Acquisition and external growth audits: specific points to consider in the construction sector

In a building market undergoing restructuring, marked by the decline in new construction activity and the concentration of players, more and more managers are considering external growth as a lever for development.

This trend is part of a broader movement: in 2024, the number of transactions of companies valued between 1 and 50 million euros jumped by 27% in France, according to a study by In Extenso Finance*, with an even more marked increase on small transactions (+39% for those between 1 and 5 million euros).

Taking over a neighboring company, a competitor, a local agency or a structured craftsman often allows you to accelerate your geographical coverage, strengthen your teams or diversify your professional skills.

But in a sector as operational as construction, a company takeover is far from a simple transfer of shares. Behind the balance sheet figures lie contracts, ongoing projects, teams to retain, and contractual obligations. An acquisition audit is therefore essential to avoid buying into hidden risks.

Beyond the economic and financial aspects, acquisition audits also play a crucial role in ensuring the target company's tax and social compliance. In the construction sector, this dimension is particularly sensitive: checks related to undeclared work, whether involving internal teams or subcontractors, can have serious consequences for the acquiring company. A rigorous audit therefore verifies the regularity of labor practices, the compliance of subcontracting agreements, and the proper application of due diligence obligations, in order to prevent any risk of joint and several liability or criminal penalties.

Contracts and commitments: the company's black box to decode

In the construction industry, a company's value is not solely based on its equipment or revenue. The weight of current contracts and commitments constitutes a determining factor in valuation, but also in risks.

To ensure that the contractual value conveyed is real, achievable, and profitable, the audit must, in particular, scrutinize:

Current contracts, private or public: analysis of termination clauses, contractual deadlines, possible late penalties, and the status of guarantees (retention money, bank guarantee, guarantee of perfect completion);
The order book: what is the timeframe, what projects are covered, and what is the expected level of profitability?
Off-balance-sheet commitments: uncontracted subcontracting, oral agreements, tacit framework agreements…
Current or potential disputes: customer litigation, outstanding reservations, insurance claims.

Ongoing projects: value or hidden liability?

This is often the most tricky aspect of a takeover. "Ongoing" projects may seem synonymous with future activity, but in reality hide profitability gaps, delays or unprovisioned defects.

The audit must go beyond accounting figures and include:

The physical progress of the work, site by site, compared to the invoiced progress;
Expenses incurred (materials, hours, subcontracting) and those still to come to complete the works;
The associated subcontractor contracts and their proper execution;
Planned time vs. actual time, particularly for internal labor, in order to avoid taking over disguised loss-making projects.

The audit must also verify the administrative and social compliance of ongoing construction projects, particularly regarding workforce declarations, URSSAF compliance certificates, and subcontractor compliance. This cross-checking is essential to prevent any risk of undeclared work or post-acquisition penalties.

A summary table of ongoing projects, with an estimate of the remaining work to be produced and the actual margins, is an essential deliverable.

Critical dependencies: suppliers, key personnel, and outstanding balances

Beyond the figures, the audit must identify the points of dependency that could weaken the post-recovery period.

Strategic Suppliers

Some supplies may rely on a single partner (specialist in bio-based materials, custom joinery, etc.). It is important to identify:

Key suppliers (and their weight in purchasing revenue);
Specific commercial conditions (discounts, deadlines, deposits);
The existence or not of personal relationships between the seller and his interlocutors.

A supplier who grants preferential conditions to the seller will not necessarily extend them to the buyer.

Human capital and organization

Technical management (site managers, works supervisors) plays a central role in ensuring operational continuity. The audit must identify:

The staff turnover rate;
Key positions under pressure;
The proportion of in-house workforce vs. temporary staff or subcontracting;
Unpaid social commitments: RTT (reduced working time), bonuses, uncompensated overtime…

In the construction industry, a takeover without human resources is an empty shell. It is therefore essential to anticipate the risk of departures following a change in management.