Major merger activity doesn’t come thick and fast among QSs and project managers, which is why AYH’s proposed £21m sale to Dutch giant Arcadis is an intriguing one.

This is the first deal among larger UK practices since the merger of Franklin + Andrews with Mott MacDonald back in May 2002. Both fit a pattern of a larger, more engineering-focused firm seeking to gain a foothold on the professional cost and project management side. It seems merging or buying between similar skilled or structured firms at present does not offer strong business logic. The only possible trend in the UK offered by one QS boss this week was for larger practices to snap up smaller or medium-sized firms rather than embarking on huge deals.

The key element to the AYH sale is where the acquisitor is from: abroad. Arcadis is based in Holland but has operations across Europe and the Americas. It clearly sees the UK as a region of opportunity and has already earmarked regeneration as a sector it wants to expand into. As a listed firm it is able to call up the cash – and it is offering a significant chunk for AYH – to fund its expansion. Marry this with the bold intentions of US firm Hill International, which declared it was seeking a significant purchase on these shores this year, and it appears that our firms are currently in demand from foreign acquisitors.

This may not be a significant issue for the bigger UK practices, who themselves are embarking on bullish expansions across the globe and may well feel comfortably able to turn down juicy offers. Witness Hyder’s acquisition of Australian project management firm Weathered Howe for £3m this week. Yet that fact that both Hyder and Arcadis are listed, and Hill International plans to be, may offer food for thought for the larger UK practices. Beware the foreign invaders.

Source

QS News