Nash Fitzwilliams identifies new funding wave in UK housebuilding sector

Nash Fitzwilliams has published a thought paper on the UK’s housebuilding sector which identifies considerable new activity on the part of equity providers. Having recently completed a very significant amount of work in the funding of residential development, we decided to dig further into the recent history of the sector to identify key themes and trends.

Our research project tracked the M&A and buy-out history of the sector over a period of 10 years together with valuation and margin benchmarks.

Our research showed that the consolidation of the sector, as exemplified by M&A amongst trade players was strong and consistent over the period 2003-2006. Against the background of rising margins and valuations, a number of major landmark and smaller regional transactions were completed. However, as valuations continued to rise, and as margins started to shrink, trade players quickly retreated leaving British bank, HBOS plc, to make the running in terms of deals in the sector.

Starting in 2010, however equity participants have re-entered the market and eclipsed trade activity.

Since 2011, gross margins have started to increase and public company valuations have increased above the important 1x Tangible Net Worth mark. This indicates that the market is now moving away from the opportunistic/ distressed phase of the cycle back to the more strategic phase.

Nash Fitzwilliams is a boutique corporate finance firm that over the last ten years has built up a specialisation in the construction sector and offers Mergers & Acquisitions and capital raising advice to firms within the construction supply chain on an EU-wide basis and increasingly in the emerging markets.

For more information please see our Housebuilding booklet published May 2012.