Industrials sector comment – September 2010

Date

The consulting engineering sector has recently been the subject of a number of high profile mergers and acquisitions.

With concerns around infrastructure and public sector spending, the need for consolidation in the sector has never been greater. This environment is pushing many large groups to utilise their cash reserves for acquisitions. Many have kept their powder dry over recent years and have been strengthening their balance sheets in order to pursue multiple acquisitions.

This summer AECOM spent over £500m on three acquisitions involving Davis Langdon, McNeil and Tishman. Earlier, URS won the highly contested £223m acquisition of Scott Wilson leaving CH2M Hill to lick its wounds. Other transactions have seen moves the other way across the Atlantic with WS Atkins acquiring PBSJ for £180m and Arcadis acquiring Malcolm Pirnie. Meanwhile, last year’s £330m acquisition of Parsons Brinckerhoff by Balfour Beatty marked a major push by the prime contractors into the consulting engineering arena with likes of Costain also likely to pursue similar opportunities. At the same time European consolidation has gathered pace with Grontmij’s acquisition of Ginger and the Scandinavian groups COWI and Ramboll continuing to pursue bolt-on acquisitions.

Clearwater has previously advised on the sale of Flint & Neill to COWI, RW Gregory to RPS and DGP International to Scott Wilson and we see yet further transactions taking place in the next 12 months. The focus is likely to turn to those smaller cap groups and mid-sized privately-owned companies that operate in particular market niches. Those active in the healthcare, nuclear, pharmaceutical, power generation, renewable energy and specialist manufacturing sectors are likely to be particularly attractive to cash-rich groups, especially if they would offer the purchaser access to the Asian, Central & Eastern European and Middle Eastern markets.

Deals

Barclays Private Equity has backed the £75m secondary management buyout of Allied Glass Holdings Ltd, a manufacturer of glass bottles and containers for the beer, food, spirits and wine markets. The transaction provides an exit for CBPE, formerly Close Brothers Private Equity, which acquired the company from Associated British Foods plc in 2002.

Endless has backed a management buyout of Amdega Ltd, a manufacturer of timber-frame conservatories, gazebos, orangeries and summer houses. The transaction will allow the management of Amdega to expand its market presence in both the consumer and commercial markets including the hospitality and leisure sectors.

CVC Capital Partners and Standard Chartered Private Equity have backed the management buyout of Avdel UK Ltd, a manufacturer of blind fastening products and associated installation tools, from Acument Global Technologies LLC. The company will be renamed Infastech Ltd and includes the Global Electronics & Commercial business of Acument based in Singapore.

Colfax Corp has acquired Baric Group Ltd, a supplier of fluid handling and lubrication equipment for critical applications in the oil and gas, petrochemical and power generation industries. Baric’s products will complement Colfax’s range of highly engineered lube oil systems and will offer the group an enlarged installed base in Asia, Europe and the Middle East.

American Superconductor Corp has acquired a 25% stake in Blade Dynamics Ltd, a designer and manufacturer of wind turbine blades based on proprietary materials and structural technologies. Blade Dynamics specializes in blade technologies that increase the efficiency and performance of very high power wind turbines. Dow Chemical Co’s Venture Capital unit has also made a minority equity investment in the company.

Hunting plc has acquired Innova-Extel Holdings Inc for £80m. Innova-Extel is a US supplier of harsh environment electronics technology for the global energy industry including printed circuit boards for down-hole logging tools. The company has a particular focus on measurement-while-drilling systems for directional drilling solutions and as a result it will enhance the range of products within Hunting’s Well Construction portfolio. The transaction provides an exit for American Capital, a US private equity firm.

Rical Group Ltd has acquired Kenwell Precision Diecastings Ltd, a provider of metal die-casting services. Rical specialises in the sub-contract manufacture of die-cast metal components from its seven manufacturing operations in the West Midlands.

Assa Abloy AB has completed its acquisition of Paddock Fabrications Ltd, a manufacturer of multipoint locks and complementary hardware. The acquisition complements Assa Abloy’s existing Yale multipoint lock business and enhances its position in the growing UK market for multipoint locks.

WS Atkins plc has acquired PBSJ Corp, a US provider of design engineering, environmental, planning and programme management services, for £180m. The transaction enhances WS Atkins’ presence in the North American market and gives the group access to the environmental, infrastructure and transportation sectors.

Chemring Group plc has acquired Roke Manor Research Ltd from Siemens AG for £55m. Roke Manor Research provides contract research, product development and low volume production for communications and network equipment, sensors and signal processing equipment used in countermeasures, counter-improvised explosive device (counter-IED) equipment and threat detection equipment for counter-terrorism and military applications.

AECOM Technology Corp has acquired Tritech Rail Ltd, a provider of consulting engineering, design and technical services for the railway industry. Tritech will be integrated into AECOM’s European Transportation division where it will be able to cross-sell the group’s other services which include clearance and structure gauging analysis, feasibility studies and infrastructure surveying.

Senior plc has acquired WahlcoMetroflex Inc (WMX), a US manufacturer of industrial dampers, exhaust gas systems and expansion joints, for £8.5m. WMX’s range of products for the safe handling of hot gases in the chemical processing, power generation and refinery sectors will complement those of Senior’s Flexonics Pathway division.