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GSF 2018: Consolidation and changes

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The number of mergers and acquisitions in a market is usually an indicator that a sector is in good health and set for growth. If that is the case, then the ground engineering market is doing well following a large number of deals completed in the last 12 months.

One of the biggest changes in the market was the collapse of Carillion at the start of 2018, which has had a knock-on effect for a number of businesses in the geotechnical market.

Whether businesses were affected by the demise of Carillion or not, it has given them food for thought and many are becoming more discerning when it comes to payment terms and the financial position of clients.

“Carillion did have a small impact on our piling business but we had already recognised the problem and started to address it to limit the effect,” says Keltbray managing director for piling, Stuart Norman. “As a result of Carillion’s collapse, we review clients’ payment terms in more detail than before.”

However, more change is needed, as RSK divisional director for geoscience and engineering George Tuckwell explains: “Despite widely condemned supply chain practices of Carillion, there is still a great deal of similar behaviour of pressure downwards on rates, commoditisation of expert services and long delays in payments.”

Keller managing director Jim De Waele says: “Fortunately, we were not badly affected by the collapse of Carillion. We protect our business by taking out bad debt insurance and while this is not a complete fail-safe it does ensure that the company is constantly reviewing customers’ credit worthiness.”

Some of the recent acquisition deals may have been directly driven by the Carillion effect but the impact of low margins and cash flow has been a driver of others. “There has been consolidation of some poor-performing businesses, but it appears to be expansion that delivers no obvious benefit for clients,” says Socotec managing director of geotechnical services, Philip Ball.

However, Tuckwell, who has been involved in a number of recent acquisitions, believes that the changes do improve the market. “For RSK, it has consolidated a substantial internal supply chain and has also provided multiple offerings and, therefore, entry points into the market,” he says. “We are also capturing a greater part of the market share to allow control over supply and quality.”

Whether the rate of mergers and acquisitions is a good or bad thing for the market, many business leaders expect there to be furthe rmarket changes in the coming 12 months, especially following the news in May this year that Skanska had put Cementation up for sale.

”Over the next year, I expect there to be some repositioning and consolidation of the foundation market combined with investment in resources in preparation for the major planned infrastructure works,” explains Bachy Soletanche managing director Chris Merridew. “One of the drivers is the prospect of HS2 foundation work stretching the resource capacity of the specialist contractors.”

Norman also expects there to be further mergers and acquisitions in the market due to the competitiveness and number of players in the sector.

Geotechnical mergers and acquisitions in the last 12 months

• Aspin Group was bought out by Sandton in March 2018

• Atkins acquired by SNC-Lavalin in July 2017

• Bentley Systems acquired Plaxis in March 2018

• Central Piling sold a 25% share of its business to HG Construction in April 2018

• Franki Foundations bought out Able Piling and Martello Piling in 2017

• Gavin and Doherty Geosolutions acquired Applied Geotechnical Engineering in September 2017

• Golder Associates bought out the Alan Auld Group in November 2017

• Jacobs acquired CH2M in December 2017

• John Wood Group, now trading under the name Wood, acquired Amec in October 2017

• Keller made a number of international acquisitions including Moretrench in the US

• RSK acquired Ian Farmer Associates inNovember 2017, CJ Associates in January 2018, Central Alliance in March 2018 and NDT Services in April 2018

• Socotec changed name from ESG in October 2017 (following acquisition by the former in March 2017) and bought out  ITM Monitoring in March 2018

• Waterman Group was acquired by CTI Engineering in May 2017

• WSP acquired Opus in December 2018

• Other notable changes include Donaldson Associates and Flint & Neill rebranding as Cowi in early 2017, Carillion going into receivership in January 2018 and Skanska putting Cementation up for sale in May 2018

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