The aborted deal between Balfour Beatty and Carillion may have hogged the headlines this summer, but more modest yet equally significant deals have been quietly coming together to potentially reshape the sector.
Arcadis (which itself snapped up EC Harris) gets a bigger foothold in the UK infrastructure market with the acquisition of Hyder to create a £2.3bn turnover, 26,500-strong business.
Aecom and URS becomes the UK’s largest engineering consultancy employing more than 11,000 people and a staggering 95,000 people worldwide, bringing in £11bn revenue.
Both these deals got the go-ahead this month. Meanwhile in contracting, Galliford Try snapped up Miller’s construction arm in the summer and United House has tied the knot with Bullock Construction.
Pressures on costs, the need for extended reach and the desire for greater capital investments: all of these provide drivers for a global trend that has seen M&A activity in overdrive.
“Signing on the dotted line can be the easiest bit, as the path to happy integration is often fraught with difficulties”
In fact, the value of M&A hit $1.7tn in first six months of 2014, 75 per cent rise on the same period last year and the highest since 2007, the Financial Times reported in June.
By all accounts it’s a trend set to continue too. As we report this week, there are plenty of merger talks that remain just talks.
And even for those that do come to fruition, signing on the dotted line can be the easiest bit, as the path to happy integration is often fraught with difficulties.
Broad range of challenges
For contractors, problems invariably reveal themselves in the financial holes in contracts. Due diligence on the outside is notoriously difficult.
Then there then there are different cultures to fuse – everything from deciding where the power lies to who gets the biggest office.
All of these things tend to be in a company’s DNA and tricky to unravel.
Bigger balance sheets may help spread the risk and bolster expertise and reach. But get it wrong and you end up with unhappy staff and clients.
Perhaps that’s why another trend emerged in yesterday’s FT – the value of deals that fail to complete has reached the highest level since 2008 too.