Recently, a number of significant transactions have been undertaken in the wider construction/engineering sector: M&A buoyed in the sector by the value attached to UK PLC currently. 

Both Atkins and Waterman Group are being acquired by large foreign groups. There's a lot of chatter in the market with overseas potential buyers, could this be a sign of further tangible movement?


Why now?

"Ever since the vote to leave the EU last June prompted a big devaluation  of sterling, analysts have been predicting a wave of foreign takeovers.  UK firms are currently, quite simply, far cheaper to buy than they were  before the Brexit poll. Sterling has lost 11% of its value against the  euro, 14% against the dollar and 10% against the Chinese yuan, meaning  purchasers can make their money go further. In March, KPMG predicted  that a weakened sterling meant North American and Asian firms would  continue to circle as UK companies were “a target for hungry investors”."


Sterling devaluation as a driver behind M&A activity is a somewhat one-sided story however. Yes, an acquisition is suddenly 14% cheaper for US companies, but the cashflows of the new subsidiary are also 14% lower. They're buying for less but (in their group reporting terms) they are also getting less. Why not cut the hassle of M&A and just bet on a Sterling recovery?

Globally speaking, a trend towards consolidation has been emerging more widely recently. The UK particularly is still enjoying a (relatively...) strong economy and a solid infrastructure sector. Even after Brexit, the UK will still be a very large economy with ample revenue generating opportunities for infrastructure firms of all shaps and sizes. Cross-border acquisitions give access to this, regardless of Britain's relationship with the EU.


With Brexit not yet having as negative an impact as some feared, but still a very long way from clarity: how will these fundamental drivers alter the landscape going forwards?