Page 97 - Built Expressions - Online Construction Magazine - November 2014 Issue

ibsee.uscmssites MASTER Stroke evidence of combination of design and construction services under a single roof. Rather, there is a regular drumbeat of activity in this direction driven by competitive pressures and owner demands. Contractors must be vigilant to observe the actions within their industry and ensure that their suites of engineering and construction services Learn and understand all the external factors and forces are compelling to owners relative to that are beyond company control but have an infuence the competition. on the company. Impact of Post-Recession Trends on Contractors In today’s market, some contractors are struggling to grab a foothold, and many are losing key staff and clients indicated that, although they are taking construction put in place for 2006 in the process. In contrast, other advantage of a low-bid environment, (48%) and 2011 (a little more than construction companies are gaining owners are not abandoning their 50%), it’s clear that, although this list traction, building backlogs, running approach to best-value procurement. does produce a signifcant portion of very proftably, and gaining new areas Another sign that there may annual construction, there is a good of specialization. be a distinguishable trend toward deal of distance to go before there is as So what is the secret? Why are consolidation, as well as a growing much consolidation among contractors some companies doing really well, divide between larger and smaller as there appears to be in design frms. while others are just barely surviving? frms, is the number of companies It is expected that more large owners The answer is that companies doing larger than a given size compared will be looking for full-service frms or well are leveraging strategies to deal with all others. In 2006, the top 21% groups of frms that can work together with the changing marketplace in of ENR’s Top 500 Design Firms seamlessly, as with IPD contracts. This their own contexts. represented 75% of the total revenue. will be especially necessary in the case In 2011, this fgure increased and the for projects in the “mega” size range. The 4Cs of Strategy top 22% of frms took in 82% of the Looking at the number of transactions A well-executed strategy development revenue. In 2011, 16 frms with more in the engineering and construction process is focused on a deep than $1 billion in annual revenue space since 2007 (for both the U.S. understanding of all the components represented approximately 52% of Top and Canada), there have been 170 that defne the company’s current and 500 revenue. Compare this with the instances where construction companies future context. These components fact that in 2006, 13 frms of greater bought engineering companies and 133 include the economic climate, customers, than $1 billion in annual revenue instances where engineering companies competitors, and capabilities (known represented only about 37% of total purchased construction companies, as the “4Cs” of strategy, which is FMI’s revenue. according to Capital IQ. strategy development model). In 2006, 46 frms with more than $1 While many of the frms involved in A rigorous data collection and billion in annual revenue represented these transactions were not on the Top research process is required for each approximately 54% of ENR Top 400 Contractors lists, many on the buyers’ component: Contractors revenue, while in 2011, side have been larger frms. M&A • Climate: Learn and understand all 54 frms represented more than 60% have cooled somewhat since the peak the external factors and forces that of total Top 400 revenue. Changes in in 2008, yet FMI expects this type of are beyond company control but revenue distribution between these two activity to continue as owners seek new have an infuence on the company. years show that only a few frms in the services and capabilities and A/E/C These include economic forecasts, middle moved up due to natural growth frms prepare strategically for future surety industry trends, commodity and mergers, while many more moved market changes. prices, politics, demographics, down. Comparing the Top 400 frms’ As with many fundamental trends, regulatory issues, globalization, and revenue against total nonresidential there is no conclusive short-term technology. Vol: 3 Issue: 11 November 2014 Built Expressions PG97