WSP Global Inc. WSP-T is eyeing more takeovers in the months and years ahead as the Canadian engineering giant pursues its relentless growth in a quest to play a defining role in shaping global infrastructure and devising solutions to the climate change crisis.
Fresh from an announcement last week that WSP intends to buy British environmental consulting firm RPS Group PLC in a takeover worth $975-million with debt, chief executive officer Alexandre L’Heureux said the company has the appetite for more deals and the firepower to match.
Montreal-based WSP is raising $800-million in new equity to purchase RPS instead of borrowing, with half of it coming from long-time shareholders Singapore sovereign wealth fund GIC Pte., Caisse de dépôt et placement du Québec and Canada Pension Plan Investment Board. WSP might tap them again if other acquisition prospects opens up, Mr. L’Heureux said.
“I always want to be in a place where we can be opportunistic,” Mr. L’Heureux said in an interview with The Globe and Mail. “We need to maintain a very agile capital structure to continue to consolidate the market.”
The comments show the scope of WSP’s ambition as it seeks to build more scale and capability to meet increasingly large and complex projects amid a rapidly changing backdrop. Governments around the world have launched major infrastructure spending plans to fuel their economies shaken by the COVID-19 pandemic but Russia’s war on Ukraine and rising inflation have caused growing insecurity among public- and private-sector organizations even as the climate crisis becomes ever more urgent.
WSP passed SNC-Lavalin years ago as Canada’s biggest engineering design firm, with a current market capitalization of $18-billion to SNC’s $5-billion. Today it is the biggest such company in the world as measured by revenue generated outside its home market, ahead of Australia’s Worley Ltd. and Dallas-based Aecom, according to the latest annual rankings published this month by construction magazine Engineering News-Record.
RPS is WSP’s third major takeover in just three months and, combined, the recent deals announced are expected to boost its net revenue by 25 per cent to $10-billion and its head count by 22 per cent, to 70,000 people. The company says it expects a 15- to 20-per-cent boost to its adjusted earnings per share once it digests these and other smaller takeovers.
The rise of WSP has been swift. Barely a decade ago, the Montreal-based engineering giant was known as Genivar, and although it had grown through consolidation it was, by world standards, a mid-sized consultancy. Hailed in Canada for such projects as the BC Place stadium renovation and the new terminal building in Ottawa’s MacDonald-Cartier Airport, it was also among the engineering firms embroiled in Quebec’s public commission into allegations of corruption in the province’s construction industry.
Genivar took a major step in 2012, buying British-based WSP Group PLC, a specialist in high-rise building design and bridge and rail systems. Then it changed its name in 2014 to WSP and adopted a new corporate structure to reflect its increasingly global footprint. Later that year, it bought U.S.-based infrastructure consultancy Parsons Brinckerhoff in one of several major deals that contributed to its current size.
Mr. L’Heureux joined WSP as chief financial officer in 2010 and became CEO in 2016. A strategy and mergers and acquisitions specialist, he has kept the M&A deal flow going. WSP has completed 80 acquisitions in all during his time as CFO and CEO, adding 50,000 people, according to its corporate website.
If engineers were once seen as the people you hired to make something work properly, they’re now much more than that, Mr. L’Heureux said. He said he wants his staff to think of themselves as change agents, as the designers of sustainable infrastructure that has to stand the test of time in the face of rapidly-changing global climate patterns and the creators of novel solutions for problems both apparent and anticipated.
“Our professional engineering industry has been static and very conservative for many, many years,” the fortysomething CEO said. “We’ve got to attract the young generation and explain to them that we’re not here just to make money. We’re here to do good.”
The planned takeover of RPS is the latest example of WSP’s decision to boost its capability in work touching the environment, water management, earth sciences and energy transition. The company last year paid US$1.1-billion to buy Golder Associates, a leading environmental consultancy. In June, it announced a deal for John Wood Group’s environment consulting business for US$1.8-billion, followed up with a deal to buy two real estate and infrastructure consultancy businesses from Capita PLC.
“What these transactions clearly suggest to us, is that the prevailing market uncertainty is creating opportunities for this well-run and well-capitalized company to further build shareholder value,” Raymond James analyst Frederic Bastien said in an Aug. 3 research note. “[They’re] not letting a good crisis go to waste.”
Demand for environment-related services has exploded in recent years as governments and private-sector companies seek advice on things such as how to lower emissions and improve heating and cooling systems. Among its recent contracts showcasing its expertise in the area, WSP is doing work on a new seawater desalination plant in Hong Kong that uses reverse osmosis technology to supply the city with an alternative strategic water resource.
The company has been pursuing a strategy of diversifying income sources to boost resiliency. When the RPS transaction closes, a full third of WSP’s revenue will come from earth and environment contracts with the balance coming from transport and infrastructure (41 per cent) and property and buildings (21 per cent). Sales by client type will be split roughly 50-50 between public- and private-sector customers.
Many of those multinational customers are only getting bigger, whether it be Alphabet Inc., Honeywell or Ikea. And “they want us to have a footprint wherever they operate,” Mr. L’Heureux said. WSP intends to grow with them as long as needed – all the while staying confident but modest, he said.
“Even the biggest can fall,” he said, adding accounting company Arthur Andersen thought it was bigger than life before it collapsed. “What keeps me up at night is making sure our culture is right and that we remain humble in our success. … I don’t want us to become overly excited when things are going well. And I don’t want us to panic when things are a bit more difficult. So that’s our style. That’s certainly my style.”
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