Arcadis reaps rewards from firm-buying spree

Gross revenues up 26% following purchases in Europe, Asia and Latin America.

8 April 2013

Arcadis is doing something right.

Announcing its results at the end of February, the Amsterdam-based global design firm could boast that:

  • gross revenues were a record €2.5bn, up 26% from the previous year;

  • net revenues, of €1.9bn, were up 30%;

  • organic growth reached 4%;

  • operational margins improved 10%; and

  • net income from operations was a record €105.1m, up 29%.

Last year was important for consolidating its acquisitions. It bought the UK’s EC Harris in late 2011 and spent 2012 completing the merger process "in an accelerated timeframe creating significant revenue and cost synergies", the company said.

In April 2012 it completed its merger with Langdon & Seah, which had 2,800 employees in 10 Asian countries and $125m in revenues. This gave Arcadis the foothold it needed in the fast-growing Asian market.

In July Arcadis bought Switzerland’s BMG, a small practice – 50 people and €8m in revenues – whose clients included some big global pharmaceutical and chemical firms.

And in August, it acquired Brazil’s ETEP (300 people, €20m in revenues), and became, as Arcadis says, "the largest provider of water consulting services in Brazil by a wide margin".

Good bet: Arcadis’ new subsidiary EC Harris, with Mace, won a big role on Saudi Arabia’s Kingdom Tower. (Credit: Adrian Smith + Gordon Gill Architecture)

Arcadis CEO Neil McArthur, who was European MD for management consultancy Booz & Company before joining the Arcadis executive board in 2011 and rising to CEO in January 2012, expressed satisfaction with how the shopping spree has turned out:

"We have excellent potential for continued synergies with newly acquired companies and stronger positions in key growth markets," he said.

The acquisitions have been helpful where organic growth in the mature markets of Europe and the US proved weak.

EC Harris proved a particularly good bet, as evidenced by it winning the contract, with Mace, to provide project, commercial and design management for the next tallest-building-in-the-world contender, the $1.2bn Kingdom Tower development in Saudi Arabia.

So what, and where next?

Arcadis wants to restructure in Europe to save €25m a year. It believes it can do this by introducing best practice and a pan-European leadership team.

It hopes to bring Europe to an EBIDTA margin of 10% by the fourth quarter of 2014, compared with 5% in 2012.

The cost of this restructuring in 2013/2014 is expected to be approximately €20m.

Of its four main business areas – infrastructure, water, environmental and buildings – Arcadis seems quite enthusiastic about buildings, in London, Asia and the Middle East, where, thanks to its acquisitions, it sees strong growth potential.

"We expect continued growth in infrastructure and buildings, a stable market in environment, and a further recovery in water," said Neil McArthur, adding that more acquisitions "remains on the agenda".

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