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Balfour Beatty and Carillion share a Cheryl Cole moment

Construction is having its very own Cheryl Cole moment.

The possible marriage between two of the UK’s largest contractors Balfour Beatty and Carillion to a create a global powerhouse with more than 80,000 employees and combined annual revenues of more than £12bn has all the shock factor of the Geordie chanteuse’s secret whirlwind romance.

Whether the nuptials take place or not, the idea of ‘BBC’ certainly spices up the news agenda as we head into silly season. But does it make sense?

Both firms have been having a tough time of it: Carillion because it gambled on the energy efficiency market which has been slow to materialise; Balfour because it took its eye of its core construction businesses, and suffered significant write-downs on loss-making contracts as a result.

With complements

Carillion seems to be making a good recovery while Balfour Beatty still appears to be finding skeletons in the cupboard.

As a consequence, though Balfour’s turnover is more than double Carillion’s, their market caps are roughly similar. Stronger together? Maybe.

Their market strengths seem to complement each other too – Balfour is stronger in roads and nuclear, Carillion is strong in FM; Balfour sold its FM business.   

“The potential deal that would form a £12bn construction player should certainly provide more financial muscle to modernise and invest”

Certainly, on the basis of the fit and financials, the City seems to quite like the idea – both stocks rose on the back of the announcement.

So far so good. However, it’s by no means a done deal, with the real work now under way. Besides, Carillion’s approach might draw in other bidders.

Whether mergers go ahead or not usually comes down to whether the sum of the parts creates a leaner, more cost-effective organisation than the two separate entities; and, just as crucially, whether the personalities involved can reach consensus on who will run the show.

Culture clash?

But what often gets overlooked to the detriment of shareholders and employees is the cultural fit, and how two very different entities can be made to operate as one. 

Operational structures, routines and rituals are some of the barriers that litter the path to a smooth integration. Balfour’s takeover of Mansell is said to have suffered from such difficulties.

The potential deal that would form a £12bn construction player should certainly provide more financial muscle to modernise and invest in what is increasingly a high-tech sector.

For that reason alone, it offers an exciting prospect.

Readers' comments (1)

  • have worked for both
    both awful employers, very difficult to work for - so a good marraige in my books!!!

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