Dealmaker of the Year: Katerra
An 865 million loan led by SoftBank Group Corp.’s Vision Fund early this year propelled Katerra's valuation to over $3 billion.
By the numbers:
Six new firms fell under the Katerra umbrella this year as the builder works to deliver $3.7 billion worth of new projects through the behind-the-scenes effort of nearly 4,000 employees.
A 577,000 square-foot manufacturing facility in Tracy, California, will help Katerra add 500 additional jobs and produce an additional 12,500 multifamily units per year.
Katerra has almost become a household name in its drive to redefine housing. By virtue of what it calls a revolutionary approach of delivering offsite design-build projects via automated manufacturing and technology stemmed from its Silicon Valley roots, Katerra was named Construction Dive’s Innovator of the Year last year.
But that doesn’t mean Katerra has necessarily delivered much yet as it tries to rapidly scale its vertically integrated operations to tackle a pipeline of $3.7 billion in new projects.
Yet the name Katerra still conjures up a threat to disrupt the industry. The Menlo Park, California-based group promises to fuse architecture and design prefabrication techniques into a linear, end-to-end design-build process through offsite “constructuring” of cross-laminated timber, windows, walls and other components scored by its own end-to-end supply chain. And it has the funds to do it.
Katerra's 2018 expansion path
Raised $865M in Series D round led by SoftBank VIsion Fund
Combined with construction management firm Fields Construction Co.
Absorbed Michael Green Architecture
Acquired architecture firm Lord Aeck Sargent
Merged with Indian "manufacturing technology specialist" KEF Infra
Announced plans to build additional manufacturing capacity
Acquired Canadian timber firm Equilibrium
Purchased contractor Bristlecone Construction Corp.
Along Katerra’s path toward shattering traditional approaches to building, it has collected many pieces of its puzzle, especially this year. It attracted rounds of venture capital that heaved its valuation past any of its competitors and with it bought architecture firms, general contractors and even technology-based offsite builders internationally, all while expanding its manufacturing bases.
The sheer volume and breadth of the partnerships, acquisitions and expansion deals that Katerra has signed this year have earned it Construction Dive’s Dealmaker of the Year award, and in case you missed any of its many moves, here’s a timeline breaking down its appetite for M&A.
Katerra kicked off 2018 with a bang, securing an $865 million loan led by SoftBank Group Corp.’s Vision Fund that propelled its valuation to over $3 billion. Completion of the Series D funding round, announced by Katerra on Jan. 24, made it the sixth biggest in its category during the year leading up to it.
Fresh off investments the prior year from the likes of FoxConn and other venture capital funds, the deal further solidified a major milestone for the company’s vision of actualization and growth.
“The construction industry is ripe for digital disruption,” said Michael Marks, chairman and co-founder of Katerra, in a statement at that time. “Katerra leverages its own software platform to remove time and costs from building development and construction. This new round of funding will enable us to further invest in R&D and continue to scale the business.”
In its first deal off the back of the capital infusion, Katerra combined with New Jersey-based construction management firm Fields Construction Co., which has since taken on the name Katerra.
At the time, Katerra planned to start 30 projects during the year, clarifying that one of its main focuses was the manufacturing of wall panels, cabinets and countertops at its Phoenix factory and noting that it planned to expand its capacity at a new Washington facility designed to churn out mass timber. It primarily had its eyes on the multifamily market then, but began hinting at its goals of tackling student housing, senior housing, hospitality and more.
As if that weren't big enough news for one month, at the end of May, Katerra announced that it had purchased Michael Green Architecture, a Vancouver, British Columbia-based mass timber and design specialist. Green, a well-known architect and proponent for tall wood, was said by Katerra to be a catalyst to help it realize its plans of building big with wood.
Before the ink had dried on the Michael Green contract, Katerra swallowed up Lord Aeck Sargent (LAS), another architecture collective. The partnership brought LAS’ tenure in architecture, planning and interior design, along with its six locations, under Katerra’s umbrella. The addition nearly doubled Katerra’s design staff — bringing it up to 291 in 11 locations — and added architecture licenses to a tally of 31 states and two Canadian provinces.
By the end of the following week, Katerra snatched up another company — this time turning its attention back to its wheelhouse of manufacturing and construction, or “constructuring,” in the form of a merger with KEF Infrastructure India Ltd.
KEF Infra, since renamed KEF Katerra, called itself an offsite manufacturing technology specialist. Its model is similar to that of Katerra’s: “Vertically integrated, end-to-end building services enhanced by offsite manufacturing and enterprise technology.”
The firms called the union a perfect match. But unlike its previous acquisitions, Katerra’s KEF buy brought it into international markets, as KEF aimed to retain its establishment in India and its growth campaign in the Middle East.
Robotics play a big part of KEF’s business, as do other forms of automation and advanced manufacturing operations. Precast concrete and prefabricated housing components also fall under KEF’s prowess. But apart from its products, the firm is one of Katerra’s biggest from a human resources standpoint, as it held around 1,400 employees at the time of the deal. The partnership brought Katerra’s total staff up to 3,400 worldwide and its office locations to 20.
Shifting focus from inorganic growth to the need to accommodate existing demand, Katerra looked in July to expansion of its output capacity. Tallying $3.7 billion in new project bookings at the time, Katerra on July 12 announced that it would build a 577,000 square-foot manufacturing facility in Tracy, California, to produce wall panels, floor systems, roof truss assemblies, windows, cabinets, finishes and other building components.
The firm said the factory will see it eventually sign paperwork for 500 additional jobs and allow it to take on new work throughout the west coast for a capacity to produce an additional 12,500 multifamily units per year.
The firm then further solidified its interest in mass timber and tall wood buildings when it courted Equilibrium, a Vancouver, Canada-based startup staffed with 15 engineers and five CAD technicians.
Equilibrium, now a Katerra company, has been involved in bringing to life tall wood art galleries, museums, university buildings, wineries and offices in several countries including Taiwan.
Katerra kept its best pens ready going into the final quarter as it signed an agreement to purchase Bristlecone Construction Corp. The Denver-based general contractor said it focused on “creating disruptive efficiencies in the vertical construction industry through self-performance, technology and innovative procurement methods.”
Katerra said that the acquisition will help it “gain important self-perform expertise in areas of structural concrete and framing and secure a foundation to scale construction execution capabilities in the central United States.” Total employees under the Katerra name now amount to closer to 4,000, a Katerra representative told Construction Dive in November.
Deadline for Construction Dive's awards came before the year concluded, so it's anyone's guess whether this last month of the year will see Katerra make any more moves. Stay tuned for updated coverage.