UK construction technology vendor Causeway plans strategic acquisitions and accelerated organic growth following £120 million Rothschild private equity injection.
Causeway, the Buckinghamshire, UK-based construction technology group, has secured a £120 million (c US$166m or €139m) investment from Five Arrows Principal Investments (the European corporate private equity arm of Rothschild & Co). The company says the investment will fund strategic acquisitions and accelerate its organic growth strategy to digitally connect the construction supply chain through further development of its cloud platform.
This investment follows a period of strong and consistent growth at Causeway, resulting in an earnings compound annual growth rate of 31% since 2015, driven by increased industry adoption of digital solutions and acquisitions that have broadened its product portfolio.
Established in 1999, Causeway Technologies has over 2,500 customers and more than 350 employees. It provides enterprise and cloud software solutions to the construction and infrastructure maintenance industries and spans the full value and supply chain. Its product portfolio spans a wide range of activities from specialist design, tendering and procurement (it has a transactions management platform, Tradex), through construction cost and site management to applications supporting operation and maintenance activities.
During the early 2000s, it offered a SaaS construction collaboration platform powered by OpenText, but this became a relatively minor part of its offering amid a series of industry transactions (Elstree Computing in 2007, Connect in 2008), and so received less Extranet Evolution attention – though Causeway LiveLink did get a passing mention in NBS’s 2019 Construction Technology Report (post). In 2017, Causeway agreed a £40.5m refinancing package with Guggenheim Investments (TCI report). In the year to 31 December 2019, Causeway Technologies Ltd reported an annual turnover of £32.6 million (c US$45m or €38m) and an annual profit of £1.8m.
Investing in AEC digitalisation opportunity
Causeway says the investment reinforces the opportunity in the construction sector and the need for solutions that address both the pace of digitalisation and productivity issues caused by complex supply chains, and the transient nature of construction projects. It says its solutions connect the construction ecosystem, providing solutions that transcend functional and organisational boundaries.
Phil Brown, chief executive and executive chairman of Causeway, said:
“This investment marks another leap forward for our business and for the value we can add to our customers. Our core purpose and passion is to digitally enable the global construction industry – the support of Five Arrows allows us to accelerate our work to help solve our customers’ challenges.
“Our ambition is to ensure that data flows seamlessly across the construction process, making our customers more efficient and their data more useful and actionable. That is the only way to drive better project outcomes, especially around value and quality.
“While cloud-based tools and mobile connectivity have helped put solutions into people’s hands, much is still very fragmented in this industry. We are building a persona-based platform with relevant applications and data delivered to each member of the construction supply chain via their desktop or mobile devices. The platform will be open, making it easy to integrate with both third-party applications and any bespoke, customised applications that customers might have had developed. This approach will help break down silos and give businesses large and small, in all parts of the construction ecosystem, complete visibility and control over their projects and supply chains.”
Five Arrows Principal Investments have made this investment in return for a significant minority stake in Causeway. Following completion of the transaction, Vivek Kumar (partner) and Sacha Oshry (managing director) of Five Arrows Principal Investments will join the board of Causeway.
Five Arrows focuses on investing in middle-market companies with highly defensible market positions; strong management teams; business models with high visibility of organic unit volume growth and strong free cash flow conversion; and multiple operational levers that can be used to unlock latent value. Sectors are limited to data and software, technology-enabled business services and healthcare.
The EE perspective
Update (noon BST: 29 June 2021) – Over the past 20 years, Causeway has grown primarily through merger and acquisition activity relating to numerous, often niche technology vendors in the architecture, engineering and construction sector. As a result it has a portfolio covering a wide and somewhat disparate range of activities, though few are covered in depth.
In an Extranet Evolution interview in 2017, then Aconex CEO Leigh Jasper talked about “not … being a mile wide but an inch deep”, talking about building deep functionality that complements core strengths. The Causeway approach appears to be different: covering as wide a range of construction activities as possible, with a view to creating a platform that connects them all. One of Causeway’s most recent acquisitions – the May 2021 purchase of telemarketing specialist Enhance Consultancy (Causeway news) – was justified on the grounds it would improve intelligence and processes between tendering phase and project delivery, integrating pre-construction and procurement. T
Causeway’s Tradex B2B transaction exchange was used by some 60,000 companies to exchange approaching £10bn in invoice value in 2020. In the UK, Tradex faces competition from, among others, the COINS Construction Cloud (now boasting over 100,000 users), and the recently launched COINS Construction Marketplace (15 June 2021), which augments its deep construction ERP expertise and its e-Xact Online technologies (acquired in 2011).* Also in this space is the Asite Marketplace supply chain management platform; Asite recently appointed former Laing executive Jas Mann to lead the development and growth of the Asite SCM solution (Asite news release). Extranet Evolution has also looked at the UK’s OpenECX, developed by former COINS executive Matthew Jones (OpenECX targeting subcontractors).
The Five Arrows investment clearly gives Causeway a warchest to make further acquisitions, and to invest in its existing applications. It has invested in an R&D centre in Middlesbrough that is focused on building new platform services and refactoring existing products so that they are all capable of serving customers from the Google Cloud platform – it clearly sees the cloud as the future. Will Causeway continue its previous approach of relatively modest acquisitions, or will it perhaps look to strike a major deal to cement a strong foothold in one of its sectors? Will it continue to focus on the UK (96% of its revenues are attributed to the UK), or will it look to diversify geographically?
* Update (1 July 2021) – David Bullock of COINS writes:
“The COINS Construction Marketplace augments its … construction ERP with an innovative eProcurement platform, providing … end-to-end procurement process for construction and home building businesses.
“Yes, we are building into the Marketplace the capability for manufacturers’ product data to be available, to supplement the information held within the Marketplace (bringing across the e-Xact product data), but first and foremost its purpose is to provide a simple, efficient, touch-less procurement process for construction and home building businesses.”