微密圈

Senior construction figures have reacted with surprise at the news that contractors Carillion and Balfour Beatty are in merger talks, but said the emergence of such a major new player could provide new opportunities for joint ventures.

Last week, Carillion and Balfour Beatty confirmed they had started merger talks to potentially create a 拢14bn-turnover business.

The move was unexpected, with the bosses of rival firms who spoke to 微密圈 this week all expressing surprise at the news - but some suggested the mega-merger, if it goes ahead, could generate new opportunities.

Many rival contracting bosses, who did not wish to be named, celebrated the fact that a merger would effectively mean one less firm to compete with when bidding for work.

But the boss of another rival contractor said: 鈥淥n the other hand you are competing against a stronger offer, so it can work both ways.鈥�

Philip Youell, chief executive of consultant EC Harris, said it was a 鈥渧ery interesting development鈥� for 鈥渢wo very strong brands鈥�.

He said: 鈥淵ou can see the rationale as their clients are aggregating and putting out bigger and bigger programmes of work, yet their balance sheets are relatively weak so it鈥檚 a real challenge.

鈥淎 strong [contracting] business in the supply chain is a good thing for UK plc.鈥�

The boss of a rival contractor said: 鈥淚f you have got a big sensible UK contractor operating in the same space as us internationally then it is not a worry for us and actually it could help with joint ventures.

鈥淲here it would be worrying would be if [Balfour Beatty] ends up being sold to yet another international player because we have got to know how they [Balfour Beatty and Carillion] are going to play in the sector, but if someone else comes along you don鈥檛 have that.鈥�

However, the boss of another contractor told 微密圈 the merger was a 鈥渃op out鈥� by the Balfour Beatty board intended to quickly return the business - which has made four large profit warnings in the last 18 months - to health rather than fixing its problems internally.

He added that it was a 鈥渟mart move鈥� by Carillion to make the offer while Balfour鈥檚 share price was low.

Several of the construction leaders 微密圈 spoke to said that they expected there to be more mega-mergers sweeping the industry in the coming years.

One contracting boss said: 鈥淐oming out of recession might be even more dangerous than going in. That may drive some more consolidation.

鈥� I think we will see some more companies struggling, and mergers, mainly because of the cost pressures [from contracts] that they signed up to in the recession.鈥�

Another boss said: 鈥淎s soon as people stumble there鈥檚 going to be people looking to make a move.鈥�