CH2M and Atkins Are Mum on Merger Speculation
U.S. and U.K. consultants won't comment on Jan. 30 British media reports of link discussions.
A CH2M spokeswoman declined to confirm or deny UK media reports published on Jan. 30 that the firm was considering an acquisition of, or merger with, England-based consultant Atkins.
“As a matter of policy, we don’t comment on rumors or speculation, as is the case here,” she said. An Atkins spokesman said: “it is our policy not to comment on rumour and speculation. That is our final response.”
Media report that the two firms, which have worked together on the UK's high-speed rail project now under way between London and northern England cities, had discussed a link late last year, with speculation that the economic timing would be good for a CH2M purchase, as the British pound has dropped in value against the U.S. dollar.
An industry source noted that Atkins “seriously wanted to merge” with consulting giant Parsons Brinckerhoff in 2014 before that firm’s purchase by Canada-based WSP Global for $1.35 billion.
"It makes potential sense," says one AE management consultant. "With both firms having difficulties, issues, etc., it’s a potential union which could work." He cites impacts to CH2M "from multi-year, fixed price type, high-risk projects. It’s been a story for close to two years." He adds that "Atkins is too small to be big, too big to be small, and somewhat capital constrained." The consultant also notes frequent recent changes in its U.S. leadership. But he indicates the firms' markets served "are more complimentary than otherwise."
CH2M reported about $5.5 billion in 2016 revenue and has 24,000 global employees; Atkins reported about $2.33 billion and has 18,000 staffers. The firms rank at No. 8 and No 11, respectively, on ENR’s list of the Top Global Design Firms.
CH2M disclosed in a U.S. Securities and Exchange Commission filing in mid-January updated results for its third quarter ending Sept. 30, that include costs of up to $70 million for a new restructuring plan that realigns the firm completely by three client groups versus vertical markets, it said.
A spokeswoman said costs cover severance for up to 800 administrative position cuts, mostly in North America. She said the realignment, to be fully implemented by mid-year, would result in $90-100 million in annual savings.
CH2M also said quarter revenue declined 6% from the previous year to $1.28 billion and that charges on two fixed-price EPC projects—a tollway in Texas and a combined-cycle power plant in Australia—generated a quarter operating loss of $108 million.
Despite a 15% backlog drop as projects were completing, Chairman and CEO Jacqueline Hinman said it was “healthy at nearly $9 billion and our gross margin opportunity pipeline has grown by 35%.” She added that the project charges “overshadow improvements in our core business, which remains sound despite the headwinds our broader industry is facing.”