Construction sector mergers and acquisitions regained momentum in the first quarter of 2026, driven by data center investment, tariff-driven supply chain restructuring, and a strategic imperative to consolidate fragmented software stacks. The wave is reshaping competitive dynamics across public tendering, construction software, and infrastructure contracting - with implications for how procurement teams assess risk, qualify vendors, and structure contracts.
Background: A Market Recalibrating Around Scale and Policy
After a cautious start to 2025, engineering and construction dealmaking rebounded decisively in the second half of the year. Large transactions exceeding $1 billion reemerged, lifting cumulative deal value in the third quarter even as deal volume contracted slightly - reflecting a market where confidence is returning at the top end but investors remain selective.
For many firms, M&A has shifted from broad expansion toward repositioning for policy certainty, supply chain resilience, and productivity gains. Buyers are adapting to shifting U.S. trade and industrial policy by using acquisitions to strengthen domestic capacity and reduce supply chain risk.
U.S.-targeted M&A surged 66% in the second half of 2025 as firms adjusted to the administration's reinforcement of Build America, Buy America provisions. That federal policy pressure is itself a key compliance milestone in 2026: projects obligated after October 1, 2026 must meet both the FHWA final assembly requirement and a minimum 55% U.S.-sourced component-cost threshold, reshaping how contractors source materials, plan schedules, and manage risk.
Details: Deal Volume Climbs, Valuations Expand, Software Consolidates
The numbers confirm an accelerating market. In Q1 2026, sector deal volume climbed to 833 transactions from 707 a year prior. TEV/EBITDA multiples rose to 10.93x from 9.65x and TEV/Revenue strengthened to 1.62x from 1.42x, reflecting heightened competition for targets with durable backlogs and exposure to high-demand end markets.
Nicole Kiriakopoulos, Director at PCE, noted that "rising deal volume and expanding multiples tell a clear story: even with tariff and labor headwinds, the strategic imperative to consolidate in high-demand end markets is outweighing caution."
Private equity buyers have underscored this momentum. Long-term tailwinds, plentiful buy-and-build opportunities, and easing cost of capital supported continued expansion of sector M&A activity, which is expected to remain robust through 2026. Between 2018 and 2025, construction M&A multiples paid by private equity firms averaged 10.6x EV/EBITDA, compared to 7.5x for strategic acquirers over the same period.
At the large-cap end, WSP Global's proposed $3.3 billion acquisition of TRC Companies highlights growing investor focus on scaling power and energy platforms with complementary infrastructure, environmental, and advisory capabilities. Apollo Global Management's approximately $2.3 billion acquisition of Kelvion - a global provider of heat exchange and cooling solutions - illustrates investor interest in assets at the intersection of energy efficiency and industrial infrastructure.
Construction software is consolidating at an equally rapid pace. On January 20, 2026, Procore completed its acquisition of Datagrid, an agentic AI platform focused on cross-system data search and automating multi-step processes such as reviewing submittals and drafting RFIs. That deal was followed in April by Trimble's announced acquisition of Document Crunch, an AI-powered contract analysis platform deployed on more than 10,000 projects and used by over 500 general contractors, deepening Trimble's construction system-of-record strategy.
Rising material costs and skilled labor shortages continue to compress margins across the construction value chain. M&A is emerging as both a defensive and strategic tool, offering scale advantages in procurement, broader access to labor pools, and opportunities to adopt labor-saving approaches such as prefabrication and modular construction.
Impact on Tendering and Public Procurement
The consolidation wave carries direct consequences for how public works are procured and bids evaluated. As larger, more integrated firms dominate tendering pools, procurement authorities face growing questions around vendor lock-in, interoperability, and competitive access for smaller contractors.
Engineering and construction companies are using M&A not just to withstand volatility but to modernize operations and capture opportunity in a shifting domestic market. The sector's near-term outlook hinges on how companies build scale, address labor and cost pressures, and adopt technologies that support more efficient and resilient delivery.
In the United Kingdom, procurement reform adds a separate layer of complexity. 2026 marks the first full calendar year under the Procurement Act 2023, which replaced the Public Contracts Regulations 2015 and introduced a shift from the Most Economically Advantageous Tender to the Most Advantageous Tender framework - emphasizing a more holistic award process centered on best value. The core change from January 2026 is an adjustment of the monetary values defining above-threshold procurement - slight decreases across most categories - meaning more contracts now meet the criteria for the full procurement regime.
In the London construction market specifically, securing tenders in 2026 depends less on project volume and more on navigating a flight to quality. Tier 1 contractors are using two-stage tendering and early engagement to lock in delivery certainty and satisfy Building Safety Regulator gateway mandates.
Outlook
As engineering and construction companies move through 2026, sector fundamentals are stabilizing and deal confidence is improving. Public infrastructure programs and energy-transition investment are strengthening backlog visibility, though labor shortages and residual inflation continue to pressure margins. Capstone Partners expects targets serving high-growth data center and power infrastructure end markets to generate outsized acquisition interest as AI demand continues to surge. For procurement teams, the critical near-term challenge is structuring tender requirements - particularly around software interoperability and domestic content compliance - that remain competitive in a market where scale and integration capabilities increasingly determine which firms can bid successfully.
