that will define the industry’s future. In a trend that will only grow more important over the next decade, companies will acquire to meet mounting demands for faster, more sustainable, and cost-effective construction—and to get out ahead of shifting profit pools (see Figures 1 and 2).

The deal mix in building products is increasingly dynamic as companies turn to deals with multiple theses for growth

Notes: Analysis includes majority deals only; 2024 includes first quarter through third quarter only

Sources: Dealogic; Bain analysis

Profit pools will shift as the industry must meet demands for faster, more sustainable, and cost-effective construction

Sources: S&P Capital IQ; Bain analysis

Where the industry is headed

Routes to market are changing rapidly, and the companies that take advantage of new sales and marketing approaches will outpace their peers. Home improvement retailer Home Depot acquired building products distributor SRS Distribution in 2024 to accelerate its growth with the residential professional customer. The acquisition gives Home Depot access to a range of capabilities—for example, direct connections with professional roofers, landscapers, and pool contractors. Similarly, Carrier acquired Viessmann Climate Solutions for access to the company's portfolio of heat pumps and other machines, yes, but especially for access to its direct relationships with installers throughout Germany.

After years of disappointing talks about smart homes and buildings, building automation is finally becoming a reality. Connectivity and the Internet of Things enable lower-cost and more open automation technology platforms that can be installed in buildings and augmented flexibly by various AI-supported apps and add-ons. These advances will create a wave of deals as companies in areas such as HVAC and electrical systems turn to M&A to enhance their existing product lines. That’s why LG Electronics bought an 80% stake in Athom. LG will merge the smart home hardware developer and manufacturer’s connectivity capability (which links multiple appliances, sensors, and lighting devices) with the generative AI–enabled LG ThinQ platform. The plan: Create a smart home with optimal connectivity solutions by gaining a deeper understanding of the customer via AI.

Sustainability is another big reason why more companies will pursue capability deals. Real estate construction and operations generate roughly 40% of global carbon emissions. Customer expectations and stricter regulations are creating an imperative for sustainable, circular construction. For European industries, especially carbon-heavy ones such as cement, sustainability is no longer an option. In 2024, Holcim bought Mark Desmedt and Cand-Landi Group, two companies active in the recycling of demolished building materials, to accelerate its decarbonization and circular construction initiatives. There’s less activity in other regions, with some notable exceptions. For example, US-based Owens Corning’s due diligence process now involves assessing how an acquisition target supports its sustainability goals or improves the target’s sustainability profile.

Industrialized construction will grow via deals, too. Modular, off-site construction is gaining real traction with M&A intended to integrate and consolidate the fragmented value chain (see the Bain Brief “Breaking New Ground: The Efficiency Gains of Industrialized Design and Construction”). For example, in 2024, Renta Group acquired modular building specialist Caro Design. And for years, major lumber companies in the US, such as Builders FirstSource and US LBM, have been rolling up smaller, local truss manufacturers, moving downstream in the value chain to broaden their capabilities in off-site construction.

Technology such as digital twins and interconnected systems will revolutionize the construction value chain. Although few large tech deals have closed in recent years, it is quickly becoming a priority for CEOs who hope to replicate the success of the Builders FirstSource acquisition of Paradigm in 2021. Paradigm specializes in technology and software that helps building products players boost sales and reduce costs. Its Paradigm Omni product makes configuring and quoting windows and doors fast and easy.

We see such deals as the beginning of a new M&A era in building products that will be less about short-term synergies and more about acquirers securing the technology and tools that will define their future business.

Meanwhile, as these deals expand capabilities for acquirers, some building products companies will continue to use M&A for growth—and in highly focused ways. Local scale and density still matter in this industry, which is why companies pursue roll-up plays in specific, fragmented markets. Even in bigger multiregional deals, value is typically created by multilocal integration efforts. Cross-regional synergies are minimal and usually come from shared infrastructure, such as IT or operations, rather than commercial gains.

Even in bigger multiregional deals, value is typically created by multilocal integration efforts.

In the US, distributors such as US LBM and ABC Supply continue to take the roll-up approach. In Europe, large private equity–owned distributors within the BME Group are pursuing the same type of rollups. But there is not a lot of hunting ground left in mature markets. In markets that are less mature, there are roll-up opportunities in categories with high weight-to-volume ratios, such as cement. For example, in 2024 India’s major cement players UltraTech Cement and Ambuja Cements acquired midsize regional competitors to capture market share. In any geography, such rollups work best for companies that have built their M&A strategy and a repeatable M&A capability to develop a robust pipeline of deals and extract deal value post-acquisition.

But in 2025 and beyond, the big story will be scope deals that deliver the five needed capabilities that will redefine the building products landscape. This is new territory for most companies in the industry. How can they improve their ability to find the best deals and make them succeed?

While scale deals follow a logic of consolidation, scope and capability deals follow a logic of expansion. Building products companies must develop a sharp thesis of customer needs and a thorough understanding of the competitive forces at play in these adjacencies. That starts by asking how an acquisition and integration will create value as well as whether consumers will be willing to buy more or pay more for expanded offerings or capabilities.

Is it a developer or an owner looking for a better ROI on their building stock? Or are the engineer and specifier typically interested in respecting norms and ensuring build quality? Are the distributors looking for tighter ways to manage their categories? Or maybe it is those in construction trades or installers who will find ways to build faster, cheaper, and with less rework? Understanding how such M&A expansions will affect the overall complex buying patterns within construction is the best place to start.

Read the Next Chapter

M&A in Consumer Products: Carving Out to Grow