Sinclair Knight Merz Set for Billion Dollar US Merger 7

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Monday, September 2nd, 2013
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Sinclair Knight Merz will reportedly be party to a $1 billion merger with US firm Jacobs Engineering, in what is set to be one of the biggest deals this year for the global engineering sector.

An unnamed source told The Australian over the weekend that the deal between the Australian engineering giant and Jacobs Engineering is now set to go head, with an announcement likely to be made within the next two weeks.

SKM had previously enlisted investment bank Greenhill as its adviser for the deal, which has long been rumored to take place.

Sinclair Knight Merz, which was founded in 1964, is a stalwart of the Australian engineering sector which has recently striven to establish itself as a major global player.

The company remains held in private hands, with equity divided amongst 660 shareholders. Its current annual revenue is around $1 billion, and its earnings before interest, tax, depreciation and amortisation are approximately $180  million.

While the company has established over 40 offices around the world and participated in a raft of landmark overseas projects – including the El Teniente copper mine in Chile, the Athens Olympic Stadium and the Roundhouse performing arts and concert venue in London, Australia remains the mainstay of its operations, accounting for around three quarters of total earnings.

The group is eager for further opportunities to expand overseas, and according to The Australian’s source feels it needs to obtain additional scale to advance its prospects abroad.

New York-listed Jacobs Engineering is a California-based firm which industry observers say is similar to SKM. The company is interested in expanding its Australia-based operations, creating a situation in which it shares a set of complimentary interests with its potential merger partner.

The company’s turnover last year was approximately USD$11 billion.

If it goes ahead the transaction will be one of very few to exceed the billion dollar threshold in the international engineering space, and is expected to have a transformational impact upon the global industry.

Other companies who are believed to have previously expressed interest in a deal with SKM include Australia’s WorsleyParsons, US-based SAIC and the UK’s Amec.

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Discussions
7
  1. David A Hood

    There goes another Australian icon. Will GHD be next?

  2. Muraliganesh Sivadorai

    It all depends on how big your golden handshake was. While the deal no doubt will make millionaires of the 600 or so shareholders, I’d question the actual benefit for the country or the new “Jacobs” coal face staff. The people with the money and decision making authority will inevitably be based in the US and profits would have to be repatriated quarterly. I wonder why making the shift to being a global player requires Australians to sell out? I was under the impression that SKM was already working all around the world off its own bat.

  3. Juan Carols Kovacic

    No doubt a “win – win” to strengthen both (that will become one) and have a truly powerful global reach.

  4. Nevin

    We don’t how long US firm Jacobs will take to phase out the SKM brand name in Australia. It is dad indeed.

  5. Warren Goodie

    Will GHD be next? Probably. Successful multi-local international companies like SKM and GHD eventually need to consider making the paradigm shift towards globalised operations, thus mimic and service the globalised clients with whom they have created. This takes a quantum shift of breaking down the geographic structures (including P+L) of these multi-local operations and driving the business by a global market sector approach. To do so often takes a merger or a public listing to attain the necessary growth these businesses require for sustainability. For without growth there are no growing internal opportunities for the individual, so the good employees leave and the business declines. Simple concept, but this is a complex evolutionary stage and we have been watching SKM grapple with the issues over the last couple of years (and so has GHD). However, when major Australian icons transition into the globalised world, demonstrable prosperity often follows for the company, the employees and Australia. In the late 90’s when the mighty BHP and its fleet of companies were set on a course for international waters opportunity grew, and Australia generally experienced over a decade of good times. We wish nothing but success for SKM in their endeavours.

  6. Om Singh

    In India,JACOB already have acquired one of largest Indian consultancy CES.It will be another big take over if it happens.In recent times JACOB,URS,SNC-LAVLION,CH2HILL have acquired other company.

  7. Sean Ghotbi

    Interesting discussion…how do you think it will impact SKM culture? Do you think US corporate culture will be imposed to SKM? Will non-shareholder staff of SKM be a winner or a loser?