With the Oct. 17 announcement that Dutch design giant ARCADIS NV will acquire London-based EC Harris LLP, yet another U.K.-based engineering consultant with broad global reach is set for new ownership
In a deal expected to be completed in November, Arnhem-based ARCADIS would issue three million shares to EC Harris’ 180 partners and pay an additional cash amount, which was not disclosed.
Avram Fisher, industry sector analyst for BMO Capital Markets, New York City, estimates the acquisition value at between $150 million and $200 million, with, he says, "roughly $50 million in stock and the remainder in cash."
ARCADIS says the acquisition would add a firm that has 2,600 employees in 48 global offices, with particular growth in the Middle East and Asia. According to the prospective parent, those regions provide 32% of EC Harris' revenue, with 57% derived in the U.K.
The U.K. firm, which specializes in cost and infrastructure asset management consulting and program management, had more than $400 million in revenue for its financial year that ended in April, according to ARCADIS. The Dutch firm reports $2.6 billion in global revenue, according to ENR’s list of the Top 150 Global Designers, on which it ranks at No. 10. EC Harris did not report its 2011 revenue figure to ENR.
With the EC Harris purchase, ARCADIS says it would become a firm with 19,000 global employees, including 6,000 in asset management and 2,000 in the U.K.
According to ARCADIS, EC Harris CEO Philip Youell would stay on in that role and join the parent firm’s “senior management committee.” The U.K. firm’s chairman, Richard Clare, would remain an adviser and “step into a wider strategic client development role in ARCADIS,” says the Dutch firm.
“This merger is a major step forward in realizing our strategic ambitions,” says ARCADIS CEO Harrie Noy. “With EC Harris, we get a leading position in project management and related services while [EC Harris'] built-asset consultancy approach perfectly fits our goal of expanding our services at the high end of the value chain.” Also, he says, “Our strengthened position in the U.K. market will allow us to provide a wider portfolio of services to the clients of our combined firms."
However, ARCADIS also projects flat earnings in 2011—“at the low end of the prior zero-to-5% growth target,” says Fisher. The firm notes strength in South American mining and U.S. environmental cleanup work but weaknesses in the budget-constrained U.S. water sector and in central and Eastern Europe, he adds.
Recently, ARCADIS purchased U.S.-based water engineering firm Malcolm Pirnie and owns U.S. architect RTKL. Other recent acquisitions of British consultants by competitors include, in a deal set to close next month, Halcrow by Denver-based CH2M Hill Cos and, in two acquisitions completed last year, Scott Wilson Group by URS Corp., San Francisco, and Davis Langdon by Los Angeles-based AECOM.
“U.K. firms appear attractive despite the weak domestic market for their global exposure to the Middle East, Africa and Asia,” says Fisher.