On Monday, Swedish infrastructure private equity investor EQT announced that its ninth fund (EQT IX) has bought a a majority stake in thinkproject, a Munich-headquartered startup that has become Europe’s leading software-as-a-service (SaaS) provider of construction intelligence solutions for the Architecture, Engineering, Construction and Owner-operated (AECO) industry.
The sellers were TA Associates and thinkproject founder Thomas Bachmaier, who will re-invest “significantly” in the company in connection with the deal. More specific price and deal terms were not disclosed.
thinkproject is a cloud-based software suite that helps improve customer delivery times, reduce waste and energy consumption across the entire construction lifecycle, thus enhancing sustainability in one of the key carbon emitting industries globally. As a software product, it aims to drive digitization in one of the world’s largest but least digitally penetrated global industries.
Founded in 2000 and headquartered in Munich, thinkproject serves more than 250,000 users across 10,000 building projects in over 60 countries. Its clients include international private and public asset owners, project developers, and general contractors.
Through its majority ownership of the firm, EQT hopes to accelerate thinkproject’s growth through its dual missions of sustainability and digitization, and to support product extension, geographical expansion, and broader consolidation of the fragmented global construction software space.
thinkproject is expected to leverage the full EQT platform during its next phase of growth, including EQT’s digital and sustainability expertise, local-with-locals presence across Europe and Asia-Pacific, and domain experience.
thinkproject will also benefit from advisory support from EQT’s software, real estate and infrastructure functions.
Post-acquisition, thinkproject’s management team, led by CEO Gareth Burton and CFO Ralf Gruesshaber, will continue to lead the company.
thinkproject’s underlying end market, the construction industry, is one of the world’s largest industries—accounting, according to think project’s data, for up to 13 percent of GDP in some countries—and one of the least digitized.
According to thinkproject, the industry’s laggardly pace of tech-driven advancement comes down to construction’s reputation as “a notoriously contractual, risk-averse and often adversarial process,” involving multiple parties with different contractual and payment relationships, in an industry characterized by such thin profit margins that companies can’t afford to risk capital for innovation.
thinkproject cites figures from research and advisory firm Gartner’s annual IT Key Metrics survey that consistently shows the construction industry at the bottom of industry league tables for IT investment: compared to an average spend of 3.5 percent of revenues on IT across industries in 2017, construction spent 1.2 percent.
Despite these structural impediments, EQT notes that the AECO industry has seen an accelerated digitization momentum and widespread technological adoption in more recent years. This shift is being driven by multiple secular trends, including stagnant productivity, growing cost pressure, increasing regulation, a demographic move towards a new generation with greater IT affinity and focus on sustainability.
Research from McKinsey has found that construction sector labor-productivity growth has averaged 1 percent per year over the past two decades, compared to 2.8 percent for the global economy and 3.6 percent for manufacturing.
Their figures indicate that if construction productivity were to catch up with the overall global economy, the construction industry’s value added could rise by $1.6 trillion per year, enough to meet roughly half of the world’s yearly infrastructure needs or add 2 percent to global GDP.
EQT also notes that by improving delivery times and reducing waste and energy consumption, thinkproject helps cut emissions in one of the key carbon emitting industries globally, thus contributing to the United Nations Sustainable Development Goal #12, “Responsible Consumption and Production.”
Construct a better world
“For us, thinkproject represents a truly thematic investment at the intersection of EQT’s two core value creation pillars, sustainability and digitization,” said EQT Partner Florian Funk in announcing the transaction: “After having followed thinkproject over the last couple of years, we are thrilled by the opportunity to work together with the management team and TA Associates to further develop this exciting company. This investment is perfectly aligned with EQT’s core focus of investing in high growth companies and partnering with world class management teams. We are truly impressed by the market leading position thinkproject has built and EQT is excited to support its vision of becoming a global champion.”
To which Gareth Burton, CEO of thinkproject, added: “EQT is one of the most active and successful private equity investors in the TMT sector, with very profound expertise specifically in the construction sector. thinkproject’s management team and EQT both share the strong conviction around the sector’s fundamentally attractive growth dynamics as well as thinkproject’s ability to further build out its excellent market leadership position and to build the leading global construction intelligence platform. thinkproject continuously strives to serve our customers to help construct a better world.”
The transaction is subject to customary closing conditions and regulatory approvals. It is expected to close by year end.
With this transaction, EQT IX is expected to be 15-20 percent invested, based on its target fund size.