Barclays PLC : Facilities management sector set for further consolidation in 2012

Facilities management (FM) providers are predicting increased M&A activity in 2012 as the sector looks to consolidate according to a survey carried out by Barclays Corporate.

An overwhelming 83 percent of FM providers believe M&A activity will pick up this year with half (50 percent) of providers suggesting that there is a good chance they would be making acquisitions. A further 21 percent said they were already eyeing acquisition targets. Interestingly, nearly 80 percent said they were confident they would not become a takeover target themselves in the next 12 months - suggesting that larger providers will be adding smaller peers in most instances.

Mike Daniels, Managing Director and Head of Business Services at Barclays Corporate said; "In difficult financial markets dominated by euro zone economic issues, competition for new contracts is more fiercely contested than ever before. Providers are therefore increasingly looking at acquisitions as a means of picking up new contracts and spreading economic risks across new service lines and geographies".

Barclays Corporate carried out a survey in Q4 2011 amongst the UK's largest FM providers to understand how facilities managers viewed the prospects for the economy, the industry and the outlook for their own businesses in 2012.

The findings show that despite the on going European sovereign debt crisis and predictions of a slow and protracted recovery, facilities managers are pragmatic about how long it will take before the UK economy picks up. More than half (54 percent) expect the economic climate to improve within three years, while another 33 percent predict a pick up within the next three to five years. In the near term, the majority of operators believe the UK will be as good a place (50 percent) or a somewhat better place (42 percent) to do business in 2012.

A significant number of FM companies surveyed stated that the low business confidence currently experienced in the UK is affecting contract pricing and the process of awarding contracts. The main challenges outlined by survey participants centred around margin pressure. Selling at a loss to win market share is considered a threat to the industry as the continued price competition and subsequent margin pressure is unsustainable in the long-term. In addition, FM companies reported that in this highly competitive environment, it takes much longer to finalise and secure contracts with FM companies having to exhibit a deeper understanding of customer requirements, which can change at very short notice.

There is however optimism within the industry given expectations around expansion. An overwhelming majority, 96 percent of FM firms surveyed, plan to expand their businesses in 2012. Most are eyeing domestic expansion and, after the UK, Western Europe and North America were the preferred overseas regions for expansion with a 38 percent and 21 percent share of the votes respectively.

When it comes to outsourcing, a substantial 84 percent of FM providers said they believed outsourcing would increase if economic growth continues to stagnate and of those 21 percent said they expected a significant increase.

With expansion, whether through acquisition or organic growth of an existing footprint, FM providers are expecting to increase headcount during the next 12 months. 42 percent expect to increase staff numbers by up to 10 percent while a further 13 percent predict headcount growth of between 10-20 percent. 33 percent expect staff numbers to remain the same and better news is that only eight percent of those asked said they planned to cut jobs during the forthcoming year.

Daniels continued; "There remain significant challenges in the business environment as we move into 2012, but FM providers see now as the time to shift the mind-set from cost-cutting to expansion and investment. This bodes well for the sector as a whole and 2012 could in fact prove to be a promising year for the FM sector."

About Barclays Corporate

With a clear focus on quality relationships, Barclays Corporate provides integrated banking solutions to businesses with an annual turnover of more than £5 million in the UK and large local companies, financial institutions and multinationals in non-UK markets. We facilitate the success and growth of our clients by providing lending, risk management, cash and liquidity management, trade finance and asset and sales financing. Additionally, our clients benefit from the breadth of the Barclays Group, through access to the investment banking services of Barclays Capital including debt and equity capital markets, the private wealth management expertise of Barclays Wealth, and the card and payment services of Barclaycard. Barclays Corporate employs over 10,000 people globally. For more information please visit .

About Barclays

Barclays is a major global financial services provider engaged in retail banking, credit cards, corporate and investment banking and wealth management with an extensive international presence in Europe, the Americas, Africa and Asia. With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs over 145,000 people. Barclays moves, lends, invests and protects money for customers and clients worldwide. For further information about Barclays, please visit our website .