Engineering and construction deals insights: 2021 midyear outlook

Innovation and transformation

Commodities and building materials prices have increased over the past year, as companies deal with global supply-chain disruptions amid increased demand for new residential and commercial properties. Furthermore, pandemic-related talent shortage challenges persist, resulting in increased labor costs as companies pay more to retain skilled labor. These challenges are likely to continue for the foreseeable future.

With digital transformation and new business models critical to coping with rising costs, protecting margins and remaining competitive, engineering and construction companies are expected to continue to make investments in disruptive technologies and assets that will drive efficiencies.

Geopolitical and regulatory shifts

The US engineering and construction industry is looking forward to the new administration’s recently announced, all-encompassing infrastructure bill intended to boost public spending. The proposed plan includes spending on transport, residential related construction, public schools, water infrastructure and broadband expansion. While there is a consensus on the need for infrastructure spend overall, any such package will likely require broad political support including tax reform to fund the ambitious investment. As a result, the timing and magnitude of the proposed infrastructure plan remains uncertain.

Commitment to purpose and talent

The engineering and construction industry inherently has relatively high exposure to environmental and social risks. Evolving consumer behaviors, accelerated in part due to the pandemic, have elevated societal issues such as social justice, governance equality and climate change. Targeted acquisitions in emerging sustainable technology and supply chain insourcing could drive M&A activity as traditional engineering and construction providers address environmental, social and governance (ESG) concerns.