Out-Law Analysis 2 min. read
02 Mar 2022, 1:13 pm
Construction industry companies have repaired their balance sheets over the past 18 months and will use their financial firepower to acquire the technology and manufacturing companies that will help them capitalise on industrialised construction.
This is clear from a recent Pinsent Masons survey of construction companies around the world. The results indicate that we are at an inflection point in the industry, on the cusp of major changes.
Industrialised construction will use technology, data and manufacturing processes to make construction more efficient, more profitable, more productive and more environmentally sustainable. These are significant benefits – 39% of the world’s energy-related carbon emissions come from buildings and construction.
To take advantage of that opportunity construction companies need new skills and approaches, and they are looking at acquisitions to achieve that quickly. We found that 30% of companies are planning a technology acquisition in the next three years, while 32% are planning an offsite manufacturing acquisition.
Until recently we thought that companies would address skills shortages through joint ventures. We still expect that to happen, but it does look as though there is a strategic tilt in favour of using healthier balance sheets to bring skills in house through acquisitions.
The stakes are high and speed matters – the decisions being made now and the ability of companies to lead and manage companies through a time of change will determine the winners and losers in the medium term.
Industrialised construction is clearly the goal – 43% of companies told us that this is strategically important to them and being actively discussed by their decision makers.
These companies know that they have skills gaps to address, hence the acquisitions. They will also need to undergo a shift in culture, attitudes and ways of working to remain attractive to the younger, more diverse workforce that they need.
They claim to be quite far along this road already, though those claims don’t always stack up. 44% of companies said they are already developing or using digital twins of built assets, which is at the more advanced end of digitisation. And they know what is holding them back – their own supply chain.
Now this might be true, but it is also the easiest place to put the blame. When we look at attitudes to data use we see clues that companies might not be as sophisticated as they think they are when it comes to modernising processes.
Data is essential to industrialised construction – you simply can’t do it without gathering, processing and working with huge amounts of data. That requires a deep understanding of how data works, how to keep it safe, what the value of it is and how it can unlock new opportunities.
The best mechanism for ensuring the integrity, safety and value of data is a Data Trust or Data Sharing Agreement. But 80% of companies make limited or no use of them which raises a number of questions including whether the data sharing that is currently being undertaken is as sophisticated and transformative as is required. It may be that companies have an optimism bias when assessing their own industrialised construction capabilities and that they are probably not quite as advanced as they think.
But we can see that companies know that industrialised construction represents a major opportunity for them. They are ready to make changes to be in the right position to take advantage of this and have done the financial hard work to be in a position to act through acquisitions.
We think that further collaborative working will lead to mergers between companies with differing capabilities to better be able to meet the challenges ahead and reap the benefits of a new way of working.