Merger market twitches – but remains in coma

After a year that most of them spent twiddling their thumbs, some have begun talking up the market as buyers regain their appetite and more distressed companies are forced to offer themselves up.

The latest figures from financial research firm Corpfin, however, suggest this is no more than talk. The number of deals done this year has fallen from 51 in the first quarter to 37 in the three months to the end of September.

Meanwhile, the value of transactions has held steady at just above £300m, although the third quarter figure does not include Balfour Beatty’s £380m acquisition of consultant Parsons Brinckerhoff. It’s a far cry from the peak of a cycle a couple of years ago (see graph).

This month two medium-sized firms have been forced down the financial restructuring route. Lancsville, the £136m-turnover contractor, is hoping to bring a fresh investor on board as part of a deal with its lenders, and Multibuild, the £80m-plus turnover Stockport firm, is attempting to cut a deal with its queue of creditors to allow it to continue trading.

Balfour’s Parsons Brinckerhoff deal may be evidence of a growing appetite on the part of buyers, but it hasn’t been enough to convince Peter Gray, a takeover specialist at Cavendish Corporate Finance.

Six months ago he said there were no signs of life in the M&A market for construction. Half a year later, he says the construction sector has all but moved off his radar as he seeks deals elsewhere.

He said: “I don’t see it returning for a couple of years. There are just so few buyers out there – you’ve got Bouygues and Vinci and that’s about it.”

For now, all the talk about creating economies of scale through the merger of larger contractors and consultants remains just that.