Contractor Mowlem this week strengthened its support services business with the acquisition of cleaning firm Pall Mall for £42.3m.
Chief executive John Gains said the purchase of Pall Mall, which also offers security services, fitted with Mowlem's strategy of complementing its construction business with higher-margin support services work.

He said: "Mowlem has been making good progress and we think this acquisition is another step on the road. It's a good fit and a good size, – not too big."

Mowlem's services now include construction, cleaning, security, M&E maintenance and testing buildings for dust and noise.

Gains said the acquisition of Pall Mall opened up a new group of clients and would also allow Mowlem to cross-sell products.

Pall Mall was established in 1915 and is now one of the UK's five biggest cleaning firms. It has 10,000 staff in London, Edinburgh, Manchester, Birmingham and Newport.

The deal will see £21.5m paid in cash and loan notes with another £2.2m of Mowlem shares. Another £2m will be paid to Pall Mall management if it reaches profit targets at the end of next year. Mowlem also assumes responsibility for the firm's £16.6m debt.

Pall Mall's pre-tax profit for the year to the end of September 2000 was £1.7m.

The City was unconvinced by the move, and Mowlem's share price fell 9p to 200p, although stockbroker Peel Hunt has kept faith with its buy note. Analyst Stephen Rawlinson said Mowlem was still undervalued compared with other contractors.