{"id":501012,"date":"2024-06-19T12:13:00","date_gmt":"2024-06-19T11:13:00","guid":{"rendered":"https:\/\/www.constructionnews.co.uk\/?p=501012"},"modified":"2024-06-19T12:13:00","modified_gmt":"2024-06-19T11:13:00","slug":"lendlease-sale-a-sprint-not-a-marathon","status":"publish","type":"post","link":"https:\/\/www.constructionnews.co.uk\/contractors\/lendlease\/lendlease-sale-a-sprint-not-a-marathon-19-06-2024\/","title":{"rendered":"Lendlease sale a sprint, not a marathon"},"content":{"rendered":"

The head of Lendlease Europe\u2019s construction operations says he wants to find a buyer for the business \u201cat pace\u201d<\/em><\/strong><\/p>\n

Simon Gorski is a man in a hurry.<\/p>\n

As the boss of Lendlease Europe\u2019s construction operations<\/a>, he is looking to line up a buyer for the UK business by the end of the year \u2013 well ahead of the originally-stated deadline.<\/p>\n

Lendlease group chief executive and managing director Tony Lombardo fired the starting gun<\/a> on 28 May, when he announced that the UK and US contracting businesses would be sold by the end of 2025 under a strategy to focus on the Australian market.<\/p>\n

But Gorski wants to move faster. \u201cWe\u2019re going to move at pace,\u201d he tells Construction News<\/em> in an exclusive interview.<\/p>\n

\u201cAnd I\u2019d like to think that we\u2019re going to have made significant headway in this calendar year. Although we talked about an 18-month directional timeline, I would expect it to move far more quickly than that.\u201d<\/p>\n

Gorski says the team that will manage the sale is already in place \u201cand working to fairly aggressive timelines, if just to remove uncertainty\u201d.<\/p>\n

The investment team is preparing a sales prospectus \u2013 \u201cthen we\u2019ll engage interested parties and work through the process to its conclusion\u201d.<\/p>\n

Lendlease Europe\u2019s most recent accounts for the year ending 30 June 2023 revealed a 37 per cent slump in pre-tax profit to \u00a311.9m. Revenue also fell from \u00a3553.5m to \u00a3509m and the pre-tax margin was 2.3 per cent.<\/p>\n

The accounts also mentioned that the firm had \u00a32.3bn of external work \u201cat the preferred bidder stage, some of which has since converted\u201d.<\/p>\n

The accounts described this pipeline as \u201cenviable\u201d and one that \u201cprovides a solid foundation for future growth in line with our strategic targets\u201d.<\/p>\n

Gorski could not say exactly how many potential bidders have already thrown their hat into the ring.<\/p>\n

When asked about reports that around five firms are interested in acquiring the firm, Gorski says: \u201cThe number isn\u2019t getting smaller \u2013 we\u2019re not engaged with any organisations yet but it\u2019s interesting to see the interest.\u201d<\/p>\n

However, a tier one contractor would be an unlikely buyer, according to a high-level source in the financial sector.<\/p>\n

\u201cScarcely any [tier ones] have the desire, muscle or firepower to be acquisitive,\u201d the source tells CN <\/em>on condition of anonymity.\u00a0 \u201cMost contractors are more focused on organic growth than growth through acquisition.\u201d<\/p>\n

It\u2019s difficult to estimate the acquisition price for Lendlease Europe and Gorski would not be drawn on the topic.<\/p>\n

He isn\u2019t ruling out private equity, a management buyout or even an employee-owned model at this stage, but he would prefer a direct sale.<\/p>\n

\u201cI\u2019ve got to think about our clients, staff and the Lendlease group itself. It\u2019s like a Venn diagram \u2013 whichever model we go for has to suit all of these parties,\u201d Gorski says.<\/p>\n

However, the financial source CN<\/em> spoke to doesn\u2019t believe that private equity firms would be interested, saying: \u201cThere\u2019s more of a chance in infrastructure services as the margins are higher, but the traditionally low margins in contracting make it less attractive.\u201d<\/p>\n

One reason for Lendlease Europe\u2019s profit slump last year was a failed legal attempt<\/a> to recoup millions of pounds on a Leeds hospital PFI construction project.<\/p>\n

Gorski insists that PFI issues belong in the past. \u201cBut there were some emerging issues at the back end of our contract liability period\u2026 It\u2019ll be interesting to see what the government and the private sector\u2019s relationship will be in the future. How that might play out is probably a lot different to traditional PFI contracts.\u201d<\/p>\n

In February this year, the Australian parent firm put aside an\u00a0additional \u00a311.4m to deal with historical UK fire safety liabilities<\/a>. But Gorski would not be drawn on whether Lendlease Europe\u2019s buyer would be expected to take on the firm\u2019s legacy liabilities.<\/p>\n

\u201cThat all falls into the [sale] process,\u201d he says. \u201cIt will come out in the wash to see where liabilities sit. We\u2019ll have a much clearer understanding of that at the back end of this year.\u201d<\/p>\n

Has Lendlease made itself a hostage to fortune \u2013 if it can\u2019t find a buyer in the tight timeframe, could a savvy would-be buyer simply bide their time to drive down the price?<\/p>\n

\u201cAs the eternal optimist, I can\u2019t envisage that scenario. I don\u2019t think that\u2019s a bridge we\u2019ll ever need to cross,\u201d Gorski says.<\/p>\n

\u201cWhen we get to the point where organisations have expressed an interest and are looking under the covers and doing their due diligence, I think they\u2019re going to be pleasantly pleased at what they discover in terms of how the business is governed. I don\u2019t think there are any particular things to be concerned about. I think we run a very, very tight ship.\u201d<\/p>\n

Gorski is a 19-year veteran of Lendlease, having joined the firm after a 10-year stint as a British Army officer. He says he is staying on to lead the construction business through the transition to its new owner.<\/p>\n

The latest official figures from the Insolvency Service show that 4,401 construction firms collapsed in the 12 months to April 2024 \u2013 more than any other industry<\/a>.<\/p>\n

But Gorski believes that \u201cthings are about to take off\u201d for the UK construction sector. \u201cWith the election coming up, it actually creates an opportunity for major public spending on hospitals, prisons and defence. There\u2019s going to be a huge impetus for spending on major capital projects, and we are one of the very few organisations capable of delivering them.<\/p>\n

\u201cAnd with the economy, we are seeing inflation drop slowly. It does seem like there are going to be two or even three base [interest] rate cuts [from the Bank of England] in the second half of this year, which might unlock some private sector developments in London and the regions.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

The head of Lendlease Europe\u2019s construction operations says he wants to find a buyer for the business \u201cat pace\u201d Simon Gorski is a man in a hurry. As the boss of Lendlease Europe\u2019s construction operations, he is looking to line up a buyer for the UK business by the end of the year \u2013 well …<\/p>\n","protected":false},"author":135716,"featured_media":501049,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ep_exclude_from_search":false},"categories":[552,570,538,559],"tags":[],"yoast_head":"\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\t\n\t\n\t\n