by Shane Henson — January 20, 2012—If a new survey by Barclays Corporate holds true, many mergers between and acquisitions of facilities management providers in the United Kingdom can be expected in 2012 as the sector looks to consolidate.
Barclays Corporate carried out a survey in Q4 2011 among the U.K.’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.
According to the survey, an overwhelming 83% of FM providers believe mergers and acquisitions (M&A) activity will pick up this year, with half (50%) of providers suggesting that there is a good chance they would be making acquisitions. A further 21% said they were already eyeing acquisition targets. Interestingly, nearly 80% 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.
Also, the findings show that despite the ongoing European sovereign debt crisis and predictions of a slow and protracted recovery, facilities managers are pragmatic about how long it will take before the U.K. economy picks up. More than half (54%) expect the economic climate to improve within three years, while another 33% predict a pickup within the next three to five years. In the near term, the majority of operators believe the U.K. will be as good a place (50%) or a somewhat better place (42%) to do business in 2012.
A significant number of FM companies surveyed stated that the low business confidence currently experienced in the U.K. is affecting contract pricing and the process of awarding contracts. The main challenges outlined by survey participants centered 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 finalize and secure contracts, with FM companies having to exhibit a deeper understanding of customer requirements, which can change at very short notice.
There is, however, optimism within the industry given expectations around expansion, notes Barclays Corporate. An overwhelming majority, 96% of FM firms surveyed, plan to expand their businesses in 2012. Most are eyeing domestic expansion and, after the U.K., Western Europe and North America were the preferred overseas regions for expansion, with a 38% and 21% share of the votes respectively.
When it comes to outsourcing, a substantial 84% of FM providers said they believed outsourcing would increase if economic growth continues to stagnate and of those 21% 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. About 42% expect to increase staff numbers by up to 10%, while a further 13% predict headcount growth of between 10 and 20%. Approximately 33% expect staff numbers to remain the same, and even better news is that only 8% of those asked said they planned to cut jobs during the forthcoming year.
