The industry believes that last week’s mergers and acquisitions will trigger a round of further consolidation.
Quantity surveyors and clients see the dramatic series of deals as proof that the industry is being pushed towards a radically different ownership structure.
Cyril Sweett chairman Francis Ives said: “Inevitably, there will be more deals. Pressure on the industry is immense, so there is an inevitable trend towards fewer larger players.
”As long as there are too many contractors, performance and investment will never improve.”
Kevin Monaghan, director of projects at developer MEPC, said fragmentation was inhibiting contractors’ performance.
The view from the contractors tipped as takeover targets was rather different.
Inevitably, there will be more deals. Pressure on the industry is immense
Francis Ives, Chairman, Cyril Sweett
Paul Lester, group managing director of Balfour Beatty argued that the deals were not out of the ordinary. He said: “I class this as normal activity in a large market place.”
The Skanska-Kvaerner deal has prompted concern over Costain because of the doubt about the future of its joint ventures with Skanska.
Monaghan said: “I think it is in everybody’s interest for Skanska to be clear about its role with Costain.”
Industry sources said another cause of the deals was the vibrant condition of the construction market. Citex chief executive Oliver Jones urged firms not to jump in to buy a contractor without taking this fact into consideration.
He said: “Firms have had a buoyant couple of years and will be looking attractive, but buyers must look at the sustainability of earnings.”
Reaction to Anglian Water’s acquisition of Morrison was mixed. One source described it as a joke and Monaghan said, more cautiously: “It does seem a strange fit.”
