Acquiring success

CN plant editor Richard Stirling reports on how the plant industry is staying buoyant in the market

"Work at height regulations and health and safety demands have raised the profile of powered access"

In a time when main contractors are going through an age of conglomeration, with some major acquisitions over the last year, the plant hire industry is doing the same to cater for their needs.

Plant hirers are adopting two strategies: to run specialist operations catering for specific needs such as access platforms, or keeping their customers in the depot for as long as possible by offering everything but the kitchen sink.

Although some contractors have healthy plant divisions, notably Laing O'Rourke's Select Plant Hire and Amey Fleet Services, it looks like contractors are happy to let hire companies manage their plant.

Plant hire accounts for about two-thirds of investment in machinery and about 80 per cent of the market. According to analyst Catherine Stratton's view in the Plant Hire Investment Report, if companies are ranked by the value of their plant, the UK's largest contractor,
Balfour Beatty, sneaks in at number five behind hire giants Ashtead, Aggreko, Speedy Hire and Hewden.

Big money

Main contractors are following a trend of consolidation with some high profile acquisitions over the last year. Carillion purchased Alfred McAlpine and Balfour Beatty got Dean & Dyball.

The firms will look for suppliers to manage national contracts and specialist requirements.

This could go some way to explain Speedy Hire's acquisition of Hewden's tool business last year, which made it an all-singing, all-dancing distributor. The deal has done nothing to quench Speedy's thirst for more acquisitions and the company has since relieved main contractors of non-core businesses with the purchase of Amec's internal supplier of general plant, lifting equipment and site accommodation – Amec Logistics and Support Services –
and Carillion Asset Management, the firm's portable and modular accommodation division.

A-Plant also raised its presence in the portable accommodation market when it paid £5.8 million for Norwest Holst's accommodation fleet.

Speedy made another tactical move and a tentative step into a new area when it bought Waterford Hire Services in Ireland.

Equipment rental specialist firm Vp had the busiest year on the acquisitions front with 10 small and strategic purchases increasing its geographical spread and strengthening its range of services.

Its largest deal was £2.9 million for Redding Hire, which has broadened the geographical coverage of its groundforce division and sits alongside its trenchless technology firm U-Mole.

Market trends The most notable trend over the last year has been specialised plant hire companies buying up the competition or moving into new geographical areas. Work at height legislation and health and safety demands from clients have raised the profile of powered
access and suppliers have been keen to cater for their customers' needs.

Powered access giant Lavendon swallowed competitor The Platform Company in a £46.1 million deal, which swelled its fleet by 4,000 machines to 15,000. Lavendon said it intends to merge the company with its existing Nationwide Access brand following the deal. The deal took place after the end of Lavendon's previous accounting period and has yet to affect its position in the top 20 companies.

The Platform Company deal was not the only one for Lavendon. The firm also made a move on mainland Europe with the acquisition of three DK Rental companies in Spain, Belgium and France for a combined sum of £61.4 million.

Lavendon competitor AFI Uplift was also eager to grow by acquisition over the year. The business strengthened its geographical presence and increased its fleet to 4,300 machines with the purchases of North East Access and Central Access.

Usually recognised for its scaffolding operations, SGB is also the country's leading powered access platform hirer and strengthened that position with the acquisition of Jarrow-based mastclimber and suspended platform specialist Sovereign Access Services.

After Speedy's purchase of Hewden's tools business last year, the two companies have swapped places in the ranking of the biggest earning plant hire companies.

The management buy-out at Ainscough Crane Hire took the limelight as the industry's most prominent deal over the last 12 months. The company originally issued a statement in which it said it would either seek a Stock Exchange listing or a buyer. Opting for the latter in October, it secured a £255 million deal led by chief operating officer and former finance director Neil Partridge.

In the wake of the deal, Ainscough bought Scottish crane hire and haulage firm James Jack Lifting Services.

On top of acquisitions, plant hirers have not been shy of organic growth, and companies such as HSS have increased coverage by opening super centres.

The firm has also formed close relationships with major contractors by opening up onsite distribution centres.

Big merchants such as Wolseley have successfully followed suit, while hirers such as Hewden, GAP and HSS have set up similar arrangements.

Less is more

Although the spend on plant hire by major contractors is relatively easy to quantify, an important source of income for hirers is from smaller contractors.

These firms often lack the resource to own or maintain certain pieces of kit so hire firms can offer their services.

The construction industry's boom over the last few years has meant contractors have been happy to farm out their plant requirements to hirers better placed to look after machinery or to provide operators and kit.

But, it remains to be seen how they will behave during a slowdown.

Over the last 12 months we have seen house builders putting the squeeze on their suppliers and effectively renegotiating contracts. They will be taking a careful look at their plant suppliers in a bid to cut costs.

Should this be the case, hire firms could also find themselves under the cosh with rising raw materials and fuel prices. Steel prices have gone haywire once again, which is pushing up the price of kit and the cost of diesel has reached such a high that fuel theft has become an attractive proposition for criminals.

Publicly-listed companies have taken a bashing over their share prices this year, but it is important to note that analyst Ms Stratton recorded an increase in companies' spend on plant hire. She found that 75 per cent of customers increased their hire expenditure on the year before.

This was the same proportion as the previous year, comparing to 68 per cent the year before.

Slowing down

So, should hirers worry about a construction slowdown?

Certainly, things might not be as rosy as they have been over the last few years. But hirers can buffer themselves against slowdowns in certain areas through diversification, even moving into markets such as supplying equipment to big events.

And changes in legislation, such as working at height rules, are dictating the use of equipment such as scissor lifts, which firms need to rent or purchase.

Either way, the UK hire market looks able to brave uncertain conditions ahead.

To download tables of the mergers and acquisitions click on the resource box on the right hand side of the page