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Published 27 March 2013 09:49, Updated 27 March 2013 10:33
MWH’s head of energy and industry Photo: Supplied
Even at a time of subdued global M&A activity, US-based engineering consultancy MWH Global has expanded its activities in Australia with the acquisition of Perth-based environmental consultancy Outback Ecology.
MWH did not say how much it paid for the firm that employs 75 staff in offices in Perth, Brisbane and Kalgoorlie. Integration of the two firms will happen upon completion of the transaction, expected early next month and Outback Ecology will take on the MWH name.
A strong Australian dollar and tightening of conditions in consulting engineering have not prevented MWH, which specialises in water supply and water resource management, from buying the Australian firm’s expertise in mining-related activities such as approvals, mine management and closure.
“In Western Australia, MWH is primarily an engineering and hydrogeology firm for the mining industry,” MWH’s head of energy and industry Joseph Adams said in an emailed response to BRW on Wednesday. “Outback Ecology provides the ecological, permitting and reclamation services that MWH lacked in Western Australia.”
The deal shows that there is still appetite for acquisition even as the consulting engineering industry is struggling. MWH has cut staff in mining, although not in WA, where it remains strong, Adams said. UK-based Hyder Consulting and privately owned Australia-based SKM make up a further part of the quarter of all firms that are making targeted redundancies, industry body Consult Australia said earlier this month.
“It is that counter-cyclical approach,” says RBS Morgans analyst Roger Leaning. “They see now’s a good time to invest. Maybe they have identified a niche business or service to add to their own. Acquiring companies will almost certainly be seeing a downturn in activity as an opportunity for revaluation of expectations . . . enabling them to acquire [a] business at more attractive prices.”
Merger activity is slowing in resources industries, too. The value of global merger activity fell last year and is likely to remain at least as subdued this year, consultancy PwC says in its latest six-monthly Global Mining Deals report.
The number of resource-industry deals fell to 1803 last year, the lowest number since 2005. The global value of deals – inflated by the $54 billion merger of Xstrata and Glencore – fell to $110 billion from $149 billion in 2011.
“The drop in 2012 reflects the nervousness many miners had to finance future growth,” the report says. “Many buyers weren’t ready to put up the funds, while sellers were reluctant to agree to takeovers at lower valuations.”
Falling prices have allowed other engineering firms to come into the Australian market and strengthen their offering in the resources industry. Hyder, which last year bought Sydney-based GW Engineering for $3 million and in January this year bought Pilbara-based BCH Engineering, said last year that prices had come off the boil from where they were.
MWH intends to use Outback Ecology’s services in other countries where the firm has mining, oil & gas and hydropower services, such as Indonesia, Latin America and Canada, Adams said.
The MWH deal is unlikely to be the last of its type in the industry.
“We are expecting a bit more consolidation over the coming years,” Leaning says.