As speculated last month, Canada's WSP Global Inc. has won a key prize in the industry's merger-and-acquisition sweepstakes with a $1.35-billion accepted offer to buy U.S.-based global design giant Parsons Brinckerhoff.
The Montreal-based firm announced the deal on Sept. 3 with PB parent firm Balfour Beatty that is set to close in the fourth quarter, possibly by the end of October. Boards of both WSP and Balfour Beatty have approved the transaction, which includes a $1.24-billion purchase price and $110-million cash consideration.
The deal creates a $4-billion professional services giant and provides Balfour Beatty PLC with a healthy return on its $626-million acquisition of PB in 2009.
The sale, which could close by the end of October, would create a professional services giant of nearly 32,000 employees that WSP President and CEO Pierre Shoiry says would be the world's largest "pure play" consulting firm.
WSP ranks at No. 16 on ENR's list of the Top 150 Global Design Firms, with $2.13 billion in 2013 global revenue. PB reported 2013 total engineering and construction revenue of more than $2.6 billion. It ranks at No. 24 on the Top 150 design list, with $1.72 billion in global design revenue last year. About $924 million was in the US. The firm also reported more than $713 million in program management/construction management services revenue.
The planned deal also helps the Canadian company realize a goal told to investors and analysts in June to make a "transformational" acquisition that provides a major boost to its presence in the U.S. and in transportation and other infrastructure. It also nudges the firm closer to becoming a 45,000-employee firm by 2020, another goal Shoiry communicated to investors.
"WSP and PB are highly compatible in mission, vision and culture," Shoiry said in a Sept. 3 analyst call. "This one checked all the boxes." WSP notes about $25 million in cost "synergies," half of which will be realized within 12 months.
The U.K. parent still owns Atlanta-based buildings consultant Heery.
The transaction value of 8.8 times earnings before interest, taxes, depreciation and amortization (EBITDA) “is at the upper end of the range of valuation metrics” in recent, similar industry deals, says Andrej Avelini, managing director of industry financial manager-broker EFCG Inc. The agreed deal for URS Corp. by AECOM in July was about 8.5 times EBITDA. It also is set to close next month.
According to sources, acquisition negotiations for PB began with 24 strategic buyers and 24 private equity firms in the hunt.
WSP and UK-based Atkins emerged as the finalists but the latter firm and PB were in too many similar types of work.
George J. Pierson, PB president and CEO for the last five years, told employees that WSP and PB "cultures and values are nearly identical."
He is set to join WSP and its board as an executive board director, although any more specific role now or after the deal closure was not detailed in the announcement.
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