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FM firms expanding service offering boost M&A in first half

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Merger & acquisitions (M&E) in the UK facilities management (FM) sector in the smaller and mid-market segments has seen considerable activity throughout the first half of the year. This activity has been driven by domestic businesses seeking to build scale through consolidation or plug gaps in their skill sets, new research has found.

The sector has seen a strong run of activity, with the volume of deals in the first half of the year totalling over 50% higher compared to the first half of 2012.

Analysis by business and financial advisers Grant Thornton UK LLP, in its quarterly Insights Into Facilities Management, showed a total of 25 deals closed during the second quarter of 2013. Although marginally fewer than in the first quarter in 2013, the first half of the year still remains the most active period since 2008.

Although the number of international deals were down slightly on quarter one of 2013, the potential for larger international acquisitions remains strong as non-UK businesses look to tap into the expertise of the UK’s highly developed players. Prominent international groups such as Ferrovial and Schneider Electric have all completed deals in the UK market, and Grant Thornton UK LLP expects to see this trend continue in the second half of 2013.

The report shows a shift towards activity in the ‘hard’ FM space, which includes companies involved in the physical maintenance of buildings including its electricity, mechanical and landscape assets. This follows a period of activity dominated in the softer FM side, which covers the areas of such as catering, cleaning and security. The maintenance and fit-out sector was especially active with a total of eight deals being recorded (including the Kier/May Gurney deal), the highest number recorded in one quarter since 2008.

David Ascott, corporate finance partner at Grant Thornton UK LLP, commented:

“The past few months have shown some clear signs of a strategic shake-up in the FM sector, with large public company mergers like Kier/May Gurney and Balfour Beatty Workplace pointing to a reshaping of the landscape, as consolidation and portfolio restructuring take hold.”

“Clearly, seeking opportunities to create economies of scale is important in the current environment, but many FM outfits are thinking beyond this with the strategic driver for consolidation being to better position themselves to offer larger, bundled service contracts – particularly to local government.”

 

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