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M&A activity finds it hard

28 March 2012

In 2011, the number of mergers and acquisitions involving the UK facilities management sector has reached the highest count since 2008 and the credit crunch, according to research analysed by Grant Thornton. Deal numbers are expected to remain high as some firms pursue scale while others seek new service lines.

"M&A in facilities management continues to be dominated by the hard FM sector, which includes Maintenance and Fit-out as well as Mechanical and engineering. Hard FM accounted for about two thirds of FM deals in 2011," commented David Ascott, corporate finance partner at Grant Thornton UK LLP.

Examples of hard FM deals included the sale of divisions of Kinetics Group to SCO Renewable Energy, the acquisitions of Linbrook Services by Wates Group and the sale of certain house building assets by Rok Ltd.

"Meanwhile, low margin FM providers were pursuing scale to protect earnings in a tough economic environment. These included cleaning, catering and security guard services. Facilities management businesses across the board increasingly seek to bolt on higher margin niche capabilities to offer even more comprehensive bundles of services."

UK facilities management assets were the target of 101 announced M&A transactions with a total value of £656 million in 2011*. That represents a 13% increase in the number of deals compared to a year earlier, even though the total value dropped by 20% (2010: 89 deals valued at £816 million).

Only one 2011 deal - the £306 million acquisition of EAGA plc by Carillion - had a reported value in excess of £100 million. By comparison, British facilities management assets had been the target of 110 M&A deals valued at £1.2 billion in 2008. The 2011 figures include 19 takeovers backed by private equity sponsors, while 11 acquisitions were made by foreign bidders.

"We are seeing signs that the M&A market in facilities management will remain highly dynamic in 2012 and will continue to offer up strong numbers of smaller deals. Beyond the hard FM space, an area that is attracting increasing interest is the provision of data centre services. As the use of cloud technology grows and businesses look to move their data away from internal servers, FM players in the data services area will surely attract more attention. Consultancy based FM businesses are also likely to generate increasing interest among potential buyers, attracted by the higher margins and high barriers to entry these businesses can offer," concluded Ascott.

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