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M&A activity in the facilities management sector bounces back in Q1 of 2015

Merger and acquisition (M&A) activity in the UK’s facilities management (FM) sector has bounced back in the first quarter of 2015, according to the latest Insights into Facilities Management report from Grant Thornton UK LLP. A raft of smaller and mid-cap acquisitions bumped the deal volume figure up above the 12-month average, driving this reversal of the previous quarters' trend.

A total of 23 FM deals were recorded in the period – an increase of 28% against the previous quarter and a 44% rise against the same quarter of 2014. Yet this increase in volume masks the low value of the deals, with the majority qualifying as small-cap or lower mid-market level. Compared to previous quarters, no significant larger FM deals were recorded during Q1 2015, with the largest deal with a disclosed value being the acquisition by Nordic group ISS of GSH’s technical division – a deal which valued the business at £53 million.

The quarter also marked the end of the recent dominance by the soft FM sectors in terms of subsector activity. Dealflow in the soft sectors was just higher than that in the hard FM space (12 versus 11 deals). Of the soft FM sectors, security remained the most active, continuing the trend of the last few years.

Commenting on the findings, David Ascott, Partner, Corporate Finance, Grant Thornton UK LLP, said: “Looking ahead, the Q1 M&A activity gives no indication of any meaningful changes to the trends that have dominated the FM sector in recent quarters. With a market that continues to be driven by consolidation activity at the smaller end of the scale, plus the occasional larger deal, the latest quarter does nothing to indicate current trends will be altered in the short term. While the second quarter of 2015 will see the completion of a large deal between Kier and Mouchel, for £265 million, we believe M&A activity should also benefit from the clear Election outcome and more positive sentiment for public sector outsourcing.”

Within the FM deals that took place over the last quarter, the majority of deal activity came from domestic acquirors – in line with previous quarters. There were no PE-backed deals in spite of the resurgence of these in 2014 and the number of acquisitions classified as international doubled, although many of these involved companies with a well-established presence in the UK.