Jeremy Swan
Jeremy Swan is the national director of CohnReznick’s financial sponsors & financial services industry practice and leader of its M&A consulting services practice.

From an investment and M&A perspective, the U.S. Senate bipartisan vote to pass the infrastructure bill signaled that companies in the infrastructure supply chain should see significant growth opportunities whatever final form the bill takes. Now is the time for dealmakers interested or already involved in the infrastructure space to evaluate their portfolios, think broadly about where they might be able to grow or expand their footprints, and evaluate their best next steps for the opportunities that may lie ahead. Keep these four points in mind.

1. Think broadly about the “infrastructure supply chain.” Given the size and breadth of the potential funding, this universe is likely to encompass a greater variety of companies than ever before. M&A activity is likely to track to the sectors outlined in the final deal – construction, building materials, and clean technology, to name a few possibilities. Look for operating companies with government contracting credentials to fetch outsized valuations.

But even across or within sectors, think about investment opportunities through all phases of an infrastructure project – design, build, operate, and maintain – and all the products and services that align with each one. And consider the impact of scale: Historically, prospective infrastructure investors may have thought about construction and engineering and design firms, but not necessarily a rebar company. But given the scale of what we expect to see in the bill, a rebar company may be an outstanding investment.

2. Think long-term. We expect that this growth opportunity will not be a six- to 12-month phenomenon, but rather will continue for years, given the extended lifetime of most infrastructure projects. A PE firm could invest in a company now, build a business over the next two to three years, and then exit somewhere in Years 3 to 5, while there are still infrastructure-related growth opportunities. 

3. Explore new platforms, or grow existing portfolios. This is a solid opportunity for PE firms to look at these companies as platform deals for moving into new spaces. Or it could be a roll-up opportunity for businesses that already have a portfolio company in the infrastructure supply chain to acquire and control a greater portion of the supply chain: to vertically consolidate, add services and products, acquire suppliers or competitors, or otherwise build critical mass.

4. Be prepared for new challenges. All this said, these opportunities will be fraught with challenges that investors must be mindful of. Some of these private companies may become first-time government contractors practically overnight, which comes with a range of potential requirements, from cybersecurity and financial reporting and accounting mandates to goals and metrics around diversity, equity, inclusion, and belonging (DEIB). The complexity of infrastructure projects and the potential amount of capital involved carry an increased risk of fraud, waste, and abuse, so it will be important to consider how to insert compliance, monitoring, and oversight.

One final takeaway: PE has a unique opportunity here to contribute to a “double bottom line.” In addition to the potential financial gain, PE can also contribute to a broader public gain, by supporting projects that will create jobs, improve access to clean water and broadband, advance clean energy, and more.