Jacobs and CH2M merger rumoured

Jacobs and CH2M are rumoured to be in advanced talks over a possible merger that would create an $11bn business worldwide.

News of a deal involving Jacobs acquiring CH2M for £1.2bn surfaced in The Times last week and has since been causing ripples as both firms have declined to comment on the rumours.

Jacobs, which predominatly focuses on oil and gas markets, is reportedly keen to gain more market share in UK and international infrastructure. The merger between the circa $11bn Jacobs business and CH2M, which earns roughly $6bn annually, would create an engineering consultancy to rival AECOM in size at $17bn.

A move by Jacobs on CH2M follows the reported attempts by CH2M to merge with Atkins earlier this year. That deal failed to come about, before Atkins was bought by the Canadian engineering and construction business SNC Lavalin for £1.2bn.

Merger and acquisition is now clearly widely accepted as an integral part of corporate growth strategy in the consultancy and engineering sector and further consolidation of the industry can be expected in the near future. Nelson Ogunshakin, chief executive of the Association for Consultancy and Engineering, said: "There will be more market shifts going forward and there will undoubtedly be more instances of mergers or acquisitions. Our industry is still growing and companies will continue to make the strategic decision, with the potential for higher yields, that they are better together." 

With constant pressure on CEOs and business leaders to de-risk and seek diversified business portfolios, both in terms of sector and geographic reach, further consolidation of the industry in the near future seems inevitable.

Ogunshakin said: "While organic growth is depended upon for day-to-day success, the average business can begin to plateau in its annual rate of growth due to lack of resources. For the UK industry, this does not usually mean decline, but rather untapped potential. It is in such circumstances, or when significantly increased yields are desired by shareholders, that mergers or acquisitions can provide sound growth solutions."