Aiming to reach growth projections and create a bigger presence in an expanding environmental consulting market spurred by coming political and climate change trends, Montreal-based design giant WSP Global Inc. said it would acquire Golder, a large employee-owned sector specialist for about $1.14 billion.
The cash deal, announced Dec. 3, "significantly accelerates our growth ln a big demand sector," WSP president and CEO Alexandre L’Heureux told analysts in a post-announcement call. He noted Golder's strength in global environmental and earth sciences consulting, particularly to Fortune 500 companies, mining and energy firms and other private-sector clients, which he said accounts for 70% of its revenue.
The purchase price is about 10.4 times the firm's earnings before interest, taxes, depreciation and amortization (EBITDA).
Deal financing includes a $960-million bank loan and $240 million from GIC Private Ltd., Singapore’s sovereign wealth fund, and British Columbia Investment Management Corp., an institutional investor.
WSP ranks seventh on ENR's Top 150 Global Design Firms list, reporting about $5.43 billion in 2019 engineering revenue, while Golder ranks at No. 37, with $1.1 billion in global design revenue reported for last year.
L’Heureux said after the acquisition closes, expected by mid-2021 with approvals needed and potential of a rival offer, environmental based work would generate 25% of WSP total revenue of about $8 billion—with transportation consulting making up about 47% and buildings related activity the remainder.
He said about 14,000 of the firm's new total of 54,000 global employees would focus on accelerating the world’s “green transition," noting Golder's large stable of "world class" environmental staff experts, particularly in developing areas such as regulation of PFAS chemicals.
"Fundamental trends are there and won't change," he said. "We are entering a market with big growth opportunities for an adviser like Golder." The environmental consultant, based in Mississauga, Ontario, has about 7,000 employees in 155 global offices.
"Now is the time to be future ready," said L'Heureux, also noting WSP's more recent larger involvement in climate change related initiatives. "We want to own this space."
L'Heureux emphasized that the deal was focused on "revenue synergy," with not much overlap in the two firms' environmental work and client roster, since WSP is more public-sector focused. The deal has a cost synergy of about 35% over two years, he said, but noted no staff cuts in "client facing" positions.
"This makes integration easier," he said, also pointing to Golder strength in Australia, Canada and Europe's Nordic region.
Hisham Mahmoud, Golder president and CEO, said the deal would provide "long-term benefits for our people." He noted the deal's "overwhelming" approval by about 820 firm partners, who own nearly 83% of its shares. With the firm privately held since 1960, one industry M&A consultant speculated on motivation to "cash out" or concern about "feeling squeezed competitively at their size."
Said another industry management expert: "I think the COVID -19 pandemic shook their confidence in the independent, employee ownership model so they sought a safe harbor and felt WSP provided a great platform for them to lead the combined environmental business."
L'Heureux said Golder "performed well" in the last three quarters despite the pandemic and had higher profit margins than WSP.
The new parent's stock, traded on the Toronto exchange, was up more than 11% at market close on Dec. 3.
Mahmoud, a former SNC-Lavalin executive who was named Golder's first non-internal CEO about five years ago, will not be part of the new integrated firm, he told ENR. He will remain during the transition but did not disclose future plans.
According to Mahmoud, Golder was not seeking a sale and was recently approached by WSP. He said the firm "has a gap where Golder fits."
Rumors were widely circulating earlier this year that WSP was in talks to acquire industry giant AECOM, but that market impact of the pandemic stalled or stopped discussions in recent months.
L'Heureux declined to confirm those discussions to ENR, a consistent position he and WSP have taken in response to the speculation. One industry executive with knowledge of the firm speculated WSP could still make a future buy of an AECOM unit.
The acquisitive WSP purchased global engineer Louis Berger in 2018 for $400 million, followed by smaller environmental sector niche buys. Its more transformative acquisition was the 2014 purchase of US-based transportation specialist Parsons Brinckerhoff for $1.3 billion from UK contractor owner Balfour Beatty.