Galliford Try’s acquisition of Miller Construction may serve as a catalyst for further takeovers, says a leading analyst.
“The sale of the Miller Construction business could trigger a small wave of other consolidations within the sector to gain size and resources, although many firms are now looking outside of the UK for growth prospects,” says Graham Robinson, director at Global Construction Perspectives.
Robinson says the £16.6m takeover is a logical move for both firms. “The acquisition of Miller Construction by Galliford Try is a good fit for the Galliford Try business as it builds size and competitive strength in the UK, especially in relation to the market in Scotland, where it already owns Morrison.
“Galliford Try now ranks in the UK’s top five construction businesses and has a strong management team to drive significant growth in a market that is in full recovery from its deep depression.
“Access to resources is now a priority for many construction businesses, after almost 400,000 left the industry in the downturn, and the industry is already seeing skills gaps,” added Robinson. The enlarged construction business now has a turnover of £1.25bn.
“The acquisition of Miller Construction by Galliford Try is a good fit for the Galliford Try business as it builds size and competitive strength in the UK, especially in relation to the market in Scotland, where it already owns Morrison.”
Graham Robinson, Global Construction Perspectives.
Greg Fitzgerald, chief executive of Galliford Try, said: “We are delighted to acquire Miller, at a very good price and with no net consideration. The acquisition brings together two construction businesses with a strong strategic fit and accelerates our strategy of growth into an improving marketplace.”
Miller Construction is understood to have been on the market for the last 18 months. Philip Bowman, chairman of The Miller Group, said: “The acquisition of Miller Construction by Galliford Try will provide it with a strong base from which to grow its competitive position and continue to serve its clients.
“It will also enable The Miller Group to concentrate all its efforts on expanding its property interests now that the housing and commercial property markets are again showing strong signs of growth.”
Galliford said its presence on national and regional frameworks would be enhanced by the deal, which is “consistent with Galliford Try’s stated strategy of disciplined and selective growth in its construction business”. It said the acquisition would enhance earnings in the year to 30 June 2015, including one-off restructuring costs.
Galliford Try’s construction chief executive Ken Gillespie told Construction News that negotiations were continuing over staff transfers, but that a number of the Miller Construction executive team would join Galliford Try under the terms of the £16.57m deal.
However, Miller Construction CEO Chris Webster will remain with the Miller Group.
Gillespie said that the firms had been in dialogue for two to three months and that it gives the enlarged Galliford Try group a new presence in acute health and defence where the firm has not been successful historically.
He said: “I declared three or four months ago a strategy to grow the construction business by 50% to 2018 and I achieved that almost overnight. It allows me to set my sights beyond that in growing to £1.5bn. The obstacle to that is the quality of people and resources to deliver it. One of the great aspects [of the acquisition] is Miller have strong leaders, good quality management and we are getting lots of great people.”
Turnover for Miller’s construction business for the year to December 2013 was up 57.6% to £408.7m, compared with £259.4m in 2012. It recorded an operating loss of £4.6m due to write-downs on “a limited number of contracts that had been procured competitively on the basis of price”. But Galliford Try said it expected the Miller business to return to profitability in the current year having restructured or exited a number of loss-making contracts.
