It’s said that a week is a long time in politics. It’s getting to be that way in construction.
Merger and acquisition activity normally gathers pace going into a recession and coming out of it, but such activity of late seems to be off the scale.
M&A among engineering consultancies - Aecom buying URS or Arcadis snapping up Hyder, for example - is being driven by globalisation of technical and engineering expertise.
Bigger pockets are needed to resource increasingly mega infrastructure projects in countries set to urbanise, and revenue per employee seems to have a good chance of moving upwards as consultancies extend their markets and reach.
This latest slew of activity among consultants certainly won’t be the last. The same is true in contracting, where the brief courtship between Balfour Beatty and Carillion is still to be consummated.
Ostensibly this is because Carillion wants Balfour’s highly regarded Parsons Brinckerhoff as part of the deal. But the posturing plays on.
Carillion is making noises about still wanting to make a play for Balfour; Balfour, meanwhile, has spurned these advances while it goes about the business of selling Parsons Brinckerhoff - with both Atkins and WSP said to be in prime position to buy.
“Even if this union doesn’t come off, consolidation in the contracting sector remains firmly on the menu”
It’s understandable that Balfour Beatty is committed to this plan A: it’s banked on the sale of PB as a means to pay down debt and appease shareholders with cash.
Balfour is having a rough ride but it’s no basket case, and as we come out of recession and margins rise, there is plenty of scope for recovery.
And let’s face it: nil premium mergers will always be difficult to pull off - there aren’t many successful ones to point at.
Most famously there was the Tarmac (a precursor to Carillion) Wimpey asset swap and since then the merger of Taylor Woodrow and George Wimpey.
So we could well reach 21 August - the date any overtures from Carillion must end - right back where we started, with both firms probably a few share points down.
Further unions ahead
But even if this union doesn’t come off, consolidation in the contracting sector remains firmly on the menu.
Overseas players are looking to increase their global market and Balfour could still be an attractive proposition for a foreign contractor prepared to pay a sizeable premium.
Such moves will be of real concern to clients. For them, it’s a little scary out there at the moment, with yet more reports this week of an overheating market plus predictions from the Construction Products Association of 10 per cent growth in the next two years.
Making the Balfour Beatty-Carillion merger stack up financially would seem to necessitate trimming Balfour Beatty’s construction capacity significantly.
The last thing any client would want right now is a major player out of the market.