It undoubtedly raises some interesting points regarding the direction the industry is taking and what these alliances will mean to companies and clients alike.
There is little doubt the events in New York on September 11 have had a profound affect on all areas of manufacturing. It seems that everyday another multinational is forced into cutbacks – usually in the form of job losses – as the world tries to come to terms with the financial implications of the World Trade Center disaster.
It would therefore seem obvious to assume that the increasing number of alliances between the major industry forces is a means of consolidation of assets at this time of uncertainty. But this may not necessarily be the case.
Jeffrey Levy, chairman of Emcor Drake & Scull, feels it is just natural progression: "Companies are looking at what they have now and how they can expand. They are also looking abroad and saying 'we need to be there'. Rather than trying to penetrate the global market on their own they look towards gaining a foothold through mergers with established companies.
"Globalisation opens up so many options and allows companies to offer clients a lot more. Where once a company could offer a limited package, now it can provide a complete solution and at an even more competitive price."
This view is endorsed by Ken Dalton, chief executive of Oscar Faber, who believes the company's merger with American giant Aecom was an opportunity not to be missed, rather than a reaction to recent events: "It is a chance for us to expand into a different industry, letting us increase both our skill and client base. What happened in America has affected everybody's thinking, but our alliance with Aecom is purely a positive move, to ensure the company expands in the right direction."
Levy believes companies are only responding to their market: "Things have changed, in the old days companies tended to employ their own, in-house engineers. Nowadays they outsource as they realise it can be far better value for money. Merging allows companies to offer better, more rounded outsourcing deals."
It appears international mergers also offer a solution to the ongoing problem of skills shortages in the construction industry, as Levy explains: "Globalisation allows a company to combat the skills shortages by pooling the resources of its foreign network. For instance, we needed a number of signals engineers on a project recently and couldn't find what we were looking for over here – so we drafted people in from Australia and South Africa."
It could be argued that employing a foriegn workforce, whilst providing an immediate solution, does not help solve the long-term difficulties of skills shortages in the UK. However, Dalton says it should be seen as a positive step: "It is difficult to fill all skill sets in any country, so why not use the international resources available to you? It also helps to share workloads, when one economy is suffering work sharing can help."
An obvious concern arising from this trend is the effect it will have on the prices companies charge for their services. While this is good news for clients, as larger firms can become increasingly competitive, there is the worry that others may find it difficult to cope.
Levy agrees: "There is no doubt that globalisation is hugely beneficial to larger companies, through their ability to become increasingly competitive and also their opportunity to expand into other markets.
"At the other end of the scale I feel smaller companies will also be ok. They will not really feel the effects of mergers; they have their localised market, which will continue to support them. It is the medium-sized companies who try to go it alone that could suffer. When things get tough they may find it difficult to remain competitive, because they cannot lean on other areas of the business that remain successful to support them."
Dalton does not share this view: "I don't think mergers will affect any good businesses, whether they are large or small. If a business is a sound business, with a strong client base then it will be fine."
This is certainly a time of transition in the services sector. Levy is convinced the trend of company mergers is set to continue as more and more realise the benefits of combining resources. It will be interesting to see if those companies not thinking of expansion get left behind.
Source
Building Sustainable Design
