Global technology mergers and acquisitions hit record levels in 2014, with nearly 4,200 companies changing hands, in deals worth more than $1 trillion, according to a Mooreland Partners annual merger and acquisition report. U.S.-based companies were the target of more than half of the deals. Many sales, acquisitions and mergers took place among construction technology firms.

"In the last year there has been a pickup of activity and acquisitions," says Larry Phillips, managing director and partner of Mooreland Partners, an M&A and private capital advisory firm in Greenwich,

Connecticut.

"There’s a metamorphosis occurring in the construction industry, with contractors opening their eyes to the value of information technology," says Matt Harris, senior vice president of Strategy and Corporate Development at Viewpoint, which purchased Maxwell Systems in the United States and Jobpac in Sydney to better serve the Australia market.

Phillips indicates a few factors are driving the merger and acquisition activity. Private equity buyers have an abundance of capital to put to work, and there is substantial liquidity in the debt markets.

"Both corporate strategic buyers and private equity firms are bullish and well positioned to buy assets," Phillips explains. "That combination is at a 10-year high point." Bain Capital of Boston purchased the equity stakes of two investors in Viewpoint Construction Software of Portland, Oregon, for $230 million. Pamlico Capital of Charlotte, North Carolina, made a growth equity investment in Dexter & Chaney of Seattle.

The company typically invests up to $100 million. Symphony Technology Group in Palo Alto, California, acquired McGraw Hill Construction, and its Dodge Data & Analytics product from McGraw Hill Financial of New York for $320 million in cash. And Procore Technologies of Carpinteria, California, raised $15 million from Bessemer Venture Partners of Menlo Park, California.

"The industry had been at a low point but has room for future growth, and buyers want to get out ahead of that," Phillips explains.

But other factors are at play. Steven James Mulka, a partner at SIS in Atlanta and a member of the AGC IT Steering Committee, reports some companies pursue acquisitions to obtain a customer base and will live off the maintenance dollars and then change customers to the flagship system.

Smaller firms agree to acquisitions to obtain financial resources to upgrade their systems to compete as technology changes. 

"We’re not done seeing the acquisition," Mulka says.

Historically, small and regionally focused companies have served the construction software industry. They may not have the resources to keep up with the rapidly evolving marketplace, Harris explains.

"If companies partner together or merge, customers of a legacy company can be exposed to modern technology and a platform for growth," Harris says. "Making it easier for customers on legacy software platforms to migrate to modern software is beneficial to the company and the market overall."

Harris reports for the most part Maxwell customers have responded well as they transitioned to Viewpoint and the new functionality. Viewpoint provided technical and economic incentives to make the switch.

SAK Construction of O’Fallon, Missouri, near St. Louis, a member of the Southern Illinois Builders Association, had used American Contractor software, from Maxwell, for a couple of years. However, as the expanding company began working in different states, with different unions and under different company entities, American Contractor was not able to deliver. Viewpoint’s system provides the necessary scalability, flexibility and customization.

"It’s fantastic and much more sophisticated," says Jim Kalishman, CIO of SAK. "It’s a more capable system that is able to handle the complexities associated with our growth."

Construction activity has picked up. "There’s a view that there is an upgrade cycle happening with software," Phillips says.

Traditionally, the construction industry spends about 1 percent of revenues on information technology, compared with an average of more than 3 percent across other major industries, Phillips reports.

"The industry has traditionally been a laggard in investing in technology," Mulka adds. "Construction companies often don’t view investments in information technology as having the ability to directly impact margin gain on projects."

Harris acknowledges the historical lowtech spending but reported some increase in investment.

Large numbers of construction firms do not use much technology, beyond Microsoft Office. However, that is starting to change, and companies are beginning to catch up.

The 3rd Annual Construction Technology  Report from JBKnowledge of Bryan, Texas, found that significantly fewer of those contractors who responded to the survey are using spreadsheets or manual processes for accounting. Those using a custom software system have more than quadrupled in one year. Likewise, spreadsheets for estimating fell by two thirds in 2014 and spreadsheets for project management decreased from nearly 44 percent to 8.8 percent. However, nearly 75 percent of the contractors continue to use manual processes or spreadsheets to collect data from the field.

"The construction industry is finally coming online," says Justin Nolan, founder of BuildingBlok of New York, which was acquired by The Blue Book Network of Jefferson Valley, New York, in 2015. "There is finally a willingness to spend money on tools and technology to help their business."

Andrew DiSabatino III, a project manager at EDiS Company in Wilmington, Delaware, a member of the Delaware Contractors Association, adds that he has found upstarts are more nimble than established firms. With people becoming more comfortable using apps on their cellular telephones and tablets, it spills over into the business market.

Young people coming into the industry expect to use modern technology, including web-based applications, Harris adds. 

The software as a service model has brought costs down. At the same time, people are beginning to feel more comfortable with cloud-based options.

Mergers and acquisitions have taken place for some time in the construction technology marketplace, Mulka says. In 2007, Sage of Irvine, California, purchased Timberline. Six years later, Textura Corp. of Chicago acquired Plan Swift and Latista.

"It’s not new, but more notable," Mulka says.

Highlights from 2014 include:

• Viewpoint purchased Maxwell System and Jobpac.
• Trimble of Sunnyvale, California, acquired Manhattan Software of Boston and Amtech Group Ltd. of the United Kingdom, and announced it would acquire Gehry Technologies of Los Angeles.
• BidClerk of Chicago and iSqFt of Cincinnati merged.
• JDM Technology Group of Vancouver, B.C., Canada, acquired Computer Guidance of Scottsdale, Arizona. JDM also owns Explorer Software North America and other international companies. Both Computer Guidance and Explorer are expected to continue operations, with new features and services. Computer Guidance will continue as an AGC Affinity Partner, offering discounts to members.

This year, The Blue Book Network of Jefferson Valley, New York, added BuildingBlok of New York, to its platform.

"When an acquisition happens, companies need to quickly understand the strategy and how it will affect me," Mulka says. He also encourages individual companies to participate in software user communities and to get in writing how the acquisition will affect any related software. He also said changes in ownership offers a prime opportunity to investigate other software systems that might be available in the market.

The 102-year-old Blue Book, an employee-owned construction network, has long provided a resource directory, print and online, about construction firms and suppliers. About 400,000 unique users access the Blue Book directory weekly, and it handles 1 million bid invites weekly.

"We’ve been aggressively moving toward building deeper information around the companies we have listed in our database, on the projects in each region and solutions that help the companies go to work or increase productivity," says Richard Johnson, president of The Blue Book Network. "We looked at BuildingBlok and thought it would be a perfect fit."

The star t-up, cloud-based BuildingBlok, founded in 2014, offers management tools to small and mid-size general contractors. Nolan had worked in the industry and created BuildingBlok to resolve some pain points he had experienced. That impressed Johnson.

The acquisition proved beneficial for BuildingBlok, allowing it to expand more quickly. Personnel are now in 250 cities nationwide to provide assistance. "Current customers are getting additional resources and products The Blue Book offers," Nolan says. "Consolidation is moving toward a one-stop shop to manage the entire life cycle."

Nolan reports his BuildingBlok customers are now using Blue Book to expand geographically. It enables them to more easily find subcontractors and suppliers in new locations.

EDiS had been a Blue Book and BuildingBlok customer prior to the acquisition, DiSabatino reports. However, he did not find The Blue Book website as easy to navigate as he would have liked.

"Now it’s woven together," DiSabatino says. "It has given us more willingness to go outside our comfort zone, to build for clients with projects in other states, because we know we won’t be on our own."

While not a merger and acquisition in the true sense of the words, AGC of America has combined its work on agcXML with the Construction Open Software Alliance (COSA). COSA assumed stewardship of the agcXML effort to develop open source integration standards last fall.

"Interoperability and integration are critical to bring about efficiency and productivity in the construction industry," says Fara Francis, chief information officer at AGC. "Working with COSA provides the synergy to alleviate the challenges pertaining to data integration and interoperability within the industry. With these challenges removed, team members will enjoy conducting business, faster, smarter and, in some cases, cheaper."

Together, by combining resources, they have developed 15 standards, or schemas, including ones for change orders, time sheets, plan files, and requests for information and proposals.

"We have moved the needle significantly," Francis says. "We are proud of it. At AGC, we are interested in initiatives that benefit members and the industry as a whole. Establishing these standards is the best way for the industry to get the best from construction technology."