AECOM to sell civil construction business to Oroco Capital
AECOM, the global infrastructure consulting firm, has signed a definitive agreement to sell its civil construction business, which includes the Shimmick Construction business, to affiliates of Oroco Capital.
In a statement, AECOM says that the transaction is expected to close in January, upon the satisfaction of customary closing conditions.
“Today’s announcement of the sale of our civil construction business, together with the sale of our power construction business in October, represents a significant milestone in advancing our strategy and focusing our efforts on our higher-margin and lower-risk professional services businesses,” says Troy Rudd, AECOM’s chief executive officer.
“Our outlook is bright as we bring together our company under our Think and Act Globally strategy, which includes transforming how we operate through the digital delivery of our work and focusing on growing our professional services businesses. I thank the civil construction team on behalf of our company for their efforts over the years and wish the business the best of success under the stewardship of Oroco Capital.”
Wachtell, Lipton, Rosen and Katz served as legal advisor to AECOM in connection with the transaction, while DBO Partners LLC served as its financial advisor, the statement adds.
AECOM’s professional services business generated revenue of £9.90 billion in the fiscal year of 2020, according to data from Nasdaq.
The announcement comes in the wake of recent changes to the company’s board of directors, which has seen seven of the eleven AECOM board members appointed within the past year. Douglas W Stotlar, chairman of AECOM’s board of directors, explains that the changes to the board have been planned to support the company’s ongoing evolution of strategy, with the focus being on becoming a ‘premier professional services firm’.
“As demonstrated by the strong performance reflected in our recently reported fiscal year end results, AECOM’s strategic transition to a premier Professional Services firm is creating value for our shareholders, delivering positive results and positioning the business for success in 2021 and beyond,” says Rudd. “In fiscal year 2020, we delivered another year of enhanced profitability that exceeded our guidance, even amid a challenging environment for nearly all industries across the globe.”
AECOM’s civil construction business operates across all civil infrastructure sectors, including heavy civil, mass transit, mining, water, highways, and bridges, for both private and public clients.
In 2017, the firm acquired Shimmick Construction as part of its plans to expand its civil construction capabilities in the Western United States.
Its portfolio includes the Golden Gate Bridge in San Francisco, the Gerald Desmond Bridge Replacement in Long Beach, the E320 South Bellevue Extension in Seattle, the HART Airport Guideway and Stations design-build project in Honolulu, and the Miramar Clearwell Improvements project in San Diego.
Contractor issues head disputes list in 2020: Arcadis report
The average value of disputes globally rose from $30.7 million in 2019 to $54.26 million in 2020, while the length of disputes fell from 15 months in 2019 to 13.4 months, according to an Arcadis report.
The data, featured in Arcadis' 11th annual report, illustrates industry-wide ripple effects of the COVID-19 pandemic although interestingly the overall volume of disputes stayed relatively the same in 2020 as in 2019.
While trends in the value and length of disputes varied from region to region, all regions surveyed saw an increase in "mega disputes" related to bigger capital programs and private projects. Notably, more than 60% of survey respondents encountered project impacts due to COVID-19.
Owners, contractors, or subcontractors failing to understand and/or comply with their contractual obligations became the leading cause of construction disputes in 2020 (jumping from 3rd place in 2019), followed by owner-directed changes and third-party or force-majeure changes as the second and third-leading causes, respectively.
Highlights from the report include:
- Proper contract administration was a theme across the globe for the successful and early resolution of disputes
- Most disputes were settled through party-to-party negotiation, and a willingness to compromise played a key role in early resolution
- Among regions surveyed, the buildings (education, healthcare, retail/commercial, government) sector saw the most disputes
- In North America, construction dispute value rose from $18.8 million in 2019 to $37.9 million in 2020, while the length of disputes shortened from 17.6 to 14.2 months.
While cost and length have changed since 2019, risk management was still seen as the most effective claims avoidance tactic, while owner/contractor willingness to compromise was once again the top-ranked factor for the mitigation/early resolution of disputes.
"COVID-19 irrevocably changed every industry," said Roy Cooper, head of contract solutions for Arcadis North America. "Construction disputes experts will have to continue to adapt, even post-pandemic, as workforce expectations, climate events and government infrastructure funding change how projects are designed and contracted in the future."
The research presented in the report was compiled by Arcadis based on survey responses, global construction disputes the team handled in 2020 and contributions from industry experts.