The rise – and fallout – of mega mergers

The mega-merger is back in the air. From the high profile Marriott Hotels’ proposed takeover of Starwood – awaiting approval by the Chinese government before moving any further forward – to the more down to earth world of industrial gases, where German firm Linde and its American rival Praxair joining forces is set to create a market share of around 40%, M&A activity in search of ever bigger corporate gains has not subsided.

Reasons are complex but frequently come down to limiting competition or increasing efficiency. As the Economist puts it ‘Innovation is limited, so competitors dream mostly of winning clout, buying rivals and especially getting more access to contracts as a dedicated supplier to a big customer’.

In our sector, these mergers are no longer a surprise. Global joining of forces is becoming a regular – if not frequent occurrence – with synergies and greater procurement power often cited but sometimes leaving those involved questioning the benefits of such approaches.

Another inevitable outcome of the mega merger is the new offshoots that inevitably follow – individuals or smaller groups setting up on their own to offer more bespoke services, a more agile approach and more personal services while their former colleagues concentrate on the bigger, global picture and the efficiencies that larger organisations can offer.

While historic names – like Cyril Sweett – continue to disappear and the pros and cons of the mega merger can be discussed until the cows come home, Building, among others, is focusing on new names coming through. This perspective is especially welcome: the industry thrives on new lifeblood, new approaches and the abilities of ambitious SMEs to find gaps in the market and niche services that their clients need.