DISCUSSION FORUM Consolidation to capture strength and growth Oct 2011
Shani Wallis, TunnelTalk
It could be the way of the world for getting through these strange times. On the one hand there is an economic squeeze which is rebalancing the world’s financial systems, while on the other there is a tunnelling market that is booming. To manage both, we are seeing acquisitions and buyouts among the big-hitters in the tunnelling industry.

Consolidation in the engineering sector has been progressive through the years and last week's takeover of Halcrow by Colorado-based CH2M-HILL serves only to bring that trend sharply into focus. Acquisition of Parsons Brinckerhoff by Balfour Beatty in 2009 saw a cross-border move that paired a contractor with a design consultancy and marked a rare move by a UK entity to secure a major US purchase.
In the contracting world there has been the McNally tie up with Weeks Marine and the take over of Frontier Kemper by Tutor Perini in North America, as well as the on-again off-again affair between ACI and Hochtief which is definitely going through now, we hear.

The bomb shell that put the need to sell to survive into perspective was the takeover of Lovat by Caterpillar in the manufacturing sector in 2008. Another move to secure its future was final full ownership of WIRTH by Aker Solutions of Norway, and full ownership of NFM by China’s Northern Heavy Industry Group (NHI).

The reasons for the different acquisitions and takeovers are diverse but one thing stands out clearly as a trend for the global tunnelling industry: the world has changed dramatically for tunnelling. The business has changed immeasurably in just a decade or two, and it has taken bold and courageous moves to maintain a viable position in the business, secure a future, and acquire the resources to meet the demands of the market and of clients, and provide a vision for growth.

Where there were two or three multi-billion dollar tunnelling projects worldwide progressing simultaneously a decade ago, today there are 20 or 30 - in one continent alone. Where three or four machines delivered by a leading manufacturer in a year was considered good business, now the need is to build and deliver several times as many.

Dozens are currently in operation world wide, with workshops all over the world providing the extra manpower, manufacturing and technical service capacity.
Where a single contract in the past was considered big at up to US$300-500 million, today's projects have billion dollar values, and more.
It is a crazy time with demand on the tunnelling business pulling it in all directions. Calls come in from the most unlikely quarters around the world to help develop a tunnelling option for variety of purposes - saving the tigers, avoiding disruption, providing mega undersea links, bringing water from the other side of the mountain or providing a road or rail link through it, burying nuclear waste or even entire nuclear power plants, providing an underground city to expand urban environment. And sometimes it is just plain save and upgrade the underground infrastructure that we have already.
The demands on the business are high and as usual, the tunnelling market is contrary to the general economic cycle. Where financial budgets are contracting, tunnelling projects are expanding. Inherited debt and high cost employment packages squeezed the balance sheets for Halcrow and Parsons Brinckerhoff. Cash flow limits the capacity to expand the manpower base. Now more than ever there is a need for vast capital injections to see a thriving business step up to the next level. All are causes to think the unthinkable and move positively down the road of voluntary takeover by a company that you know, can do business with or has that future in their hands.
Halcrow sells itself to CH2M HILL - TunnelTalk, Sept 2011
URS acquires Scott Wilson Group - TunnelTalk, Sept 2010
Parsons Brinckerhoff finds a buyer in Balfour Beatty - TunnelTalk, Sept 2009
Jacobs Engineering acquires Jordan, Jones and Goulding - TunnelTalk, Feb 2010
McNally under new Weeks Marine ownership - TunnelTalk, July 2011
Tutor Perini buys Frontier Kemper's expertise - TunnelTalk, June 2011
Lovat joins Caterpillar - TunnelTalk, April 2008
Lovat speaks of acquisition - TunnelTalk, Apr 2008
Wirth acquired by Aker Solutions of Norway - TunnelTalk, June 2009
NFM appoints new chief executive - TunnelTalk, June 2011
Normet and TAM form global partnership - TunnelTalk, April 2010

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