Facilities management sector set for further consolidation in 2012

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The FINANCIAL — An overwhelming 83 percent of FM providers believe M&A activity will pick up this year with half (50 percent) of providers suggesting that there is a good chance they would be making acquisitions. A further 21 percent said they were already eyeing acquisition targets, according to Barclays.

 

Interestingly, nearly 80 percent said they were confident they would not become a takeover target themselves in the next 12 months – suggesting that larger providers will be adding smaller peers in most instances.

 

Barclays Corporate carried out a survey in Q4 2011 amongst the UK’s largest FM providers to understand how facilities managers viewed the prospects for the economy, the industry and the outlook for their own businesses in 2012.

The findings show that despite the on going European sovereign debt crisis and predictions of a slow and protracted recovery, facilities managers are pragmatic about how long it will take before the UK economy picks up. More than half (54 percent) expect the economic climate to improve within three years, while another 33 percent predict a pick up within the next three to five years. In the near term, the majority of operators believe the UK will be as good a place (50 percent) or a somewhat better place (42 percent) to do business in 2012.

A significant number of FM companies surveyed stated that the low business confidence currently experienced in the UK is affecting contract pricing and the process of awarding contracts. The main challenges outlined by survey participants centred around margin pressure. Selling at a loss to win market share is considered a threat to the industry as the continued price competition and subsequent margin pressure is unsustainable in the long-term. In addition, FM companies reported that in this highly competitive environment, it takes much longer to finalise and secure contracts with FM companies having to exhibit a deeper understanding of customer requirements, which can change at very short notice.

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There is however optimism within the industry given expectations around expansion. An overwhelming majority, 96 percent of FM firms surveyed, plan to expand their businesses in 2012. Most are eyeing domestic expansion and, after the UK, Western Europe and North America were the preferred overseas regions for expansion with a 38 percent and 21 percent share of the votes respectively.

When it comes to outsourcing, a substantial 84 percent of FM providers said they believed outsourcing would increase if economic growth continues to stagnate and of those 21 percent said they expected a significant increase.

With expansion, whether through acquisition or organic growth of an existing footprint, FM providers are expecting to increase headcount during the next 12 months. 42 percent expect to increase staff numbers by up to 10 percent while a further 13 percent predict headcount growth of between 10-20 percent. 33 percent expect staff numbers to remain the same and better news is that only eight percent of those asked said they planned to cut jobs during the forthcoming year.

 

 

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