How to Sell a Construction Company: What You Need to Know

Construction companies present unique opportunities and challenges in M&A. The industry is fragmented, demand is strong, and well-run construction businesses are attracting significant buyer interest — particularly from private equity firms building platforms in the space.

But construction businesses are also harder to sell than many other industries. Revenue can be lumpy, backlog is uncertain, bonding capacity is tied to the owner, and workforce challenges are real. Understanding these dynamics is essential to getting the best outcome.

Construction Business Valuation Multiples

Construction company valuations vary widely based on specialization, size, and revenue quality:

• General contractors: 2.5x – 4x EBITDA
• Specialty subcontractors (electrical, mechanical, concrete): 3x – 5x EBITDA
• Infrastructure and civil: 3.5x – 6x EBITDA
• Construction services (testing, inspection, environmental): 4x – 7x EBITDA

Specialty subcontractors and infrastructure companies tend to command higher multiples because they have more defensible market positions and recurring relationship-driven revenue.

What Drives Higher Multiples

• Backlog quality and duration — long-term contracts and repeat clients
• Specialty expertise that's hard to replicate
• Strong bonding capacity that transfers with the business
• Diversified project portfolio across sectors (commercial, residential, government)
• Consistent margins despite project variability
• Experienced project management team beyond the owner
• Equipment fleet that's well-maintained and mostly owned

Key Challenges in Selling a Construction Company

Revenue Recognition

Construction revenue is recognized differently than most businesses — percentage-of-completion accounting, change orders, and retainage make financials more complex. Buyers will need to understand your backlog, work-in-progress, and billing practices in detail.

Bonding

Many construction companies depend on surety bonds to win contracts. The company's bonding capacity is often tied to the owner's personal financial statement and track record. Transferring bonding capacity to a new owner requires careful planning and lender/surety relationships.

Customer Concentration

Construction companies often have a few large clients or general contractors that drive a significant portion of revenue. Heavy concentration with one or two GCs or project owners is a meaningful risk factor that buyers will price into their offer.

Workforce

Skilled tradespeople are the scarcest resource in construction. Buyers need confidence that key employees — superintendents, project managers, foremen, estimators — will stay post-acquisition.

Project Risk

Active projects carry execution risk. Buyers will scrutinize your backlog for potential cost overruns, disputes, warranty exposure, and problem projects that could become liabilities.

Who Buys Construction Companies?

Private equity has become the dominant buyer in construction M&A. PE firms are building platforms in electrical, mechanical, civil, and specialty trades. They're looking for companies with $1M+ in EBITDA, strong management teams, and geographic or service-line expansion potential.

Strategic acquirers — larger construction companies — buy to add capabilities, enter new markets, or increase bonding capacity. They can realize synergies through shared estimating, equipment, and back-office functions.

Employee Stock Ownership Plans (ESOPs) are increasingly popular in construction. An ESOP allows you to sell to your employees, maintain the company's legacy, and receive significant tax benefits. ESOPs work best for companies with $3M+ in EBITDA and strong management teams.

Individual buyers target smaller construction companies ($500K–$3M in SDE), often with industry experience and SBA financing.

Preparing Your Construction Company for Sale

Organize Your Backlog

Create a detailed backlog report showing all active and committed projects: contract values, completion percentages, remaining revenue, expected margins, and timeline. This is the first thing every buyer will ask for.

Clean Up Your Financials

Construction financials are inherently complex. Work with a CPA experienced in construction accounting to ensure your financial statements accurately reflect your business — proper revenue recognition, accurate WIP schedules, and well-documented add-backs.

Address Bonding Transfer

Talk to your surety broker about what a bonding transfer looks like. If your bonding capacity is heavily dependent on your personal guarantee and financial statement, start working on building the company's independent bonding capacity.

Retain Key Employees

Identify your critical employees and implement retention strategies before going to market. Key person risk is amplified in construction because relationships with clients, subs, and suppliers are so relationship-driven.

Settle Disputes

Active litigation, unresolved change orders, and warranty claims all create uncertainty that reduces your valuation. Resolve as many outstanding issues as possible before going to market.

Update Equipment Records

Create a comprehensive equipment list with descriptions, age, condition, maintenance records, and estimated values. For companies with significant equipment assets, professional appraisals are advisable.

Document Your Safety Record

Your EMR (Experience Modification Rate), OSHA incident history, and safety programs all affect your valuation. A strong safety record signals operational discipline. A poor record creates liability concerns and higher insurance costs for the buyer.

Deal Structure Considerations

Construction deals often have unique structural elements:

Working capital adjustments are particularly important in construction because of the timing differences between billing and revenue recognition. Make sure the LOI clearly defines how underbillings, overbillings, retainage, and WIP are treated.

Earnouts tied to backlog completion are common when there's a gap between seller expectations and buyer risk tolerance. These can work well if the metrics are clear and the seller retains some influence over project outcomes.

Seller transition periods tend to be longer in construction — often 12-24 months — because of the relationship-driven nature of the business and the need to ensure project continuity and bonding transfer.

Timeline

Expect a 9 to 15 month timeline from engagement to close. Construction deals take longer due to the complexity of backlog analysis, bonding transfer, project risk assessment, and equipment valuations.

Next Steps

If you're considering selling your construction company — or want to understand what your business might be worth — early planning makes a significant difference in outcomes.

I work with construction company owners nationwide to help them prepare for and execute successful exits. Book a confidential call to discuss your situation.