Today, Wood Group announced the acquisition of Amec Foster Wheeler. This merger will create a clear market leader within the engineering and MMO-market, with a market share twice as large as its competitors. With a combined workforce of 64,000, it will rank as one of the top 15 oilfield service companies in the world.
“The engineering and MMO markets have been very fragmented for a long time, so a market consolidation was not surprising” said Audun Martinsen, VP of Oilfield Service Research. “Wood Group have previously been active with mergers and acquisitions by acquiring Mustang and Alliance Engineering, Baker Energy and PSN, so it was expected that they would not squander this unique opportunity during a downturn in the market”.
Wood Group has had a larger footprint into the upstream oil and gas business than AMECFW, which traditionally have been more exposed to non-upstream markets such as civil work and mining business. Combined they reached $14.2 billion of revenues in 2015, of which about 40% is related to upstream services and the majority of that is associated with engineering and MMO.
“When Amec and Foster Wheeler merged November 2014, Wood Group saw them as a clear competitor to their upstream business. However, the timing of this acquisition was better positioned than when AMECFW merged at the brink of the downturn” comments Martinsen.
The projected market growth for this new entity is expected to further contract in 2017 before recovery in 2018.
“The market outlook will still be challenging for Wood Group and AMECFW, but they should be able to leverage on their size going forward through realized synergies and dominating some markets. Now, it is only time before we expect their competitors to consolidate” said Martinsen.
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