Forged transformative deal
Fortive Corp.’s $775 million acquisition of Gordian, a privately-held provider of construction cost data, software and services, from Warburg Pincus LLC, was a transformative deal for Fortive (NYSE: FTV) and for the construction industry as a whole, earning the company Mergers & Acquisitions' 2018 M&A Mid-Market Award for Deal of the Year. Gordian provides construction cost data and software that enables owners and operators to manage the entire construction continuum, from design and build, to manage and operate. “Gordian’s over 70 years of proprietary construction cost data and domain expertise and a seasoned management team created the industry standard in construction task data, workflow software and service,” Fortive CEO James Lico said when the deal was announced in July.
See the full list of Mergers & Acquisitions' 2018 M&A Mid-Market Awards.
Digital disruption to the rescue
With a total addressable market of $20 billion and massive scale globally, the construction software sector is extremely attractive but plagued by antiquated, paper- and spreadsheet-based systems, according to investment bank William Blair, which advised Gordian on the sale to Fortive. As such, the construction industry is ripe for the productivity gains that software and data can deliver, and the adoption of software platforms is reaching an inflection point. “In addition to the generational shift that is occurring as more millennials and other digital natives ascend the ranks at contractors and project owners, several construction technology platforms have now reached a scale at which the data they collect provides immensely valuable information to constituents across the construction ecosystem,” said Peter Dalrymple, managing director, William Blair. “The growth and maturation of software and analytics platforms, such as Gordian’s, are bringing much-needed efficiency to the construction ecosystem.”
Construction software consolidates
A diversified industrial growth company comprised of professional instrumentation and industrial technologies businesses with 2017 revenues of $6.7 billion, Fortive is actively acquiring technology companies that use software, data analytics, and other elements of the industrial Internet of Things, or IoT, to drive efficiency in large, complex end markets.
Soon after snatching up Gordian, Fortive bought Accruent, which develops software used to manage real estate, facilities, and other assets, from Genstar Capital, for $2 billion. Under Genstar’s two-year ownership, Accruent doubled revenue, completed nine acquisitions and expanded internationally, according to the tech-focused private equity firm. Combining Gordian and Accruent with Fortive’s Fluke Digital Systems created an IoT portfolio, consisting of connected devices, software-enabled workflows, and data analytics. Gordian’s procurement data and Accruent’s facilities management data give owners and contractors enviable insight into the full real estate life cycle.
There have been 7 major acquisitions of construction software companies by multiple players since the end of 2017.
· Fortive bought Gordian and Accruent.
· Oracle (NYSE: ORCL) bought Aconex.
· Trimble Inc. (Nasdaq: TRMB) acquired e-Builder and Viewpoint.
· Autodesk Inc. (Nasdaq: ADSK) bought PlanGrid and BuildingConnected.