Business Valuation Mandate for a Construction Sector Carve-Out
Independent valuation of a construction company conducted ahead of a carve-out and future M&A process
Description of the mandate: valuation of a Swiss construction player ahead of a carve-out and M&A process
The engagement focused on the determination of the economic value of a historical French-speaking Swiss construction player, active for several decades in the realisation of real estate, infrastructure and technical building projects. The business valuation was conducted as part of a carve-out ahead of a subsequent M&A process.
This independent valuation enabled the documentation of key financial aggregates and prepared the technical elements necessary for the future transmission operation.
Key challenges: reading structural profitability in a cyclical sector and anticipating transactional issues
The main challenges of the mandate were:
- analysing the operational performance of a low-capital-intensity company;
- identifying structural profitability levers in a sector exposed to real estate market cyclicality;
- anticipating valuation issues likely to influence the upcoming negotiation (contractual structure, project exposure, margins by segment);
- structuring the preparation of the subsequent M&A mandate.
Approach and outcomes: cross-checking DCF, 5-7x EBITDA multiples and adjusted EBITDA/EBIT earnings value
The valuation deployed several recognised approaches:
- a discounted cash flow (DCF) approach with contrasted scenarios incorporating sector cyclicality;
- a relative approach by sector multiples, calculated on EBITDA (multiples typically between 5.0x and 7.0x EBITDA depending on size and risk profile);
- a capitalised earnings approach, based on the adjusted average EBITDA/EBIT over the last three years;
- an explicit reading by business segment (building, infrastructure, civil engineering) to identify higher-profitability perimeters;
- an articulation with the M&A strategy of the subsequent sale process.
The work enabled the determination of a value range consistent with sector standards, incorporating economic prospects, cycle constraints and the group's operational specifics. This valuation served as a technical and strategic reference during preliminary discussions between shareholders and potential partners.
Illustrative example: numerical application to a French-speaking Swiss construction player
For illustrative purposes only — unrelated to the actual data of the mandate — a French-speaking Swiss construction player generating CHF 80M in revenue with an average 3-year EBITDA of CHF 5M (6% margin) could exhibit an enterprise value range of between CHF 25M and 35M based on 5.0x to 7.0x EBITDA multiples. The range incorporates cyclicality (possible 20-30% drop in order book in sector downturn) and segment mix (public infrastructure offering a visibility premium vs private projects).
Summary: 5-week mandate, three cross-checked methods, basis for sale preparation
Business valuation mandate delivered in 5 weeks for a Swiss construction player in carve-out ahead of an M&A process. Three methods deployed (scenario-based DCF, 5-7x EBITDA multiples, adjusted EBITDA/EBIT earnings value). Deliverable: independent report securing shareholder reflection and structuring the preparation of the subsequent M&A mandate.
Frequently asked questions: construction, cyclicality, multiples and carve-out
What multiples for the construction sector?
For construction players (building, infrastructure, civil engineering), observed EV/EBITDA multiples range between 5.0x and 8.0x, with dispersion depending on (i) size (mid-caps > EUR 100M = high end of range), (ii) public infrastructure vs private construction mix, (iii) order book quality (duration, margin), (iv) vertical integration.
How to integrate cyclicality into the valuation?
Cyclicality is integrated via (i) a 3-5 year adjusted average of EBITDA/EBIT to neutralise peaks and troughs, (ii) contrasted DCF scenarios (top of cycle, bottom of cycle, normalised), (iii) an increased sector risk premium in the WACC (+1-3% vs less cyclical companies), (iv) an order book analysis and its visibility (book-to-bill).
Why conduct a valuation before the M&A process?
A pre-M&A valuation provides (i) a reference price to calibrate the sale strategy, (ii) an identification of value levers activatable before marketing (working capital optimisation, EBITDA normalisation, structure simplification), (iii) prepared documentation for the subsequent phase, (iv) an objectification of shareholder expectations.
What is a carve-out?
A carve-out consists of legally, financially and operationally isolating an activity or subsidiary of a group before divestment. This involves (i) account separation, (ii) definition of a transferable perimeter, (iii) duplication of support functions (IT, HR, finance), (iv) implementation of TSAs (transitional services agreements) to manage the transition.
How long does a pre-M&A valuation take?
The standard duration is 4 to 7 weeks, depending on the availability of financial documentation and the carve-out perimeter. The mandate described was completed in 5 weeks.
How does the valuation articulate with the subsequent M&A process?
The valuation feeds the M&A process by providing (i) a reference price for the LOI and teaser, (ii) a defence basis in negotiations vs acquirers, (iii) a support for the buyer's bank pool. A targeted update of figures is generally carried out before the process is opened. To go further: sell-side M&A process.
Similar mandates: other business valuations and restructurings
The transactions shown include those completed by, or with the involvement of, Hectelion team members in current or previous professional roles. They are presented for illustrative purposes only and do not imply exclusive responsibility by Hectelion.
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The transactions presented were carried out by, with the contribution of, or with the participation of members of the Hectelion team in the context of functions performed currently or previously.