One in nine companies 'are ripe for takeover'

By Tom Bill and Tom Bill Tom Bill2009-07-24T00:00:00+01:00

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One in nine construction companies could change ownership as a result of the recession, according to financial analyst Plimsoll

Its latest UK Construction Industry report concluded that about 80 of a total of 748 firms in its study were ripe for acquisition thanks to 鈥渁 surprising number鈥� of cash-rich firms in the market, which it said was likely to produce a 鈥減rolonged period of consolidation鈥�.

David Pattison, the report鈥檚 author, said: 鈥淎ny director worth his salt would agree that there are simply too many companies chasing too little market. With many directors eyeing the exit door and highly leveraged buyouts consigned to history for the time being, it really is a buyers鈥� market out there for cash-rich companies.鈥�

The report also identified 239 companies as potential buyers, although did not reveal names.

It really is a buyers鈥� market out there for cash-rich companies
David Pattison, Plimsoll

Pattison said: 鈥淒ue to record low interest, money sitting on the balance sheet is generating nothing. One company has a 拢36m cash pot: a whopping 80% of turnover. These companies are now in a position to buy up large chunks of market share at rock bottom prices.鈥�

Despite the forecast, some were sceptical that contractors would spend cash buying rivals. Peter Gray, a partner and takeover specialist at Cavendish Corporate Finance, said: 鈥淎cquisitions are fraught with danger at the best of times because of problem contracts that can come out of the woodwork. The market may pick up later in the year but now it is the quietest I鈥檝e ever known.鈥�

The report also ranked contractors as trading partners in the recession, based on turnover growth and overall financial strength. It cited Galliford Try, Mansell, Morgan Ashurst, Skanska UK and Wates as among the best in the industry.