16 January 2012 Around 83 per cent of FM providers believe M&A activity will pick up this year with half of those polled suggesting that there is a good chance they would be making acquisitions.
Twenty-one per cent said they were already eyeing acquisition targets.
Nearly 80 per cent said they were confident they would not become a takeover target themselves in the next 12 months.This is suggesting that larger providers will be adding smaller peers in most instances, the report said.Mike Daniels, managing director and head of business services at Barclays Corporate, said new contracts are more fiercely contested than ever before in difficult financial markets dominated by euro zone economic issues.Providers are, therefore, increasingly looking at acquisitions as a means of picking up new contracts and spreading economic risks across new service lines and geographies, he said.
Barclays Corporate said it carried out a survey in the last quarter of 2011 among the UKs 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, FMS are guardedly optimistic about the economy in the medium term. More than half (54 per cent) expect the economic climate to improve within three years, while another 33 per cent 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 per cent) or a somewhat better place (42 per cent) to do business this year.
The report said a significant number of FM companies surveyed stated that the low business confidence in the UK is affecting contract pricing and the process of awarding contracts.According to the report, 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.
There is however optimism within the industry given expectations around expansion. An overwhelming majority, 96 per cent 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 per cent and 21 per cent share of the votes respectively.
When it comes to outsourcing, 84 per cent 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.
Just over 40 per cent expect to increase staff numbers by up to 10 per cent. Another 13 per cent predict headcount growth of between 10 and 20 per cent.
A third of respondents expect staff numbers to remain the same and better news is that only 8 per cent of those asked said they planned to cut jobs during the forthcoming year.Daniels said even though 2012 looks to be a tough year financially, FM providers see now as the time to move from cost-cutting to increased expansion and investment. This bodes well for the sector as a whole and 2012 could in fact prove to be a promising year for the FM sector.Barclays Corporate provides ibanking solutions to businesses with an annual turnover of more than £5 million in the UK and large local companies, financial institutions and multinationals in non-UK markets.
Published in :FMs predict more M&A activity in 2012 | FM World the BIFMs Facilities Management magazine
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