Size can certainly be important in the world of construction, but it isn’t everything.
With the trend for packaging deals together and for one firm to provide a number of services, it’s true that the biggest firms with a wide range of businesses are well placed to take advantage of this trend. But those with the big balance sheets are best placed.
Having a solid balance sheet, with plenty of cash, is probably more important than sheer size in the kind of market we are experiencing at the moment.
Clients’ are increasingly risk averse and only want to award work to those firms they know will be in business not just at the start of a project but when it is close to completion. The collapse of big contractors such as Rok and Connaught has played a major part in this, but many more smaller firms have also gone bust in the last year.
A cash rich balance sheet brings opportunities to help finance projects, which can be a key differentiator, especially when budgets are coming under severe pressure. It will also help in the future as private firms are expected to provide the bulk of the investment for the government’s £200bn National Infrastructure Plan.
An example of this in action can be found with Bouygues recent move to take a majority stake in Leadbitter. Bouygues gets diversification, while Leadbitter gains access to the Bouygues balance sheet, which means it can go for work it might have avoided previously.
It’s a win, win situation for both firms – if it leads to contracts actually being won.