The Boom of M&A in Engineering and Construction

Benefits of M&A Engineering

Due to the market’s contribution to the national economy, it is unsurprising there is a high level of engineering M&A activity. KBS Corporate’s research team engage with hundreds of parties in the sector on an annual basis, leading to 10 business sales in the first six months of 2023. Interest is primarily generated by trade buyers. However, we are observing increased engagement from private equity investors.

Clarke Banks Group is a great example of M&A interest in the engineering sector. The business specialises in fire safety engineering and building control and attracted over 160 interested parties. Assent Building Control was the successful buyer – a business that was acquired itself by Alpina Partners in 2017 with the assistance of KBS Corporate.

So why are buyers looking to expand and invest in the engineering sector? Several factors are being considered, for example:

• Revenue and profitability — M&A in the engineering market allows businesses to expand their capabilities and, subsequently, their work capacity. Size gives a distinct advantage in the market, allowing companies to undertake more significant projects and improve both revenue and profitability by streamlining costs.
• Risk reduction — An important goal of M&A is to mitigate risk. An organisation with a more diversified geographic footprint can reduce the impact of regional risk across the UK.
• Increased agility and resilience — Engineering firms that explore the M&A space and specialise in multiple disciplines can demonstrate considerable agility and resilience to market trends.

M&A Engineering Strategies

Trade buyers and private equity investors are looking to achieve the following with engineering M&A:

• New region access — Completing a local acquisition allows buyers to establish a sustainable presence in a new national or international market.
• Improved capabilities — An acquisition is an effective way to move into an adjacent market and establish synergies between business divisions.
• Consolidation — By consolidating the market, large businesses operating at the forefront of a particular sector can further cement themselves as industry leaders.
• Vertical integration — Some businesses look to take more control of activities in the value chain, allowing engineering firms to offer a complete end-to-end solution comprising consultancy, design and implementation.

Improving the Odds of Engineering M&A Success

KBS Corporate has a proven track record in engineering M&A, working with both experienced and first-time buyers and sellers.

While current market trends and conditions can influence your success in the engineering sector, there are ways in which you can improve your chances of success when selling or acquiring a business:

Pre-Deal and Pre-Negotiation

• Assess strategic similarities — Buyers will take their time when assessing the operational similarities a target company may have with their own. A seller should look to refine their business model, ensuring all activities are being operated as effectively as possible, while developing a culture to improve overall productivity.
• Be prepared for due diligence — Due diligence is a comprehensive step in any business sale, allowing buyers to ensure their financial and operational assumptions are correct. Buyers will need to be prepared to share key documentation when exploring engineering M&A.
• Identify key talent — Understanding who are the key personnel within a company is critical. Ensuring all vital positions are aligned before opening negotiations will ensure a smooth transition.

Post-Deal

• Integrate talent — Having retained employees working alongside an existing workforce can ensure that shared experience and knowledge will optimise future potential.
• Strict control mechanisms — It is important to monitor project progress from the get-go, observing how new capabilities are benefitting overall workflow.
• Culture alignment — Culture integration can help a company successfully align with a new acquisition, minimising disruption across operations.

Successful KBS Engineering Mergers and Acquisitions

The deals below illustrate KBS Corporate’s success in the engineering M&A industry:

• Clarke Banks Group was sold to Assent Building Control in 2023. Clarke Banks offers a variety of compliance solutions to the domestic and commercial construction markets, including building control approval and fire safety engineering. Assent was acquired by Alpina Partners in 2017 in a deal managed by KBS Corporate. Under Munich-based Alpina Partners, Assent has grown into one of the UK’s leading building control bodies.

• TGM Industrial Group acquired Connect Precision, a Yorkshire-based business specialising in precision CNC machining and wire cutting. TGM is a UK-based investment firm focusing on the acquisition and growth of owner-managed businesses in the engineering and manufacturing industries. Connect Precision was TGM’s third acquisition with KBS Corporate, following Automatic Engineers (Hinckley) Ltd and PT Engineers Ltd.

• As part of the organisation’s long-term growth strategy, Northend Holdings acquired Micom Engineering. The company provides high-quality precision engineered components and assemblies to a broad range of industries throughout the UK. KBS Corporate engaged with circa 100 interested parties, allowing us to create a competitive bidding environment.