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Costain acquisition three years in the making

Costain’s proposed “transformational” acquisition of May Gurney, announced last night, comes after three years of failed takeovers by the contractor.

Costain chief executive Andrew Wyllie has long talked of a “transformational transaction”.

He reiterated this point as recently as last September: “We have no preconceived ideas about scale, but we are clear on what the skills will be,” he told NCE.

“We have openly said the focus is consulting and operations and maintenance.”

It is understood that Costain had been looking at Atkins’ highways maintenance operation, but backed away at the price being asked. It was bought by Skanska last month.

The acquisition gels with Costain’s core strategy which fundamentally means offering clients the full range of services, from scheme concept and design through to project delivery and then operations and maintenance.

“The ability to mobilise a range of services is key,” Wyllie told NCE. “But what we believe big customers want is for us to bring an increasingly integrated service.”

To do that, Wyllie acknowledged that Costain must grow rapidly – both organically and through acquisition.

“We have to grow. That is non-negotiable for us,” he said. “We won our fifth contract on Crossrail this year on the back of success on the first four and on demonstrating to the client that we’ve got a fifth A-team, and that we will not be diluting our four existing A-teams.”

Organic growth is already happening. “Our strategy means we need a lot of recruitment and we have got a lot of vacancies. But we have no difficulty filling them,” he said. “Our graduate intake this year is the highest quality intake yet.”

“But we do recognise the need to grow quite quickly, and we are going to do that through 50% organic growth and 50% mergers and acquisitions,” he said.

Three years ago Wyllie was aiming to inject energy into this growth through “transformational transactions”, which led to a takeover bid for consultant Mouchel. That deal eventually fell apart in March 2011 at due diligence stage and instead Wyllie focused his efforts on more niche acquisitions such as oil and gas specialist ClerkMaxwell and industrial firm Promanex.

But he has always remained focused on the big acquisition.

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