2021 Construction Industry Trends: Ownership Transfers & Management Succession Planning

2021 Construction Industry Trends: Ownership Transfers & Management Succession Planning

Most business owners right now are sharply focused on steady cash flow, cutting costs, maintaining operations as close to the status quo as possible, and ensuring the health and productivity of their clients and employees. In an uncertain economy, it’s easy for business owners to let fear of the unknown justify their choice to slow down or halt their succession or exit plans. In mid-2020, FMI partnered with the Construction Financial Management Association (CFMA) to survey nearly 250 construction executives on their ownership transfer and management succession plans. 

Key Survey Insights

  •  As a result of COVID-19 and the economic downturn:
    • 19% believe their succession plan will be negatively impacted;
    • 29% aren’t sure; and 
    • 52% do not feel their plan will be negatively impacted.
  • 30% said economic slowdown would affect their ownership transfer plans.
  • 50% reported they do not have an ownership transfer plan.
  • 66% identified successors wouldn’t be ready for another three to five years.
  • 27% are uncertain to whom they will sell.
  • 35% now expect to have sold their ownership stake in the next six to 10 years, with respondents favoring internal sales by a considerable margin (91% versus 9% external).
  • There is a continued industry shift toward employee stock ownership plans (ESOPs) and healthy M&A activity.

Information on Survey Respondents 

  • 55% are family-owned
  • 21% LLC 
  • 65% S Corp
  • 14% C Corp
  • 52% General Contractor/Construction Manager
  • 48% Trade Contractor/Subcontractor
  • 16% of respondents’ companies had revenue below $20 million
  • 44% of respondents companies’ had revenue ranging from $20 million to $100 million 

For more information or to read the entire survey, go to www.fminet.com.

Keeping Your Exit or Succession Plan a Priority

From planning to implementation, exiting a business generally takes about 3-5 years. During a pandemic, there will be some degree of recalibration needed for exit plans already well underway, but exit and succession plans need not be abandoned. 

I encourage business owners to reevaluate their current exit timeline and make adjustments as necessary.  However, pushing out the timeline doesn’t mean opportunities to streamline and grow your business aren’t there.

Contact Altus Exit Strategies

Altus Exit Strategies is a wholly-owned subsidiary of Albin, Randall & Bennett. As Certified Public Accountants, the Altus Exit Strategies team members bring the financial consulting and tax expertise of a public accounting firm to the exit planning process. As a Certified Exit Planner, I bring together and lead exit planning teams that include lawyers and other financial and professional advisors. Together, we help business owners create comprehensive exit plans that help them ensure strong legacies and reach successful exits. Contact me today to start your exit plan. 

Check out other recent ARB and Altus insights: 

by David Jean, CPA, CCIFP, CExP 

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David Jean is the Director of Altus Exit Strategies and a Principal at Albin, Randall & Bennett, where he is also the Practice Leader of the Construction & Real Estate and Succession Planning Service Groups. David works with business owners who want to improve their business’s value before they sell through the Seven-Step Exit Planning Preparation™ process. He has worked with companies from $5 million to $50 million in revenue across a range of industries.