Merger and acquisition (M&A) activity in the UK facilities management (FM) sector slackened in the final quarter of 2014, after two quarters of robust activity. A total of 18 deals were recorded over the last three months of the year, according to the latest Grant Thornton UK LLP Insights into Facilities Management report.
As a result of the slow-down, the full-year total was at the joint lowest level seen in the post-financial crisis period, with 82 deals recorded in 2014, representing a 12 per cent drop on the previous year’s total of 93. Meanwhile, that winter quarter saw no major transactions compared with previous quarters and the value of deals where financing details were disclosed only reached around £46m. A primary factor behind the overall drop in M&A activity in 2014 according to the accounting firm was a marked fall in the number of acquisitions by trade buyers, both local and international. The only offset to these falls came from private equity buyers, which became much more visible in the market as leveraged lending conditions began to improve significantly.
Despite the slow-down, the outlook for the UK’s FM sector in 2015 should remain relatively positive. A drive towards the outsourcing of services and the resulting shift in FM activity from the public to the private sectors will continue to make the sector attractive, it’s claimed. Another important factor, and somewhat unknown is the potential for a knock-on effect on the M&A markets as a result of the dramatic fall in oil prices. The sharp fall may encourage businesses to take a more short-term approach but it could also encourage utilities to be more aggressive in the FM area.
David Ascott, Corporate Finance Partner at Grant Thornton UK LLP, said: “2014 was a mixed bag in terms of M&A activity. The year started fairly sluggishly but rapidly picked up with two strong consecutive quarters, only to fall off again in the final quarter. Nevertheless, the fundamentals in the FM sector remain strong and there clearly will be M&A opportunities into 2015, so we should remain relatively positive.
“The M&A outlook in the FM market in 2015 is undoubtedly clouded by the electoral uncertainty in the first half of the year. This will probably put a brake on activity levels as in the wider corporate market but we would expect a strong recovery later in the year as the fundamentals of consolidation and strengthening service offerings come to the fore.”
Within the deals over the last year, FM sectors continue to dominate, with 51 recorded deals in that area compared with 31 deals in the hard FM area. M&A activity was particularly strong in the cleaning and security sectors and slowed in the catering and hygiene sectors. Visit www.grant-thornton.co.uk.
