Could more mergers and acquisitions be on the cards this year? With the credit crunch taking its toll on share prices across the industry it looks like 2008 will be a busy year for deals...
Carillion’s takeover of Alfred McAlpine, all being well, should complete in February next year. The move, which will create the UK’s second largest contractor behind Balfour Beatty, is likely to provide more impetus to the growing pattern of consolidation in the marketplace, as contractors struggle to compete with bigger rivals to win work.
The knocked down share price of many companies following the credit crunch will make deals more likely, as will the desire of some owners of private companies to sell up following changes to capital gains tax legislation.
- Galliford Try, which in the past two years has snapped up Morrison Construction and a string of housebuilders, is among analysts’ hottest tips for more purchases. The company, which has seen rapid expansion under chief executive Greg Fitzgerald, is likely to look to regional players across both sectors for buys.
- Perceived at one stage as a potential rival to Carillion for Alfred McAlpine, Balfour Beatty is thought to be keen to cement its position as the UK’s largest construction firm. Expect more deals to follow its recent acquisition of Cowlin construction, particularly of regional contractors.
- Having just bought Warings, French giant Bougyues is set for a run on the UK market, and is looking to grow rapidly with a succession of contractor purchases. Fellow European firms such as Vinci and Bilfinger Berger, already with a foothold in the UK, may well follow suit.
- In housing, it’s hard to see how the current crop of mid sized companies – Redrow, Bovis Homes and Bellway – can continue to survive tough market conditions without buying or being bought. Persimmon is many city commentators’ top tip for a buyer, although Barratt may also be tempted back into the market at the end of the year. Another one to watch is the ongoing unrest among stakeholders at privately owned Miller, which may yet become a target despite chief executive Keith Miller’s determination to keep the company in his own hands.