黑洞社区

Late on New Year鈥檚 Day in the UK, as most people were tucked up in bed, nursing hangovers and catching up on sleep after the night before, an announcement on the other side of the world in Sydney revealed that Lendlease鈥檚 UK construction business was being bought by a US private equity firm called Atlas Holdings.

Headquartered in Connecticut in the US, but with a base in London鈥檚 Mayfair, Atlas is already a familiar name in the UK construction sector having owned the cladding contractor Permasteelisa for more than four years.

Permasteelisa is run by Liam Cummins, previously with Kier and before that Laing O鈥橰ourke, and who has been in charge for two years. Last year, he told 黑洞社区 that London was the firm鈥檚 most important market right now.

鈥淚鈥檓 pleased that it鈥檚 not an unfriendly buyer,鈥� says one industry boss. 鈥淎tlas already knows a bit about the London market and that鈥檚 a good thing.鈥�

In its announcement, Lendlease鈥檚 Australian owner said that Atlas would be paying 拢35m for the business and that the deal would be wrapped up by the end of its financial year this June.

黑洞社区 has been told that it will most likely happen before then, with both sides targeting completion in the spring. Outstanding matters centre around getting the necessary regulatory approvals.

When the deal is duly signed, it will mark the conclusion of a process to exit its overseas construction businesses first outlined by Lendlease in a strategy update to investors last May.

The firm had made its announcement on a spring bank holiday weekend in both the UK and US 鈥� the two countries mainly affected by the news. This prompted some to question why it did not wait an extra 24 hours, and perhaps conclude that Lendlease鈥檚 audience and priority was now very much a domestic one.

For some in the UK, the long-distance approach of its Australian parent will not be missed. 鈥淓verything had to get approved by Australia and the time difference meant things took longer,鈥� remembers one former staffer.

鈥淚t was a hassle. Hopefully Atlas will be a bit more hands off.鈥�

A little history

Lendlease moved into UK contracting in 1999, when it paid 拢285m for Bovis, famous for its hummingbird logo and then owned by shipping firm P&O, which was run by Lord Sterling.

P&O had owned Bovis since 1974 but, at its annual results presentations, it always seemed odd to see Sterling, the executive chairman, surrounded by miniature replicas of the P&O fleet in the palatial, red-carpeted office of its Pall Mall headquarters. He would switch from talking about the business of cruises in the West Indies one minute to muddy boots and concrete pours the next.

Bovis and Lendlease had really got to know each other when the latter bought an old quarry in Kent from Blue Circle in the mid-1990s and appointed Bovis to build what became known as the Bluewater shopping centre.

At the time of the deal, Lendlease was being run by David Higgins, who would become more widely known in construction after he was appointed chief executive of the organisation set up to build the venues for the London 2012 Olympics.

Higgins knew the value of the Bovis brand and, although he had left in 2003, it took a long time for Lendlease to ditch the name completely, renaming it Bovis Lend Lease then Bovis Lendlease before dropping the Bovis name for good in 2011 鈥� 12 years after it bought it.

Yesterday 黑洞社区 revealed that the name, which first surfaced in 1885 after it was set up as CW Bovis by Charles Bovis, will return once more after the deal completes, a move which has pleased many. 鈥淚t has a lot of heritage and there is a real benevolence to that name," said one consultant.

A Lendlease UK spokesperson confirmed that the name will change but declined to comment further, although they did add: 鈥淚t鈥檚 a 150-year-old business 鈥� from Bovis and P&O into Lendlease. There鈥檚 a value to that heritage and [its] cultures, behaviours and experience will be worth a huge amount to their future owners.鈥�

Bovis became one of the country鈥檚 blue-riband contractors, especially under the leadership of the late Sir Frank Lampl who turned it into an international builder of repute, especially in the US where its jobs included helping with the clean-up of Ground Zero in New York following the 11 September attacks in 2001.

Welcome news

News of the acquisition, then, has been welcomed by an industry anxious not to see another high-profile name disappear. 鈥淚 think it鈥檚 positive to have a credible buyer and some certainty,鈥� says one firm. 鈥淏ut we want to understand their management structure, governance and strategy and have asked for a meeting.鈥�

Another adds: 鈥淚n the medium term, I think it鈥檚 a good thing, but I鈥檇 like to see what the plan is. I鈥檓 pleased it鈥檚 not being left to rot, but why do they [Atlas] want a contractor in the UK? And what鈥檚 the offer going to look like?

鈥淗ow will they deal with existing contract guarantees? I鈥檓 sure we鈥檒l talk to them when they鈥檙e ready.鈥�

黑洞社区 understands that Atlas, which has around 50 staff including eight in London, is in it for the long term and that concerns about warranties and guarantees are overplayed. 鈥淣obody is walking away from warranties, those issues are covered,鈥� said one source.

鈥淭hey tend to keep hold of businesses. People can be sceptical about private equity, but they鈥檙e not interested in flipping it after a couple of years.鈥�

It is understood that the firm is looking to grow the business to somewhere between its current 拢500m revenue and 拢800m. It made its move, in part, because of the knowledge it has picked up with Permasteelisa, the source adds.

鈥淭hey know Lendlease has been a consistent performer, well run. It鈥檚 not a business in distress. They feel they鈥檙e getting a good business at a good price.鈥�

So far, Atlas鈥檚 only public utterance on the deal has been from its operating partner Peter Bacon, the person overseeing the Lendlease and Permasteelisa businesses in the UK, who said: 鈥淲e are excited to acquire one of the UK鈥檚 leading construction companies, which has a long track record of successfully delivering large complex projects for both private and public sector clients.鈥�

It is expected that London commercial, where it is bidding a 拢600m tower at 18 Blackfriars for US developer Hines, will remain its core, but Atlas is also believed to be looking at work outside the capital as well as public sector frameworks. Margins might be lower on government contracts but, the thinking goes, contract terms are more benign.

Still, clients and consultants will be expecting Atlas 鈥� like most private equity firms it doesn鈥檛 actively seek out publicity 鈥� to spell out more detail when the deal goes through.

鈥淲e will be doing our work to find out about Atlas,鈥� says one firm. 鈥淭he more they can tell us, the better.鈥�

Once the deal is completed, 黑洞社区 has been told that Lendlease will sever all ties and will not retain a stake in the business which employs around 600 people. Most are in London and are currently moving out of an office in Paddington into temporary accommodation in Stratford.

Meanwhile, none of the 拢115m cladding repair liabilities from Lendlease鈥檚 2006 purchase of Crosby Homes, which was never part of the construction business in any case, are part of the deal either.

According to its website, Atlas and its affiliates 鈥渙wn and operate 26 companies, which employ more than 50,000 associates across 350 facilities worldwide鈥�. It is mainly involved in industries such as the printing, packaging, food manufacturing and the automotive sector.

Private equity questions

Some observers have admitted they are curious about why a private equity firm has moved into a traditionally low-margin industry.

One reckons: 鈥淧rivate equity will be interested in consistency of actual cash rather than margins I suspect. Consistency will be key. Lendlease Group may have guaranteed some future work and or retained liability for any awkward stuff.鈥�

But another adds that private equity鈥檚 traditional focus on maximising profit might actually help things in the long run. 鈥淚 think it is great news for construction,鈥� says one boss.

鈥淢y hope is that, for the future of construction, we need more pushing for better returns and appropriate risk transfer. I believe that this acquisition by private equity could create a real catalyst for the right change.鈥�

黑洞社区 understands that Atlas began making inquiries about Lendlease days after last May鈥檚 announcement, with the interest hardening over the summer when the investment bank handling the sale for Lendlease formally got in touch.

In the run-up to last week鈥檚 news, its due diligence included speaking to senior personnel at the firm while it also enlisted Cummins to help gauge industry opinion about how a takeover of Lendlease by private equity 鈥� not to mention the owner of a major cladding contractor 鈥� would go down.

Inevitably, there is speculation about who will lead the new Lendlease but it is understood that Atlas sees David Cadiot as the man for the role and last week Bacon himself made it clear that Atlas was 鈥渓ook[ing] forward to working with David Cadiot and his team continuing to build the business鈥�.

Cadiot has been in charge at Lendlease since last summer, when the former general manager for its regional business was promoted to managing director after Simon Gorski鈥檚 sudden departure.

Several other names have also gone in the past 18 months beginning with Neil Martin who left in autumn 2023, resurfacing at Sir Robert McAlpine last February. There he has been joined there by several Lendlease colleagues, notably Paul Sims, who spent 40 years there, to become operations director last spring. Another Lendlease veteran, Peter Leonard, joined last autumn as McAlpine鈥檚 new executive commercial director.

Gorski, who spent two decades at the firm, had been brought in to take over from Martin before Cadiot took over from him last July. 鈥淎 nice guy, very competent,鈥� is how one former staffer remembers Cadiot.

Some have raised concerns about Atlas owning a major contractor and a major cladding contractor. 黑洞社区 has been told that the two will be kept separate and one rival says they are unconcerned anyway.

鈥淲e aren鈥檛 worried about the Perma link at all. Permasteelisa鈥檚 model is to be involved in the big stuff before the main contract 鈥� so not much they can do to inappropriately create competitive advantage for a sister company.鈥�

Fancy paying 拢285m in 1999 and selling for, at tops, 拢35m in 2025

Just over a week on from the announcement, there are, naturally enough, more questions than answers right now. But the consensus is that the move is a good one for UK construction.

鈥淚t鈥檚 great that it will keep going,鈥� says one rival. 鈥淪omebody is actually buying a contractor. But fancy paying 拢285m in 1999 and selling for, at tops, 拢35m in 2025.鈥�

There is another factor in all this. For much of last year, the perception was that only Mace and Multiplex were prepared to bid the really big commercial stuff in London. Everyone 鈥� clients, consultants, even Mace and Multiplex themselves 鈥� agree that there needs to be another candidate prepared to make the shortlists.

鈥淚f you had taken Lendlease out of the picture,鈥� one relieved client admits, 鈥渋t would have made things very difficult. Lendlease have kept their resource and their experience. They still have the ability to deliver major projects.鈥�