WSP Global, the Canadian-listed global professional services firm, is set to acquire the international environment and infrastructure (E&I) element of Scotland's John Wood Group for a cash consideration of US$1.81bn.
The deal - if it completes as expected in the fourth quarter of 2022 - will see WSP’s earth & environment (E&E) consultancy leading the sector by a significant margin over its nearest competitors with a contingent of close to 20,000 experts.
Under the transaction terms, Wood's built environment consulting business is valued at US$1.81bn, with an EV/EBIDTA multiple of 16x based on its FY21 pro-forma EBITDA margin and 14.6x that expected for FY22. A unique feature is the purchase price includes the "net present value" of a US$200m M&A tax-related benefit.
The deal adds around US$830m of additional net revenue to WSP’s FY21 total of US$5.5bn - and consultants and technicians numbering 5,500 - with much of the acquired E&I business a legacy of Amec Foster Wheeler, which Wood acquired back in 2017. It means that around one-third of WSP’s total group revenues will come from the earth & environment global business line, which was rebadged as such after WSP completed another transformative acquisition, that of Golder (7,000 FTEs) for US$1.14bn last April.
"With this enhanced scale and unparalleled depth of expertise, WSP is unequivocally and uniquely positioned to help build a better future and drive the green transition."
"The acquisition of Wood’s E&I business will directly contribute to the realisation of the ambitions we set out in our 2022-2024 global strategic action plan," said Alexandre L’Heureux, president and CEO of WSP. "Our platform will be increasingly diversified and resilient, with increased scale in geographies which we have identified for growth such as the United States, where our E&E team will double in size."
The buy will boost WSP’s presence in other OECD countries, including Canada and the UK. And critically it will enhance WSP's scale and capabilities in the water sector, which has not historically been an area of focus for the group (so it will now be worth C$830m/US$656m in net revenues annually).
Environmental leader
André-Martin Bouchard, WSP E&E director and global executive sponsor of ESG, told Environment Analyst: "This is another hugely significant milestone for the WSP earth & environment sector. WSP has been clear about its aspirations to be the leading environmental and earth sciences consulting firm worldwide. Following on from our acquisition of Golder last year, bringing on board the Wood E&I business further expands our reach as the global E&E leader.
"With this enhanced scale and unparalleled depth of expertise, WSP is unequivocally and uniquely positioned to help build a better future and drive the green transition."
Environment Analyst’s soon-to-be-released updated global industry rankings for the 2020/21 period confirm that, when considered on a pro forma basis, the WSP (plus Golder) and Wood combination would far outrank the closest rivals based on its environmental & sustainability consulting gross revenue total of around US$3.3bn.
Joe Sczurko, executive president of the E&I consulting business, said: "Throughout this process, I’ve been impressed with WSP’s growth story, excellent capabilities, focus on clients and the future aspirations for its business. [..] I look forward to the new opportunities that will be created for our employees and clients by joining WSP." Sczurko's future role in the business remains as yet unconfirmed.
Wood troubles
Wood first announced its intention to sell off the built environment portion in November last year, after the group (which traditionally focused on energy support services) suffered losses in the wake of the COVID-19 pandemic and oil price volatility. Last month, Wood announced that its CEO of six years Robin Watson would be stepping down (EA 04-May-22).
Wood said in a statement that the divestment of E&I will "provide enhanced financial flexibility and improve cash flow," as well as significantly reduce its leverage. It will enable the group to invest in accelerating its strategy "to be a leader across energy security and sustainability". However, the loss of a major chunk of its environmental expertise does appear to be somewhat at odds with this goal, at least on the surface.
Outgoing CEO Robin Watson said: "This transaction will deliver significant value for our shareholders and marks a new chapter for Wood. It enables us to move onto our next strategic phase, to capture the growth opportunities ahead across both energy security and sustainability". Energy security, carbon intensity reduction, industrial decarbonisation, resourcing the energy transition, and low carbon energy form the "five key growth drivers" identified by the company for focus on going forward.
The deal is still subject to various conditions, including Wood shareholder approval and the customary regulatory approvals.
Perella Weinberg Partners acted as financial advisor to WSP on the transaction, while JP Morgan and Morgan Stanley advised Wood.