Critical Success Factors for Construction Industry Mergers and Acquisitions (2012)

The construction industry has a long history of mergers and acquisitions, largely in response to the changing market conditions. Evidence suggests that the size that a company needs to be to compete successfully in the marketplace has been rising year on year for the past 30 years. In addition, the Egan report (1998) can be commended for further driving M&A activity in the sector in the past decade. Despite the effects of the global recession, the trend towards consolidation in construction businesses is still strong.

Notable high-profile UK acquisitions in the past year include Scott Wilson by URS; Eaga by Carillion; Davis Langdon by AECOM; Archial Architects by Ingenium; and Drivers Jonas by Deloitte. Further to this, contractors have capitalised on the demise of businesses such as Connaught and ROK by purchasing profitable divisions from the administrators. In addition, the total number of construction firms between 2008 and 2009 decreased by 6% (ONS 20101), however only 31% of these were a result of insolvencies or bankruptcy (ONS 20102), further highlighting the continued consolidation within the sector. Early acquisition and integration guides emerged such as Why do mergers miscarry?

Followed by a vast quantity of modern literature trying to explain how to eliminate failure. Despite this, a high failure rate still exists in M&A. Similarly, with the construction industry accounting for 10% of Gross Domestic Product, it is more alarming to note the lack of literature on construction M&A. Construction can be classified separately from other industries due to the project-based nature, with many smaller firms taking most of the market share, in addition to the bespoke nature of construction projects. These characteristics mean that there are fundamental differences in the way that a construction business would integrate their acquisition from a manufacturing business.

It is expected that consolidation within the construction industry will accelerate over the next decade as medium-sized players within the industry join together, or are acquired by a larger business as part of an effort to compete on a level playing field. In support of this, it is noted that M&A waves are linked with economic recovery. There is a large volume of existing management literature available on the subject of M&A, and this dissertation will attempt to organise this into relevant success factors. There are many reasons highlighted for the failure of M&A. However, in an attempt to remain as concise as possible, the factors will be assessed based on whether they are significant enough to influence the success before inclusion.

The second part will focus on a desktop investigation into the practice of M&A in the construction industry. This additional secondary research is required due to the large differences between the construction industry, and generic M&A theory. Further research and fieldwork will then be carried out to draw connections between M&A theory and industry practice ensuring it is specific to the construction industry, before forming critical success factors.

Research Aim: to identify the critical success factors for construction industry mergers and acquisitions. Dissertation objectives:

• To identify the strategic reasons for merging with /acquiring a company
• To identify causes of success and failure of mergers and acquisitions in the construction industry
• To propose critical success factors for construction industry mergers and acquisitions

• 12,000 words – 92 pages in length
• Excellent use of literature
• Good use of cases
• Good analysis of the subject area
• Includes interview transcripts

1: Introduction
Rationale
Aims and objectives
Dissertation structure

2: Business performance
Strategic Objectives of Mergers and Acquisitions
Success of Mergers and Acquisitions
Strategic Fit
Cultural Fit
Integration Team
Integration Plan
Management Team Formation
Clearly Defined Leaders
Culture Integration
Conclusions

3: Construction industry M&A
Objectives of M&A in the construction industry
Analysis of construction industry M&A
Acquisition search
Acquisition strategy
Strategic fit
Integration
Cultural fit & integration
Retain management
Retain key talent
Operational, commercial and financial controls
Summary of Construction Industry Mergers

4: Concluding the literature review
Merger strategy findings
Profitability/value
Efficiency gains
Market power
Management ego
Acquire people and knowledge
Critical success factors findings
Acquisition search
Strategic fit
Integration team
Integration plan
Integration and cultural integration
Management retention
Operational, commercial and financial controls
Summary
Further steps and research questions

5: Research Methods
Data type
Data collection method
Research sample
Ethical considerations
Conclusions and next steps

6: Data collection and analysis
Findings
Cultural fit
Cultural integration
Management team
Management retention
Communication
Strategic fit
Retain key-talent
Acquisition team/plan
Work practices
Success factors
Key learning areas
Conclusions

7: Conclusions and recommendations
Statement of findings
Recommendations

References

Appendices