Mixed Outlook For Facilities Services Sector

Underlying demand for Industrial Services suggests improving industrial growth is on the horizon.

Mixed Outlook For Facilities Services Sector

Twitter bannerThis FM Alert is brought to you by REAL STREET EXPO, a new event sponsored by Facility Executive and Business Facilities magazines. Posted by Heidi Schwartz FM AlertA recent report explained how infrastructural development and technological advancements have been driving the growth for the facility management market. However, the latest Baird report on the Facility, Industrial, and Rental Services (FIRS) sector is more modest, revealing a mixed but improving outlook. A potential pick-up in M&A remains topical as economic clarity and growth improve. Companies retain active M&A pipelines but are conducting more due diligence on strategic fits and the growth outlook. High valuations are making the process more selective as the major segments reported varied outlooks. First-quarter surveys demonstrated solid construction Rental Equipment Revenue growth, while Industrial Services performances gained steam after 18 months of lagging the Consumer sector. Uniform Rental trends remained stable.

  • Deal activity and dollar volume for the first quarter appears to lag the pace of 2013 and 2012. In the first three months of 2014, there were 57 transactions with a total dollar volume of $6.6 billion. There were 346 FIRS transactions last year with a total value of $32.9 billion, and 421 deals in 2012, with a total value of $32.5 billion.
  • The recent initial public offering for Danish services company ISS raised $1.5 billion, matching total 2013 IPOs in the sector. There were no FIRS IPOs in 2012, and five in 2011.
  • First-quarter construction Equipment Rental Revenue increased 9% year over year, up from last quarter’s 7.2% gain. Rental rates increased 2.2% year/year, down slightly from last quarter’s 2.3% increase and within the 1-4% range registered over the three years of the survey. Companies expect to increase fleet spending 6.1% in the next six months.
  • Underlying demand for Industrial Services suggests improving industrial growth is on the horizon. Short-cycle products tied to business investment are beginning to recover from a lack of investment and tight cost control seen in late 2012 and 2013.

The latest Facility, Industrial and Rental Services Report offers first-quarter 2014 data on each FIRS subsector, along with comprehensive valuation and operating metrics. It also spotlights the recently closed $2.5 billion deaI in which Harsco Corp.’s infrastructure division merged with Brand Energy and Infrastructure Services to create a new company providing specialized industrial services to the worldwide energy and infrastructure sectors. For more stories on facilities management outsourcing services, click this link.


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