The announcement this week that John Sisk & Son has agreed terms to acquire fellow contractor Farrans provides another indicator that the construction mergers and acquisitions (M&A) market is hotting up, according to experts.
Industry observers say the move is not only a sign of confidence in the sector but also reflects the opportunities to be pursued in a new wave of government-backed infrastructure spending.
Neither privately owned company divulged the value of the transaction when they announced the acquisition on 1 September.
They also declined to comment beyond the original announcement, citing an ongoing regulatory process involving the Irish government’s Competition and Consumer Protection Commission (CCPC).
“Infrastructure is hot and by acquiring Farrans, Sisk significantly boosts its exposure to the aviation and utilities sectors,” said Dan Coppel, a London-based partner at multinational law firm Faegre Drinker.
In this sense, the acquisition appears complementary as Sisk’s UK subsidiary has been involved in roads frameworks for National Highways and as part of the Eastern Highways Alliance.
Farrans has some road sector experience but has a deeper presence in energy and water as well as the aforementioned sectors, with ongoing projects like the £100m expansion of Leeds Bradford Airport (pictured).
The Sisk/Farrans deal would present opportunities and challenges for the firms’ respective supply chains, said Roni Savage, chief executive of engineering firm Jomas Associates and a UK government advisor.
“Scale can bring stability, but it must not come at the cost of regional diversity or supplier inclusion,” she told Construction News.
“As procurement models evolve within the larger group [assuming the deal goes ahead], they must ensure that smaller firms remain visible, valued, utilised and empowered to contribute successfully.”
The move to acquire Farrans marks a rare foray into the M&A market for Sisk. Speaking to CN late last year, chief operating officer Stephen McGee did not highlight any plans for specific acquisitions.
“We are always open to explore acquisitions – we’ve done so in the past, in the recent past and not so recent past – and would always look at opportunity where it manifests itself,” he said at the time.
Sisk’s previous UK acquisitions include electrification and specialist rail services provider Fuse Rail in January 2022. In Ireland, it bought offsite construction firm Vision Built Group in August 2019.
The timing of the announcement is interesting in Coppel’s view, as Farrans’ ultimate parent firm, Dublin-based CRH plc, was considering selling off Farrans as far back as December 2022.
“Why now after being on the block for [nearly] three years?” he asked.
The answer lies in market trends as UK construction M&A activity is “heating up”, Coppel said, as shown by Vinci’s acquisition of FM Conway.
“The UK government’s recently published 10-year infrastructure strategy outlining £725bn in planned spending, and a more benign outlook for interest rates, raw material costs and (perhaps) inflation are underpinning more deal announcements,” he added.
Since May 2023, Farrans has been the sole trading division of Belfast-based Northstone (NI) Ltd – itself a subsidiary of CRH.
Northstone’s most recent accounts, covering the 2023 calendar year, revealed turnover of £512.5m and a pre-tax profit of £8.2m, generating a 1.6 per cent margin.
Sisk’s UK subsidiary has not yet released its 2024 accounts. The contractor turned over £475m and posted a £9.7m pre-tax loss the year before, delivering a margin of -2 per cent.
It is unclear for now if Farrans would report to Sisk’s UK business or the Irish parent company. And asked whether there are potential Brexit-related complications when an Irish firm makes an acquisition north of the border, Coppel said: “It’s a factor – dual competition and foreign investment reviews may be triggered in two jurisdictions – but experienced advisors are well-equipped to manage.
“Importantly, Northern Ireland’s unique post-Brexit status provides a potential strategic advantage with continued preferential access to the EU as well as the UK market.”
But Sisk may have to wait until late December before learning if the CCPC approves the acquisition. CN understands that the Irish competition regulator usually takes 12 to 16 weeks to arrive at a decision.
