Private equity firm KKR is among suitors to have expressed an interest in German engineering group Bilfinger’s property businesses, which include Bilfinger GVA and Bilfinger Real Estate.
Approaches earlier this month prompted the company to appoint advisers to explore a sale.
Bilfinger bought GVA for around £150m in 2014 in a deal that merged GVA’s real estate advisory division with Bilfinger’s facilities management business. A sale to KKR or another suitor would see it separated from its German parent.
Here, EG examines the pros and cons of the possible scenarios.
Private equity takeover
PROS: A prospective cash-rich backer could expand the business and fund new acquisitions.
CONS: Private equity owners could look to cut costs as well as headcount and are rarely long-term owners.
Takeover by a large rival
PROS: A deal with the likes of JLL or CBRE would plug the business into a global network and offer economies of scale advantages in the facilities management divisions.
CONS: Major crossover in some areas and the potential for job losses.
Takeover by a facilities management company
PROS: Economies of scale and little overlap for the transactional businesses.
CONS: Possible decreased stature of the transactional business.
Management buyout
PROS: A management buyout of the transactional element of the business led by Rob Bould, chief executive of GVA Bilfinger, who is well respected and has the ability to raise capital, would give the company control of its own destiny.
CONS: Raising funds for such a deal is tough, would require management to risk equity and may not be an avenue to expanding the business.
IPO/separate listing
PROS: Would allow Bilfinger to cash in and GVA to issue stock in order to grow.
CONS: GVA may not be the optimum size for a flotation, the stock market is choppy and the move would initially decrease the size of the business.
Do nothing
PROS: The status quo aids Bilfinger’s flagging engineering business in terms of the steady revenue GVA generates.
CONS: There is limited potential for the growth of the transactional business given the engineering business’s problems.
Dispose of FM and transactional businesses separately
PROS: Allows each division to find a buyer that is best suited to it, which may provide Bilfinger with a better price and less potential crossover with purchasers.
CONS: Any synergies and cross-selling opportunities could be lost.
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