Infrastructure bill passage presents opportunities for construction and engineering firms

The passage of the $1.2 trillion Bipartisan Infrastructure Bill is the latest large domestic spending bill passed by Congress. Targeted spending will occur over the next five years and will present great opportunities for construction and engineering firms.

The Bipartisan Infrastructure Bill bolsters an already positive outlook by executives in the construction and engineering space, according to Deloitte.¹ Increased federal funding in an already busy sector creates an opportunity-rich environment for firms. The bill has a broad reach; however, certain segments are in particular focus. Furthermore, strained supply chains, technological advances, and increased merger and acquisition activity present both challenges and opportunities.

Considering these exceptional circumstances, now is the time for you to optimize your capital spending plans and financing structures. CIBC is uniquely positioned to support you with dedicated Construction and Engineering Banking. To help with equipment acquisition, we’ve launched a new Equipment Finance Team. As a trusted advisor, we can help you consider opportunities presented by the act and create custom financing structures tailored to your strategic initiatives.

The plan’s tax incentives position private projects alongside city and state partnerships. According to Deloitte, infrastructure spending will also encompass investment in technology, including data centers, warehouses and healthcare. 

The Bipartisan Infrastructure Bill is not alone in spurring infrastructure investment. State governments are increasing spending today, particularly in broadband. According to Ernst & Young, “One East Coast state is investing $1.2 billion in American Rescue Plan Act funds over the next four years toward bringing high-speed internet access to all homes with children. Another state government established a broadband council to deliver Broadband for All, including difficult-to-reach rural regions.”² Ernst & Young believes federal funding for broadband will continue for a decade, and that it could add significant demand in the construction industry over the long term. 

“All of these opportunities will need to be paired with a comprehensive capital expenditure plan in order to ensure you have the right machinery and equipment to meet demand,” said Matt Gibbons, group head of CIBC’s Construction and Engineering Group. “Our group can advise you on the financing options across all product sets and create tailored solutions for your business requirements.”

We recognize that you are operating in a dynamic market with supply chain disruptions. Our Construction and Engineering Group and Equipment Finance Group understand the potential roadblocks you could face, and we are here to address your specific needs. 

According to the December 2021 Equipment Leasing and Finance Foundation (ELFF) US Equipment & Software Investment Momentum Monitor, investment in the construction and engineering space is up 24% since 2020. The construction momentum index highlights the continued growth on a year-over-year basis.³

Source: ELFF, US Equipment & Software Investment Momentum Monitor, December 2021.

According to Deloitte, strong demand will continue to strain supply chains. Supply shortages have already been evident in lumber, paints and coatings, aluminum, steel and cement. Other inputs, including labor, could be in short supply in 2022. 

Shortages will mean delays and higher costs, and construction profits could be pinched if bid pricing fails to keep pace, as it has recently. While input costs rose 21% year-over-year as of June 2021, bid prices increased only 3.4%, per Deloitte. 

CIBC’s Construction and Engineering Group has a holistic suite of products providing a variety of financing solutions, from asset-specific financing to strategic cash flow lending.

“We anticipate a strong appetite for mergers and acquisitions in this segment next year,” Gibbons projects. “While healthy demand will keep construction and engineering firms at full capacity in 2022, the need to diversify revenue streams, emphasize the use of technology and unload underperforming assets is expected to fuel a surge in mergers, acquisitions and divestitures.” 

That surge is already underway, according to Deloitte. In dollar terms, transactions in the first nine months of 2021 were 152% higher than the entire year in 2020, and the number of deals through the first eight months came to about 80% of 2020’s total. Looking ahead, firms seeking deals are expected to emphasize technology and optimization to address operational efficiencies, labor shortages and alternate service delivery approaches.⁴

“Our clients have increasingly participated in strategic combinations that further diversify their geographic reach and strengthen their service offerings,” adds Gibbons. “We have been fortunate to assist them in these efforts by providing value-added financing solutions, including pro rata revolving lines of credit and term loan A support, as well as high-yield, term loan B and equity capital markets capabilities.”

“The construction and engineering industry weathered a hectic two years. The coming year may present a new set of challenges alongside the ripe opportunities. With a team of dedicated professionals that services more than 90 clients nationally, CIBC is in tune with the industry’s needs. Whether you are looking to optimize your machinery and equipment or seeking synergies through mergers and acquisitions, CIBC is here to advise and support you through your strategic initiatives. 

CIBC is accustomed to the volatility and many challenges that our construction clients continually navigate. We have decades of experience and strong institutional knowledge of the construction and engineering sectors. This lets us structure flexible credit that gives you the liquidity and support you need. We see great opportunity in front of our clients. We look forward to partnering with you to achieve your objectives.

Equipment Finance: Matthew Green

  312-564-1814 Opens your phone app.

 Matthew.Green@cibc.com Opens your email app.

Construction and Engineering: Matthew Gibbons

  312-564-1233 Opens your phone app.

 Matthew.Gibbons@cibc.com Opens your email app.