Dive Brief:

• Katerra has acquired two companies — UEB Builders and Fortune-Johnson General Contractors — for an undisclosed amount, the Menlo Park, California-based, technology-focused builder announced yesterday.
• The deals help Katerra expand its presence across the U.S., the firm told Construction Dive. UEB Builders, based in Scottsdale, Arizona, is expected to enhance Katerra’s reach in commercial, institutional and multifamily markets on the West Coast and Texas. F-J, of Peachtree Corners, Georgia, brings Katerra into new geographical markets with its focus on mixed-use and multifamily segments throughout the Southeast and Mid-Atlantic. 
• While the two builders hadn’t previously factored offsite manufacturing and modular building techniques, Katerra’s specialty, into their business models, Katerra said, both anticipate that access to Katerra’s technologies and supply chain will allow them to enhance their offering to existing clients, but at scale. Katerra said the firms will bring new construction expertise and an additional 320 employees, bringing its total staff to 8,500.

Dive Insight:

Katerra is known for these types of acquisitions, having purchased a total of 18 companies in North America since its 2015 start and at least six architecture and contracting groups last year alone. Katerra’s 2018 spree, which earned it Construction Dive’s Dealmaker of the Year award, sprouted from an $865 million loan led by SoftBank Group Corp.’s Vision Fund early in the year. This week’s moves show the firm is still acquisitive.

Many of the entities Katerra bought last year, such as New Jersey-based construction management firm Fields Construction Co. and KEF Infra, a "constructuring" group based in India, now operate as Katerra. The two firms added this week are now known as Katerra as well.

Katerra's approach seems to be to piece together a portfolio of boutique builders and architecture firms to integrate and draw on a vast array of experts to capitalize on those firms' client history and strong growth models and apply their models into Katerra's. "While UEB and F-J weren’t previously focused on offsite methods, they bring many strengths to Katerra, including a strong client base, track records for delivering projects on time and on budget, and established presence in new markets important to Katerra," JZ Rigney, director of public affairs at Katerra, told Construction Dive.

But whether Katerra is greater than the sum of its parts is yet to be seen. 

That’s especially true as the competition in modular and offsite manufacturing intensifies, with firms like Skender, Prescient and even household names like IKEA establishing viable business models and elbowing for market share across the country in segments such as student housing, healthcare facilities and hotels. 

"After decades of relatively slow change, an at-scale shift to modularization — alongside digitization — looks likely to disrupt the construction industry and broader ecosystem," research firm McKinsey said in a recent report. "There are strong signs of what could be a genuine broad-scale disruption in the making.

"For example," the report continued, "Skender ... has pursued a strategy of vertical integration to try to bring in-house as much of the modular value chain as is feasible, including architectural design, engineering fabrication, and construction. The contractor sees this approach as giving it a point of difference in Chicago’s housing market."

Katerra is in a race with these firms to come out in front, and may make headway once it completes its next production facility, a 577,000-square-foot-factory in Tracy, California, near the company's Menlo Park headquarters, which is set to start production this fall, according to Rigney.