We heard the news of Mitie take over of Interserve support services last week. The combined entity will be the largest facilities management business in the UK with £3.5 billion in revenue, 80000 employees, 17% market share, and 500+ public and private sector contracts.
With Mitie doubling its offer price from last year, its clearly evident top-line growth will be challenging in the UK outsourced services market in the coming years.
As UKs ONLY AI-based facilities and workplace services insight provider, we have had 1000+ conversations with FM providers, buyers, and investors to validate their assumptions with market data, we know 100+ FM contracts were terminated in the UK past 4 months as a reaction to covid19.
Consolidations create more white space opportunities, synergies and hence help achieve bottom-line profitability and margin.
Worryingly, if you look at Mitie – Interserve deal, hedge funds will hold 20% control of the combined entity. Shareholders in both companies will immediately benefit from the tens of millions of pounds in synergies from the deal. Synergies tend to start with people. Our estimate, approx. 800 – 1000 FTEs will be at risk within the first 6 – 12 months of approval.
There is an underlying reason for this acquisition. With the average facilities sector profitability in the range 3 – 6 % and with a continued negative impact on customer demand, I predict many more mergers, disposals, partnerships, and acquisitions in the “new normal”. What do you think?
We shared our latest detailed breakdown of the UK facilities management Market, competitive landscape – public and private recently at our leadership council last week. Here is a snapshot
- Key markets – public and private
- Key players – Top 15
- Key services – IFM, Cleaning and Hard FM
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My advice to service providers and buyers –
- Right-size your property portfolio, benchmark your performance & contracts
- Position for two* market corrections – Nov 2020 (when the Job Retention Scheme ends) and Jan 2021 ( Brexit).
Thinking Time!
You can thank me later.
Baskar Sundaram