--- title: M&A Activity in Underground Utility Contracting | Sorrel Advisors description: M&A activity in underground utility contracting. HDD and trenchless services are the most actively acquired in construction services M&A in 2026. image: https://www.sorrel-advisors.com/hubfs/AI-Generated%20Media/Images/Underground%20Utility%20Construction%20Site%20with%20Cranes.png --- [Skip to content](https://www.sorrel-advisors.com/insights/ma-activity-in-underground-utility-contracting#main-content) [![](https://www.sorrel-advisors.com/hs-fs/hubfs/Sorrel%20Logo%20Large.png?width=1000&height=500&name=Sorrel%20Logo%20Large.png)Homepage](https://www.sorrel-advisors.com) - Services - [M&A Advisory](https://www.sorrel-advisors.com/merger-acquisition-advisory) - [Exit Planning](https://www.sorrel-advisors.com/exit-planning) - [About](https://www.sorrel-advisors.com/about) - [Insights](https://www.sorrel-advisors.com/insights) - [Contact Us](https://www.sorrel-advisors.com/contact) - Services - [M&A Advisory](https://www.sorrel-advisors.com/merger-acquisition-advisory) - [Exit Planning](https://www.sorrel-advisors.com/exit-planning) - [About](https://www.sorrel-advisors.com/about) - [Insights](https://www.sorrel-advisors.com/insights) - [Contact Us](https://www.sorrel-advisors.com/contact) ![](https://www.sorrel-advisors.com/hs-fs/hubfs/AI-Generated%20Media/Images/Underground%20Utility%20Construction%20Site%20with%20Cranes.png?width=1536&height=1024&name=Underground%20Utility%20Construction%20Site%20with%20Cranes.png) # M&A Activity in Underground Utility Contracting ![Jeff Swenson | Managing Director](https://app.hubspot.com/settings/avatar/2bd668c3e7feb22423c5dba2931fb7a5) Jeff Swenson | Managing Director August 20, 2026 The underground utility contracting sector is one of the most active areas in construction services M&A right now. Aging infrastructure, federal funding mandates, and a fragmented contractor landscape have put utility services businesses on the radar of private equity and strategic acquirers at a level not seen before. If you own a business in this space whether you're doing water and sewer work, gas distribution, HDD, electrical utility services, or some combination the dynamics are worth understanding. According to [FMI](https://fmicorp.com/uploads/media/FMI_PE_Sector_Brief_Utility_Services.pdf), the U.S. utility services contractor market stands at $214 billion in 2026 and is projected to reach $282.8 billion by 2030 at a 7.2% CAGR. That growth is underpinned by non-discretionary, compliance-driven demand which is the kind of work that doesn't go away when the economy softens. That's the fundamental reason financial buyers have been so active here. As [M&A Advisors](https://www.sorrel-advisors.com/) in the utilities and construction space we're talking to a lot of buyers and sellers in right now. Here's what we're seeing. ## **What's Driving Demand For Underground Utility Contracting Businesses** ### **Aging infrastructure and deferred reinvestment** The capital requirements are enormous and unavoidable. U.S. investor-owned utilities spent $207.9 billion in capital expenditures in 2025 which represents a 16.7% increase year-over-year, according to [Delancey Street Partners](https://www.delanceystreetpartners.com/publication/utility-services-2024-year-in-review/). Natural gas utility investment reached $49.1 billion in 2023, up 50% from 2022. That spending flows directly to contractors. Water and wastewater infrastructure across most of the country is decades past its designed service life. Gas distribution networks are being replaced or rehabilitated at scale. Electric grid modernization is being driven by both age and the load growth that comes with electrification and data center construction. In nearly every case, the work favors contractors with trenchless capability, where open-cut installation isn't practical. ### **Federal broadband funding** The BEAD program's [$42.5 billion](https://www.utilityox.com/post/26th-annual-directional-drilling-survey) allocation for fiber buildout in underserved markets has created multi-year contract visibility for contractors serving telecommunications customers. That funding is in active disbursement, and horizontal directional drilling is the primary installation method where trenching isn't viable. According to [Research & Markets](https://finance.yahoo.com/news/horizontal-directional-drilling-hdd-industry-101800387.html), the global HDD market was valued at $10.2 billion in 2023 and is projected to reach $16.4 billion by 2030 at a 7.0% CAGR, with North America accounting for approximately 34% of global activity. ![Remaining BEAD Funding August 2026](https://www.sorrel-advisors.com/hs-fs/hubfs/Remaining%20BEAD%20Funding%20August%202026.png?width=1602&height=785&name=Remaining%20BEAD%20Funding%20August%202026.png) Remaining BEAD funding as of August 2026; [Connected Nation](https://connectednation.org/bead-tracker) ### **Capacity constraints across the board** Demand consistently outpaces available contractor capacity. The [26th Annual Directional Drilling Survey](https://www.utilityox.com/post/26th-annual-directional-drilling-survey) found that utility company in-house HDD adoption rose 6% year-over-year in 2023 — a direct signal that owners were standing up their own crews because they couldn't get contractor capacity. [Ditch Witch's 2025 industry outlook](https://www.ditchwitch.com/fiber/the-state-of-horizontal-directional-drilling-in-fiber-installation-2025-industry-outlook/) identifies labor availability, not demand, as the sector's primary constraint. Businesses with trained crews and available capacity command attention from buyers for exactly this reason. ## **M&A and Investment Activity in Underground Utilities** ### **Sector-wide deal volume** [Delancey Street Partners](https://www.delanceystreetpartners.com/publication/utility-services-2024-year-in-review/) tracked 97 outsourced utility services M&A transactions in 2024 across electric, water, telecom, and diversified subsectors. Activity remained robust through 2025, with the firm noting strong M&A momentum continuing into 2026. [Capstone Partners](https://www.capstonepartners.com/insights/article-construction-ma-update/) reported that construction services M&A closed 2025 with 562 total deals — up 18.2% from 2024 and the highest annual count on record. Private equity buyers accounted for 54.3% of transactions, the first year financial buyers outnumbered strategics, with 68 new PE platform formations recorded. [FMI](https://fmicorp.com/uploads/media/FMI_PE_Sector_Brief_Utility_Services.pdf) describes the utility contractor market as presenting "a compelling buy-and-build opportunity" given the fragmented competitive landscape — a large number of regional and local contractors with no dominant national player. Water, fiber, and gas distribution are identified as subsectors earlier in the consolidation cycle than electric, meaning more independent businesses are still available to acquire. ### **Recent transactions** Four sponsored acquisitions of HDD-capable underground contractors closed between September 2024 and July 2026: - [HardRock Infrastructure Services and Tower Arch Capital](https://www.prnewswire.com/news-releases/hardrock-infrastructure-services-and-tower-arch-capital-complete-the-acquisition-of-hdw-construction--drilling-302252634.html) acquired HDW Construction & Drilling, September 2024 - [Vortex Companies, backed by ORIX Capital Partners](https://www.prnewswire.com/news-releases/vortex-companies-announces-its-acquisition-of-virginia-based-tri-state-utilities--pipe-vision-302331446.html), acquired Tri-State Utilities & Pipe Vision, December 2024 - [Shenandoah General Construction, a GenNx360 Capital platform](https://www.businesswire.com/news/home/20250909654356/en/GenNx360-Capital-Partners-Announces-Shenandoahs-Acquisition-of-Nu-Pipe), acquired Nu-Pipe LLC, September 2025 - [RF Investment Partners](https://www.prnewswire.com/news-releases/tko-miller-advises-rj-underground-inc-on-its-sale-to-rf-investment-partners-302835590.html) acquired RJ Underground, Inc., July 2026 None of these transactions disclosed financial terms. The pace of activity indicates active platform-building in underground utility contracting specifically, not just construction services broadly. ## **What Buyers Are Looking For in Utility Contractors** ### **Private equity: platform-building in a fragmented market** Private equity buyers are building platforms in fragmented markets, and underground utility services fits that thesis well. They're drawn to recurring municipal and utility customers, revenue tied to essential services, and the federal infrastructure tailwinds that extend contract visibility for years. They want strong EBITDA margins, room to grow into adjacent geographies or service lines, and — critically — a management team that can operate the business after the owner transitions out. Diversification across end markets matters to PE buyers. Work spread across telecom, water and sewer, gas distribution, and electric means no single sector pullback brings the whole revenue base down. Businesses with that kind of spread are viewed as more resilient and command higher multiples as a result. ### **Strategic buyers: geographic coverage and service line depth** Strategics are after complementary geography and the ability to add capability without building it from scratch. A contractor who can deliver HDD alongside hydrovac, pipe rehabilitation, and inspection is a meaningfully stronger acquisition candidate than one who only operates in one discipline. Bundled capability drives higher customer retention and a more defensible competitive position. For a platform building regionally or nationally, an acquisition that adds a full service menu in a new market is worth more than headcount alone. ### **What both buyer types prioritize** Backlog and contracted revenue visibility are important to both. Equipment quality matters — owned, modern, and well-maintained fleets carry weight when capacity is a market-wide constraint. And workforce is the factor that comes up consistently on both sides: structured recruiting and retention programs, not just informal hiring, are what buyers are actually paying attention to in a sector where labor availability limits growth more than demand does. According to [Delancey Street Partners](https://www.delanceystreetpartners.com/publication/utility-services-2024-year-in-review/), the median EV/EBITDA multiple across outsourced utility services transactions from 2010–2024 was 8.0x for companies with $10–100M in EBITDA, and 5.1x for smaller businesses below $10M EBITDA. The spread between those two figures reflects exactly the premium that scale, management depth, and diversification command. ## **What Can Reduce the Value of a Utility Contractor in an M&A Process** Not every business commands a premium. A few factors consistently give buyers grounds to reduce their offer or walk away during diligence. ### **Messy financials** Commingled personal and business expenses, missing records, or no clean trailing P&L make it impossible for a buyer to build a reliable model. The ones who proceed will adjust their offer to account for the uncertainty; many won't proceed at all. ### **Owner dependency** If the owner holds the key customer relationships, makes the operational decisions, or is the one the crews call when something goes wrong, buyers price in the risk of losing what they paid for the moment the deal closes. PE buyers in particular underwrite to a post-close growth thesis that requires management capable of executing without the founder. ### **Revenue concentration** One or two customers representing the majority of revenue creates fragility that buyers model explicitly. What happens to EBITDA if that customer leaves? The answer shapes the offer. ### **An aging equipment fleet** Deferred reinvestment in rigs or equipment inflates reported EBITDA — the cash that should have gone back into the fleet didn't, so earnings look better than the underlying business supports. Buyers recognize this and adjust the offer to account for the capital they'll need to spend after close. None of these are automatically disqualifying. A buyer entering a new geography may prefer a business with deep local roots. A strategic with existing relationships in a customer base won't penalize concentration the way a financial buyer would. Context matters, and buyer-to-buyer variation is real. We always recommend working with an [exit planning for business owners](https://www.sorrel-advisors.com/exit-planning) who want to get the best possible outcome when they sell their businessvalu. ## **Is Now the Right Time to Explore a Sale or Recapitalization?** Market conditions are favorable. Utility infrastructure spending is at record levels. Deal activity closed 2025 at the highest annual count on record. Financial buyers are more active in this sector than at any point in recent history. FMI specifically identifies water, fiber, and gas distribution contracting as sectors earlier in the consolidation cycle — meaning the window for independent businesses to transact at strong valuations is open, but it won't stay open indefinitely as the market consolidates around larger platforms. The more relevant question is whether your own timing aligns. If the next phase of your business — additional states, expanded service lines, a larger fleet — requires capital you don't currently have, a recapitalization or sale can fund that growth while giving you the opportunity to realize some of the value you've built. If you're thinking about an eventual exit, a well-run [sell-side advisory](https://www.sorrel-advisors.com/merger-acquisition-advisory) process typically runs 6 to 12 months from launch to close. Owners who wait until they're ready to walk out often find they've missed the conditions that produced the best outcomes. *"The businesses that command premium prices are almost always the ones that prepared 12–24 months in advance — not the ones that called an advisor the day they decided to sell."* **Start the Conversation** We work with business owners in underground infrastructure and specialty contracting to understand their market positioning, assess strategic alternatives, and evaluate what their business is worth — before they decide whether to sell, grow, or recapitalize. 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