Engineering, Construction & Building Materials industry review Q1-2008; RSM EquiCo Capital Markets

2008 Industry Outlook

We are cautiously optimistic about companies that serve the commercial market, which we expect to grow, albeit at a decelerating pace. Meanwhile, we expect infrastructure construction to grow in 2008 due to increased highway funding, with a continuing favorable pricing outlook. E&C companies with improved cash flows will accelerate M&A activity in 2008, particularly within the infrastructure upgrade and build-out, upstream oil and gas, and nuclear decommissioning sectors. The green building movement will continue to be driven by rising energy costs, strained water supplies, and environmental awareness. We expect green-building M&A activity to accelerate in 2008, which will likely lead to higher valuations in this niche segment of the building materials industry. Furthermore, aggregates will continue to be sought after and command aggressive pricing. In conclusion, we believe opportunities exist for international strategic and private equity groups to acquire overleveraged companies at attractive valuations. Read complete report.