Insights Archives - BaseRock Partners

BaseRock Partners Expands Engineering and Construction Advisory Practice with Addition of Managing Director Jim Owen

April 9, 2025/in Articles, Insights, News

BaseRock Partners is pleased to announce the hiring of Jim Owen as Managing Director. Based in Chicago, Owen brings more than 30 years of investment banking and capital markets experience to BaseRock, with deep expertise advising companies on mergers and acquisitions, capital raising, and ownership transitions.

Mr. Owen will expand BaseRock’s advisory capabilities across the architecture, engineering, and industrial services markets. His appointment supports the firm’s continued growth in advising businesses across North America navigating complex transaction environments.

“Jim’s experience and client-first focus make him a natural fit for BaseRock,” said Dustin Bass, Co-Founder of BaseRock Partners.

“He has long been a trusted advisor to engineering and construction leaders, and his experience strengthens our ability to deliver exceptional outcomes for our clients.”

Owen began his career at Harris Bank/BMO Capital Markets, where he spent 16 years advising middle-market and large corporate clients. He later served as Managing Director at Houlihan Lokey, where he led M&A and capital raise transactions for engineering, construction, and industrial services firms in the U.S. and abroad. In 2017, he founded Alpine Lake Capital Partners, which focused on investments in utility and infrastructure-related businesses. Most recently, he led the Infrastructure & Industrial Services group at Stout Capital, completing numerous sell-side, buy-side, and capital raise transactions.

“There’s never been a more important time to provide specialized advice to infrastructure-focused companies,” Owen said. “I’m excited to join a team that is singularly focused on the engineering and construction space and committed to helping owners and leadership teams achieve their strategic goals.”

Learn More About Jim Owen

Jim Owen

Managing Director

Email Jim

Electrical Services Market Update March 2025

March 25, 2025/in Insights, Market Updates

In our latest Electrical Services Market Update, we explore key forces shaping the sector – from rising consolidation and private equity activity to the growing influence of mega projects and evolving safety standards.

Gain timely insights and strategic takeaways to help you understand market dynamics, evaluate opportunities, and navigate the changing landscape of the electrical services industry.

Key takeaways from the Electrical Services Market Update include:

– Growing consolidation and private equity interest in electrical services
– Mega projects challenging smaller firms with cost overruns and labor shortages
– Potential for NFPA 70B adoption to drive new opportunities

Contact BaseRock Partners

Luke Smith

Managing Director
720.846.0004

Email Luke

Key Trends in Power, Water, and Communications Infrastructure: Utility Services Market 2025

March 24, 2025/in Articles, Insights

The utility services sector is at an inflection point, driven by surging energy demand, deteriorating infrastructure, and continued fiber deployment. According to BaseRock Partners Utility Services Market Report 2025, major outlays are expected across transmission and distribution networks, water systems, and broadband infrastructure. With a median 17% increase in CapEx among utilities and a growing backlog of infrastructure projects, industry players must stay informed to seize opportunities in the evolving landscape.

Surging Energy Demand and Grid Modernization

Following decades of flat growth, U.S. power demand is set to rise sharply, propelled by energy-intensive industries such as data centers. By 2030, data centers are projected to consume 12% of total U.S. electricity, significantly impacting grid infrastructure (BaseRock Partners Utility Services Market Report 2025).

In response, utilities are ramping up investments to modernize transmission and distribution networks, ensuring grid reliability amid rising demand. The report notes that

“major utilities are expected to increase capital expenditures by a median of 17% in the coming years.”

This capital allocation will prioritize system resilience, capacity expansion, and the integration of renewable energy sources.

Addressing America’s Aging Water Infrastructure

With more than 40% of U.S. drinking water infrastructure surpassing the 50-year mark, the need for investment is urgent. Outdated wastewater and stormwater systems are under increased pressure from more frequent and severe storms. “Frequent and intense storm events are straining outdated wastewater and stormwater systems, highlighting the need for resilience,” the report states.

Compounding these challenges is a workforce shortage in the water utility sector. “33% of utility operators can retire in 10 years, with only 10% under the age of 24,” creating a significant knowledge gap and potential delays in necessary infrastructure upgrades. Investments in workforce development, technology, and system resilience will be critical to ensuring long-term water security.

Fiber Expansion Faces Administrative Delays but Continues

The broadband industry remains on a strong growth trajectory, with fiber passing more than half of U.S. homes. By 2029, this figure is expected to exceed 90% of passable homes, with three key providers driving 75% of new passings (BaseRock Partners Utility Services Market Report 2025).

Despite this momentum, the report highlights a temporary slowdown: “An executive order issued in January has suspended the disbursement of BEAD funding as the new administration reviews the program.” While the extent of the impact remains uncertain, the near-term outlook for fiber remains strong, driven by private sector investment and state-level broadband initiatives.

Private Equity Fuels M&A Activity in Utility Services

Private equity firms remain highly active in the utility services sector, with significant transactions reshaping the competitive landscape. Some of the most notable deals include:

• Roark Capital’s partnership with GPRS (January 2025)
• Cerberus’ acquisition of Landmark Structures (December 2024)
• GridTek Utility Services’ sale from First Reserve to BlackRock (June 2024)

The report underscores that “Wall Street analysts expect a repeat of 2024 in 2025, with anticipated near-double-digit top-line growth and expanding backlogs.” For commentary on these sector trends and more, download the full BaseRock Partners Utility Services Market Report 2025.

Download the Full Report Now

Contact BaseRock Partners

Luke Smith

Managing Director
720.846.0004

Email Luke

Utility Services Market Update March 2025

March 20, 2025/in Insights, Market Updates

In our 2025 Utility Services Market Update, we explore key trends shaping the industry, from rising electricity demand and aging water infrastructure to ongoing fiber expansion and sector consolidation. With utilities ramping up investment and infrastructure upgrades accelerating, the need for modernization and resilience has never been greater.

Stay ahead with essential insights and expert analysis to navigate the evolving utility services sector.

Utility Services Market Update Insights & Megatrends include:

– Rising power demand drives major transmission & distribution investment
– Aging water infrastructure accelerates modernization and resilience efforts
– Fiber expansion continues, despite funding uncertainties
– Notable M&A transactions highlight ongoing utility services sector consolidation

Contact BaseRock Partners

Luke Smith

Managing Director
720.846.0004

Email Luke

ESOPs: The Emerging Ownership Model for Heavy Civil and General Contractors

November 12, 2024/in Articles, Insights Wide

Are you thinking about selling your heavy civil construction or general contracting company? If so, you may be wondering what your best options are for succession and transition. In the majority of industries, business owners are often confronted with one of two options– a sale to a strategic acquirer or to a financial buyer (e.g., private equity).

However, for heavy civil and general contractors, the buyer pool is often more limited, primarily consisting of large, well-capitalized public strategics. This is because heavy civil and general contractors don’t align well with the leveraged acquisition strategies that financial buyers typically employ.

M&A Realities

While public strategics may have significant reserves of cash, they are often reluctant to pursue acquisitions proactively, preferring to maintain liquidity in case of industry downturns.

Even when acquisition opportunities do arise, these large players tend to be slow to act, adopting increasingly conservative approaches to both valuation and the transaction process.

Adding to the complexity, surety bond obligations make M&A in this industry more challenging, which further diminishes private equity interest in the sector.

A surety company’s underwriters evaluate the business’s financial health by examining its capital position, liquidity, and the stability of the management team.

If a proposed acquisition results in excessive debt on the balance sheet or leads to the departure of key leadership, the surety company may be unwilling to underwrite bonds. This reluctance stems from concerns about the business’s financial viability and the continuity of its management, both of which are critical to securing bonding.

(1) NCEO; BaseRock Analysis

ESOPs by the Numbers

As a result, the M&A market in the heavy civil and general contracting industry tends to be sluggish, with owners looking to sell often relying on favorable timing and circumstances.

These conditions have led heavy civil and general contractor owners to identify Employee Stock Ownership Plans (ESOPs) as a compelling solution, with significant advantages for both owners and employees.

• Over the past decade, contractors have become the fastest-growing ESOP segment.
• Construction companies account for 16%-17% of ESOPs in the US.
• As of 2021, approximately 30% of newly formed ESOPs in the US are in the construction sector.
• Across all industries, ~15 million employees participate in ESOPs, with 250+ plans established annually.

(1) NCEO; BaseRock Analysis

What is an Employee Stock Ownership Plan, and Why are they an Attractive Option?

Given the various mechanics of an ESOP transaction, it’s crucial to understand why these plans are gaining popularity in the heavy civil and general contracting industry and how they can be a valuable component of a company’s succession planning strategy.

An ESOP is a type of qualified retirement plan, similar to a 401(k) or profit-sharing plan, designed to provide employees with retirement income over time. What makes an ESOP unique is its dual function, not only offering retirement benefits but also facilitating the transfer of business ownership to future leaders.

In an ESOP, the current owner sells either a portion or all of their ownership interest in the business to the plan, allowing employees to become participants in the ownership structure.

Importantly, the owner is not obligated to divest their entire stake at once; there is no minimum percentage of company stock an ESOP must hold when established. In the construction industry, owners typically structure ESOPs to include between 30% and 100% of the company’s shares.

While most new ESOP transactions involve a 100% sale, it’s also common for owners to transition ownership gradually through a series of smaller sales over time. For sellers, an ESOP also affords value built over decades, enables tax-efficient estate planning, and helps preserve the company’s culture and legacy.

Advantages of the ESOP Structure¹

Tax Benefits

ESOPs can offer selling shareholders the opportunity to defer or even eliminate capital gains taxes on the proceeds from the sale. Additionally, 100% ESOP-owned S-Corporations are exempt from most if not all state and federal income taxes, which can significantly boost cash flow.

Preserve Continuity and Legacy

ESOPs maintain the existing management and operational structures, minimizing disruptions for employees and customers while helping to secure the company’s legacy.

Bolster Employee Recruitment

ESOPs provide employees with additional retirement benefits at no extra cost to the company, making them a valuable tool for attracting and retaining talent.

Strengthen Business Resilience

Data from NCEO shows that companies with ESOPs are 25% more likely to remain in business, highlighting their role in fostering long-term stability.

Promote Employee Wealth-Creation

Employees in ESOP-owned companies typically have 2.5 times more retirement savings compared to workers in non-ESOP firms, driving significant wealth creation for the workforce.

(1) NECO

Is an ESOP Right for You and Your Construction Business?

While an ESOP offers numerous benefits, it’s essential to assess whether this ownership transition method is a good fit for your heavy civil construction or general contracting business.

The following considerations are critical to keep in mind:

- → Strong Company Culture
  - ESOPs are designed to enhance employee alignment and engagement, but they can’t create cohesion where it doesn’t already exist. For an ESOP to succeed, employee engagement is critical. In companies with high turnover or strained employee relations, this can be a significant challenge.
- → Established Business with Stable Cash Flows
  - Since ESOPs are often financed through debt, companies with unstable cash flows may face heightened risks. Heavy civil and general contractors with consistent, stable cash flow are better positioned for successful ESOP transactions. An experienced advisor can help structure the deal to safeguard the company through industry cycles, ensuring a smoother transition.
- → Bonding Requirements
  - Surety bonds may introduce financial covenants or conditions that can complicate ESOP transactions. While bonding requirements don’t necessarily exclude a company from pursuing an ESOP, those with significant bonding needs must carefully structure the transaction and communicate proactively with sureties to avoid any disruptions in coverage that could affect business performance.
- → Patient Capital
  - Sellers in an ESOP transaction typically receive a combination of cash, seller notes, and equity in the form of warrants. Depending on the company’s ability to secure external senior debt, a significant portion of the proceeds may come from seller notes, with repayment terms extending over 7–10 years. A long-term perspective is crucial for sellers in this type of transaction.
- → Estate Planning Opportunities
  - There are many estate planning opportunities for ESOPs, including leveraging Section 1042 for deferral of capital gains and potential step-up in basis for permanent tax avoidance, as well as gifting warrants at a reduced price for future economic benefit.

Choose BaseRock Partners as Your ESOP Advisor for Your Construction Company

For construction company owners considering an ESOP as a transition strategy, BaseRock Partners is a recognized, trusted advisor. With extensive expertise in the heavy civil construction and general contracting industries, we design sustainable ESOPs that provide lasting benefits for both owners and employees.

Our team is well-versed in the unique challenges of the construction industry, including surety, licensing, bonding, lending requirements, and M&A complexities. We leverage this knowledge to:

1. Guide business owners through the decision-making process, helping determine whether an ESOP is the best path to achieving their personal and business goals.
2. Design tailored ESOP transactions that align with the unique needs of all parties involved, ensuring an optimal outcome for the owner, the company, and its employees.

We also collaborate closely with the essential partners in the ESOP process, including CPAs, attorneys, and trustees. We understand the critical role each party plays in structuring the deal to maximize advantages for everyone involved.

Contact BaseRock Partners to discuss your business ownership transition goals and learn about the advantages of an ESOP for your construction company.

“BaseRock Partners provided exceptional insight and advice as we navigated a very difficult decision-making process,” said Dick Ghilotti, Founder, Ghilotti Construction Company, one of the nation’s largest heavy civil construction firms. “Their leadership, market knowledge, and financial acumen were critically important to our owners and executive team. BaseRock will continue to be trusted advisors to our firm as we enter our next 100 years as an employee-owned company.”

Dick Ghilotti

Founder, Ghilotti Construction Company

“At Brix Paving Northwest, we believe in the incredible talent and dedication of our team. That’s why we decided to sell the company to our employees through an ESOP. They have contributed so much to our success, and now they get to write the next chapter,” said Billy Stimpson, President of Brix. “We’re grateful to BaseRock Partners for partnering with us on this process. We couldn’t have done it without their expertise. Their reputation as a leader in this field is well-deserved.

Billy Stimpson

President of Brix Paving Northwest

“BaseRock Partners came highly recommended to us within the construction industry, and their reputation as a leader in this field is well-deserved,” said Doug McAninch, owner of McAninch Corporation. Their guidance and expertise were instrumental in helping us navigate the complex process of transitioning to an ESOP. BaseRock not only provided valuable insight but also led us with precision through each step of the journey. We couldn’t have asked for a more capable partner during this pivotal time for McAninch Corporation.”

Doug McAninch

Owner of McAninch Corporation

Contact BaseRock Partners

Matthew Drake
Co-Founder & Partner
Email Matthew

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Jay Rolader
Associate
Email Jay

Electrical Services Market Update June 2024

July 9, 2024/in Insights, Market Updates

In our Electrical Services market update, manufacturing facility construction, data center expansion, and a focus on sustainable energy are driving growth while the industry grapples with extended lead times and a scarcity of skilled electricians.

Stay ahead of the curve and overcome these obstacles with proactive recruitment, training, and retention strategies.

Key takeaways from the Electrical Services Market Update include:

– Executive summary on the current state of electrical services market today.
– Broad currents shaping the market, including 6 key takeaways.
– Latest industry news and public company updates.

Contact BaseRock Partners

Luke Smith

Managing Director
720.846.0004

Email Luke

Utility Services Market Update April 2024

May 7, 2024/in Insights, Market Updates

In our Utility Services Market Update, we share megatrends in transmission, broadband infrastructure, and more, highlighting the need for modernization and resilience and the growing demand for utility service assets.

Gain access to critical takeaways and acquire fresh insights to effectively navigate the shifting landscape.

Utility Services Market Update Insights & Megatrends include:

– How Transmission and Distribution requirements are evolving to meet new demands
– Importance of asset modernization and hardening across the sector
– Role of fiber in powering the modern economy
– Summary of key transactions in utility services

Contact BaseRock Partners

Luke Smith

Managing Director
720.846.0004

Email Luke

Construction Materials Outlook 2024

April 18, 2024/in Insights, Reports

2024 brings a host of challenges to the market, including inflation risk, rising deficits/debt, and the specter of a recession. However, non-residential construction, particularly manufacturing and infrastructure, have strong tailwinds. The key question in 2024: Will pricing power continue to offset stagnant and weakening demand? Download the 2024 Outlook to learn more.

Key Insights Include:

– Strategic recap of 2023 in the construction materials industry
– Summary of key M&A transactions that are reshaping markets
– Construction materials 5 key 2024 trends to watch
– Key drivers of pricing power in construction materials markets

Contact BaseRock Partners

Scott Duncan
Partner
sduncan@baserockpartners.com
720.273.2781