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Investors flock to construction

Strong growth prospects for construction combined with high value mergers and acquisitions over the past year have made the industry increasingly popular with investors, says a report published on Monday.
Management consultant PriceWaterHouseCoopers' (PWC) 2007 review of mergers and acquisitions in construction and housebuilding also identifies the potential to push industry profit margins up from their historical 2% average.Construction output growth is expected to exceed that of GDP over the next three years, and this has helped contribute to high value mergers and acquisitions such as the £50M purchase of contractor McNicholas by Skanksa last December and Balfour Beatty's £32M takeover of Birse in July 2006.The value of takeovers in construction has risen an average of 30% for the past four years and the report says that this has made listed firms increasingly attractive to investors, while private equity firms are targeting smaller specialist contractors.The large and steady volumes of work on offer over the next few years combined with the lack of skilled labour means construction firms should seize the opportunity to increase profitability once and for all, said PWC construction and housebuilding leader Jonathan Hook.'This is a time of opportunity for the construction sector in the UK, with order books full, major projects set to come online and development in the South East in particular,' said Hook.'Risk and reward needs to be rebalanced and contractors should look to be more fully rewarded for the value that they bring to the sector.'

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