engineering review

2012
ENGINEERING
REVIEW
INTRODUCTION
Welcome to the Credo 2012
Engineering Review, a new
publication reviewing the
performance of the leading global
engineering firms.
Engineering News Record (ENR).
These 220 companies had aggregate
design revenues of $140bn in
2011, accounting for c.10% of
global professional services spend.
The bulk of this came from the
US, Asian and European markets,
which reflects in the home markets
of the firms.
We have reviewed the performance
of the leading global professional
services firms, based on data from
DESIGN REVENUE BY REGION
TOTAL $140bn
$43bn
ASIA/AUSTRALIA
TRANSPORT
$30bn
PETROLEUM
$36bn
EUROPE
We hope you find it informative.
DESIGN REVENUE BY SECTOR
TOTAL $140bn
U.S.
Over the following pages we
consider the growth of these
companies, relative performance of
the largest firms and M&A activity
in the sector.
$29bn
BUILDING
$28bn
$22bn
POWER
$13bn
INDUSTRIAL PROCESS
MIDDLE EAST
$11bn
$10bn
WATER
LATIN AMERICA
$5bn
OTHER
$5bn
HAZARDOUS WASTE
$7bn
OTHER
Other includes Central/Southern Africa,
North Africa, Caribbean & Arctic/Antarctic
$16bn
Other includes Sewer/waste,
Manufacturing & Telecommunications
#11-50
10%
2
2011
#51
-
0
P1
TO
2008
ENR TOP 220
SHARE OF GLOBAL SPEND
2012 ENGINEERING REVIEW
$8bn
20
CANADA
$16bn
CONSOLIDATION
OF ENR TOP 220
1
HOME MARKET
10
61
48
CANADA
EUROPE
ASIA
TOP FIVE FIRMS
TOP FIVE FIRMS
TOP FIVE FIRMS
1. SNC-LAVALIN INT’L INC
$3.4BN
2. HATCH GROUP
$1.7BN
3. STANTEC INC
$1.7BN
4. GOLDER ASSOCIATES CORP
$1.3BN
5. DESSAU INC
$0.7BN
1. FUGRO NV
$3.6BN
2. ARCARDIS NV
$2.8BN
3. ATKINS
$2.4BN
4. MOTT MACDONALD GROUP LTD
$1.7BN
5. ARUP GROUP LTD
$1.5BN
1. CHINA COMMUNICATIONS
CONSTRUCTION GROUP LTD
$2.4BN
2. HYDROCHINA CORP
$2.0BN
3. CHINA RAILWAY
CONSTRUCTION CORP LTD
$1.5BN
4. CHINA RAILWAY GROUP LTD
$1.4BN
5. AURECON
$1.0BN
1
LATIN AMERICA
83
UNITED STATES
TOP FIVE FIRMS
1. AECOM TECHNOLOGY CORP
$6.9BN
2. URS CORP
$5.3BN
3. JACOBS
$5.2BN
4. FLUOR CORP
$4.0BN
5. CH2M HILL
$3.9BN
Note: Design revenue only
6
NORTH AFRICA
11
AUSTRALASIA
TOP FIVE FIRMS
TOP FIVE FIRMS
1. DAR AL-HANDASAH CONULTANTS
(SHAIR & PARTNERS)
$1.7BN
2. ENGINEERING FOR THE
PETROLEUM & PROCESS INDUSTRIES
$0.2BN
3. ENGINEERING CONSULTANTS GROUP SA
$65M
4. EHAF CONSULTANT ENGINEERS
$46M
5. STUDI INTERNATIONAL
$44M
1. WORLEY PARSONS LTD
$4.5BN
2. SINCLAIR KNIGHT MERZ
$1.3BN
3. GHD PTY LTD
$1.0BN
4. CARDINO LTD
$0.8BN
5. SMEC
$0.5BN
2
TOTAL
GROWTH
LATIN
AMERICA
$5bn
BY REGION
4%
ALIA
STR
/ AU bn
IA
AS $36
U
$4 .S.
3b
n
20%
10%
0%
-10%
CAN
$13 ADA
bn
EUR
$28 OPE
bn
LE EAST
MIDD 0bn
$1
GRO
WTH
%
ER
OTH 5bn
$
TOTAL
REVENUE
OUS
HAZAARSDTE
W
$7bn
BY SECTOR
ING
LD bn
2
OTHE
$16b R
n
BU
$2 I
5%
0%
PORT
TRANS n
$30b
UM
ROLE n
T
E
P 29b
$
-5%
WA
$8 TER
bn
RIAL
UST SS
INDPROCE n
b
$11
POWER
$16bn
2012 ENGINEERING REVIEW
3
M
OLEU
DESIGN REVENUE GROWTH, 2008-2011
COMPANY PERFORMANCE
Since 2008, design revenues have
grown fastest in Latin America
and Asia/ Australia (see opposite
page). Brazil, China and India
have undoubtedly contributed to
this, but we would also point to the
less heralded markets of Argentina,
Indonesia and Vietnam where
growth has been significant.
We have assessed whether each firm
has out or underperformed the
growth of all the firms tracked by
ENR.
Since at least some of this
performance will be a factor of the
markets in which the firms operate,
we have also sought to compare
the growth of each company to its
sector and geographic peers. To
do this, we have used the sector
and geographic revenue growth
rates, and the revenue mix of
each company in 2008. We show
this comparative growth for each
company below, and highlight
those firms that have out or
underperformed against this.
The fall in US revenues is
unsurprising given the market
situation. The Building market has
contracted significantly, but the
infrastructure markets have also
been affected.
Against this backdrop, we
have considered the revenue
performance of the 20 largest firms.
We note three key conclusions:
1.Most of the largest firms have
underperformed at an overall
level, driven by relatively
less exposure to high growth
geographies
2.The standout performers are
the Chinese firms, which have
benefited from a strong domestic
market (and an expansionary
overseas strategy)
3.Two of the other firms to
outperform the market –
AECOM and Amec – are serial
acquirers
We consider the trend in
acquisitions next.
COMPANY
2011 REVENUE USD
ANNUAL GROWTH
2008-11
PERFORMANCE VS.
ALL PLAYERS
SECTOR PEERS’
GROWTH
PERFORMANCE VS.
SECTOR PEERS
GEOGRAPHIC
PEERS’ GROWTH
PERFORMANCE VS.
GEOG. PEERS
AECOM
$6.9bn
10%
OUTPERFORM
3%
OUTPERFORM
1%
OUTPERFORM
URS
$5.3bn
1%
UNDERPERFORM
3%
UNDERPERFORM
-3%
OUTPERFORM
Jacobs
$5.2bn
-2%
UNDERPERFORM
3%
UNDERPERFORM
-1%
UNDERPERFORM
Worley Parsons
$4.5bn
5%
OUTPERFORM
4%
OUTPERFORM
11%
UNDERPERFORM
Fluor
$4.0bn
-2%
UNDERPERFORM
3%
UNDERPERFORM
2%
UNDERPERFORM
AMEC
$3.9bn
7%
OUTPERFORM
4%
OUTPERFORM
6%
OUTPERFORM
CH2M HILL
$3.9bn
2%
UNDERPERFORM
3%
UNDERPERFORM
-2%
OUTPERFORM
Fugro
$3.6bn
5%
OUTPERFORM
4%
OUTPERFORM
4%
OUTPERFORM
SNC-Lavalin
$3.4bn
3%
UNDERPERFORM
4%
UNDERPERFORM
7%
UNDERPERFORM
ARCADIS
$2.8bn
3%
UNDERPERFORM
2%
OUTPERFORM
1%
OUTPERFORM
Bechtel
$2.6bn
2%
UNDERPERFORM
3%
UNDERPERFORM
4%
UNDERPERFORM
Tetra Tech
$2.5bn
4%
IN LINE
2%
OUTPERFORM
-5%
OUTPERFORM
CCC Group
$2.4bn
30%
OUTPERFORM
7%
OUTPERFORM
17%
OUTPERFORM
Atkins
$2.4bn
-4%
UNDERPERFORM
4%
UNDERPERFORM
2%
UNDERPERFORM
KBR
$2.2bn
0%
UNDERPERFORM
3%
UNDERPERFORM
7%
UNDERPERFORM
Hydrochina
$2.0bn
29%
OUTPERFORM
4%
OUTPERFORM
17%
OUTPERFORM
Mott MacDonald
$1.7bn
1%
UNDERPERFORM
4%
UNDERPERFORM
3%
UNDERPERFORM
Hatch Group
$1.7bn
9%
OUTPERFORM
6%
OUTPERFORM
11%
UNDERPERFORM
Parsons Brinckerhoff
$1.7bn
2%
UNDERPERFORM
6%
UNDERPERFORM
3%
UNDERPERFORM
Dar Al-Handasah Consultants
$1.7bn
4%
IN LINE
3%
OUTPERFORM
3%
OUTPERFORM
4
ACQUISITIONS
Since 2005, the leading 50 firms
have made c.100 professional
services acquisitions. In terms of
geographic expansion, European
firms have been the most prolific,
doing deals in most continents.
US firms have, surprisingly given
the issues in their home market,
been less focussed on moving into
new geographies (at least through
acquisition). In sectoral terms, the
broad Transport sector has been
targeted most.
The acquisitions have been
concentrated in relatively few
firms. In Amec and AECOM’s
cases, these acquisitions have
driven revenue outperformance
(although that may not be the
case for organic revenue growth).
For Fugro and Arcadis, multiple
acquisitions have only supported
average growth. In Atkins’s
case, its acquisitions have not
been enough to compensate for
underperformance.
ACQUISITIVE GEOGRAPHIC EXPANSION
1
CA
1
2
BUYER
1
US
EU
BUYER
6
BUYER
3
2
5
2
1
ACQUISITIVE SECTOR EXPANSION
TRANSPORT
WATER
2012 ENGINEERING REVIEW
INDUSTRIAL
PROCESS
POWER
5
SEWER / WASTE
BUILDING
TOP 10 MOST ACQUISITIVE FIRMS
BASED ON ENTERPRISE VALUES, 2005-2012
AMEC
$1,029m
MACTEC
$280m
AECOM
$834m
EARTH TECH INC
$510m
DAVIS LANGDON LLP
$324m
BALFOUR BEATTY
$592m
PARSONS
BRINCKERHOFF
$476m
SAIPEM
$503m
ATKINS
$394m
THE PBSJ
CORP.
$292m
URS
$379m
SCOTT
WILSON GROUP
$282m
CH2M HILL
$282m
HALCROW
GROUP
$260m
FUGRO
$260m
ARCADIS
$251m
MALCOLM
PIRNIE
$222m
RAMBOLL
$212m
WHITBYBIRD
HOLDINGS
$212m
2005
2006
2007
2008
2009
2010
2012
UNKNOWN VALUE
RATIONALE
TOTAL
$4.4bn
2011
CONSOLIDATION
$1.7bn
SERVICES
$1.1bn
GEOGRAPHY
$1.0bn
SECTOR
$0.5bn
UNKNOWN $25m
6
INTRODUCTION TO CREDO
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2012 ENGINEERING
REVIEW
7
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comparisons for each company and their
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and0%
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Asia &
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er
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Caribb
We would welcome the opportunity
to share a combination of our more
detailed analysis and broader views
on the market with you. Do get in
touch if you would like to arrange a
meeting to discuss this.
ntral &
The analysis presented inCethis
hern
Soutlarger
review is a subset of a much
rica
East
Middle
e
Europ
piece of analysis that we have
carried out. We highlight some of
this below.
m
La tA
M.E.
This means we understand the
underlying drivers in the world’s
largest construction markets and
strategic questions these pose. We
have significant expertise across
Latin
a
Americ
%
a broad range of areas including:
overall strategy formulation, market
prioritisation and entry (organic
and acquisitive), and operational
improvement (including cost
reduction and organisational
structure).
Credo is a leading strategy
consultancy in the global
Construction and Engineering
markets.
0%
0%
IN-DEPTH BENCHMARKING
We have extended the benchmarking in this
review to include each company compared
to a broader set of competitors and a more
focussed set of direct peers. We benchmark
market exposure (and the implications
for future strategy) in addition to revenue
performance.
1%
FOOTNOTES
REVENUE
All revenue splits are taken from
ENR. This dataset is generated from
self-reported data. Reported revenue
contains only design revenue, and
therefore should exclude contracting
revenue from all firms. Credo has not
undertaken research to confirm the
data.
The market consolidation figure (page
1) has been calculated by assessing
the design revenues of the top 220
players against the professional services
segment (assumed to be 10%) of the
global construction market size. This
market size includes in-house design
spend.
The total revenues (page 3) have
been calculated from the professional
services revenue of the top 220 global
firms. The revenue growth has been
calculated using data from firms
present in both the 2008 and the 2011
datasets (151 firms).
LEO VAN
DER BORGH
MANAGER
Leo is an expert in Construction
and Engineering, with experience
in strategy, organisational structure
and operational improvement. He
has worked across the major global
engineering markets and drives Credo’s
thought leadership in the sector.
REVENUE GROWTH AND PEERS’
GROWTH
Each firm’s achieved annual growth
(2008-2011) is compared against
market average revenue growth (page
4). Each company’s revenue growth
is also compared to its peers’ growth,
which is calculated based on the
revenue growth of individual sectors
and geographies, and each firm’s
market exposure.
HOME MARKETS
Home markets (page 2) are defined
as the country in which each firm is
headquartered.
ACQUISITIONS
Acquisition analysis (page 5) includes
acquisitions only by the top 50 firms.
A single rationale for each acquisition
has been assumed. Figures are based on
enterprise value, where known.
CHRIS MOLLOY
PARTNER
Chris has 20 years of international
consulting experience in both strategy
and performance improvement.
Chris co-leads Credo’s Business and
Support Services capability and has
broad Construction and Engineering
experience, both in the UK and
internationally.
12 Arthur Street, London, EC4R 9AB, United Kingdom
Tel +44 (0)20 3206 8800
www.credo-group.com
SIMON BONES
PARTNER
Simon co-leads Credo’s Business and
Support Services capability, including
Construction and Engineering
where he has a particular focus on
Infrastructure Markets. Simon also
leads Credo’s Private Equity practice.