Bright future forecast for FM industry

The past few years have seen frenetic merger and acquisition activity including Interserve’s £250 million acquisition of Initial Facilities, which was recently cleared by the Competition and Markets Authority.

The level of international interest in UK facilities management businesses has also increased. Among the largest and most high profile acquirers over the past two years have been the French-based GDF SUEZ, South African group Servest, German firm Bilfinger and the US real estate business CBRE.

By the sheer weight of activity that has already taken place, the report predicts that the market will likely cool in the coming months. Many companies have made strategic acquisitive moves and will now focus on integrating the new entities and ensuring the associated costs don’t thin already tight margins. 

A further factor limiting funds for investment, and influencing the direction of future acquisitions, is the spending cuts being undertaken by government. Targeted businesses are likely to have predominantly private sector client relationships.

Where acquisitions are made, they are expected to focus on the provision of ‘hard’ services, such as mechanical and electrical contracting. Hard facilities management services are those associated with the physical maintenance of a building or asset, such as work done to the electrics or fabric of a structure. 

Mintel forecasts mechanical and electrical contracting will grow faster than any other sector of the facilities management market, at 19% in real terms over the five years to 2018. With these services strongly linked to a construction industry gathering momentum, selective moves here are anticipated to generate the greatest gains for acquiring companies.