Surprise and relief: why the Lendlease sale to private equity is seen as a vote of confidence in UK contractors

Late on New Year’s Day in the UK, as most people were tucked up in bed, nursing hangovers and catching up on sleep after the night before, an announcement on the other side of the world in Sydney revealed that Lendlease’s UK construction business was being bought by a US private equity firm called Atlas Holdings.

Headquartered in Connecticut in the US, but with a base in London’s Mayfair, Atlas is already a familiar name in the UK construction sector having owned the cladding contractor Permasteelisa for more than four years.

Permasteelisa is run by Liam Cummins, previously with Kier and before that Laing O’Rourke, and who has been in charge for two years. Last year, he told Building that London was the firm’s most important market right now.

“I’m pleased that it’s not an unfriendly buyer,” says one industry boss. “Atlas already knows a bit about the London market and that’s a good thing.”

In its announcement, Lendlease’s Australian owner said that Atlas would be paying £35m for the business and that the deal would be wrapped up by the end of its financial year this June.

Building has been told that it will most likely happen before then, with both sides targeting completion in the spring. Outstanding matters centre around getting the necessary regulatory approvals.

When the deal is duly signed, it will mark the conclusion of a process to exit its overseas construction businesses first outlined by Lendlease in a strategy update to investors last May.

The firm had made its announcement on a spring bank holiday weekend in both the UK and US – the two countries mainly affected by the news. This prompted some to question why it did not wait an extra 24 hours, and perhaps conclude that Lendlease’s audience and priority was now very much a domestic one.

For some in the UK, the long-distance approach of its Australian parent will not be missed. “Everything had to get approved by Australia and the time difference meant things took longer,” remembers one former staffer.

“It was a hassle. Hopefully Atlas will be a bit more hands off.”

A little history

Lendlease moved into UK contracting in 1999, when it paid £285m for Bovis, famous for its hummingbird logo and then owned by shipping firm P&O, which was run by Lord Sterling.

P&O had owned Bovis since 1974 but, at its annual results presentations, it always seemed odd to see Sterling, the executive chairman, surrounded by miniature replicas of the P&O fleet in the palatial, red-carpeted office of its Pall Mall headquarters. He would switch from talking about the business of cruises in the West Indies one minute to muddy boots and concrete pours the next.

Bovis and Lendlease had really got to know each other when the latter bought an old quarry in Kent from Blue Circle in the mid-1990s and appointed Bovis to build what became known as the Bluewater shopping centre.

At the time of the deal, Lendlease was being run by David Higgins, who would become more widely known in construction after he was appointed chief executive of the organisation set up to build the venues for the London 2012 Olympics.

Higgins knew the value of the Bovis brand and, although he had left in 2003, it took a long time for Lendlease to ditch the name completely, renaming it Bovis Lend Lease then Bovis Lendlease before dropping the Bovis name for good in 2011 – 12 years after it bought it.

Yesterday Building revealed that the name, which first surfaced in 1885 after it was set up as CW Bovis by Charles Bovis, will return once more after the deal completes, a move which has pleased many. “It has a lot of heritage and there is a real benevolence to that name," said one consultant.

A Lendlease UK spokesperson confirmed that the name will change but declined to comment further, although they did add: “It’s a 150-year-old business – from Bovis and P&O into Lendlease. There’s a value to that heritage and [its] cultures, behaviours and experience will be worth a huge amount to their future owners.”

Bovis became one of the country’s blue-riband contractors, especially under the leadership of the late Sir Frank Lampl who turned it into an international builder of repute, especially in the US where its jobs included helping with the clean-up of Ground Zero in New York following the 11 September attacks in 2001.

Welcome news

News of the acquisition, then, has been welcomed by an industry anxious not to see another high-profile name disappear. “I think it’s positive to have a credible buyer and some certainty,” says one firm. “But we want to understand their management structure, governance and strategy and have asked for a meeting.”

Another adds: “In the medium term, I think it’s a good thing, but I’d like to see what the plan is. I’m pleased it’s not being left to rot, but why do they [Atlas] want a contractor in the UK? And what’s the offer going to look like?

“How will they deal with existing contract guarantees? I’m sure we’ll talk to them when they’re ready.”

Building understands that Atlas, which has around 50 staff including eight in London, is in it for the long term and that concerns about warranties and guarantees are overplayed. “Nobody is walking away from warranties, those issues are covered,” said one source.

“They tend to keep hold of businesses. People can be sceptical about private equity, but they’re not interested in flipping it after a couple of years.”

It is understood that the firm is looking to grow the business to somewhere between its current £500m revenue and £800m. It made its move, in part, because of the knowledge it has picked up with Permasteelisa, the source adds.

“They know Lendlease has been a consistent performer, well run. It’s not a business in distress. They feel they’re getting a good business at a good price.”

So far, Atlas’s only public utterance on the deal has been from its operating partner Peter Bacon, the person overseeing the Lendlease and Permasteelisa businesses in the UK, who said: “We are excited to acquire one of the UK’s leading construction companies, which has a long track record of successfully delivering large complex projects for both private and public sector clients.”

It is expected that London commercial, where it is bidding a £600m tower at 18 Blackfriars for US developer Hines, will remain its core, but Atlas is also believed to be looking at work outside the capital as well as public sector frameworks. Margins might be lower on government contracts but, the thinking goes, contract terms are more benign.

Still, clients and consultants will be expecting Atlas – like most private equity firms it doesn’t actively seek out publicity – to spell out more detail when the deal goes through.

“We will be doing our work to find out about Atlas,” says one firm. “The more they can tell us, the better.”

Once the deal is completed, Building has been told that Lendlease will sever all ties and will not retain a stake in the business which employs around 600 people. Most are in London and are currently moving out of an office in Paddington into temporary accommodation in Stratford.

Meanwhile, none of the £115m cladding repair liabilities from Lendlease’s 2006 purchase of Crosby Homes, which was never part of the construction business in any case, are part of the deal either.

According to its website, Atlas and its affiliates “own and operate 26 companies, which employ more than 50,000 associates across 350 facilities worldwide”. It is mainly involved in industries such as the printing, packaging, food manufacturing and the automotive sector.

Private equity questions

Some observers have admitted they are curious about why a private equity firm has moved into a traditionally low-margin industry.

One reckons: “Private equity will be interested in consistency of actual cash rather than margins I suspect. Consistency will be key. Lendlease Group may have guaranteed some future work and or retained liability for any awkward stuff.”

But another adds that private equity’s traditional focus on maximising profit might actually help things in the long run. “I think it is great news for construction,” says one boss.

“My hope is that, for the future of construction, we need more pushing for better returns and appropriate risk transfer. I believe that this acquisition by private equity could create a real catalyst for the right change.”

Building understands that Atlas began making inquiries about Lendlease days after last May’s announcement, with the interest hardening over the summer when the investment bank handling the sale for Lendlease formally got in touch.

In the run-up to last week’s news, its due diligence included speaking to senior personnel at the firm while it also enlisted Cummins to help gauge industry opinion about how a takeover of Lendlease by private equity – not to mention the owner of a major cladding contractor – would go down.

Inevitably, there is speculation about who will lead the new Lendlease but it is understood that Atlas sees David Cadiot as the man for the role and last week Bacon himself made it clear that Atlas was “look[ing] forward to working with David Cadiot and his team continuing to build the business”.

Cadiot has been in charge at Lendlease since last summer, when the former general manager for its regional business was promoted to managing director after Simon Gorski’s sudden departure.

Several other names have also gone in the past 18 months beginning with Neil Martin who left in autumn 2023, resurfacing at Sir Robert McAlpine last February. There he has been joined there by several Lendlease colleagues, notably Paul Sims, who spent 40 years there, to become operations director last spring. Another Lendlease veteran, Peter Leonard, joined last autumn as McAlpine’s new executive commercial director.

Gorski, who spent two decades at the firm, had been brought in to take over from Martin before Cadiot took over from him last July. “A nice guy, very competent,” is how one former staffer remembers Cadiot.

Some have raised concerns about Atlas owning a major contractor and a major cladding contractor. Building has been told that the two will be kept separate and one rival says they are unconcerned anyway.

“We aren’t worried about the Perma link at all. Permasteelisa’s model is to be involved in the big stuff before the main contract – so not much they can do to inappropriately create competitive advantage for a sister company.”

Fancy paying £285m in 1999 and selling for, at tops, £35m in 2025

Just over a week on from the announcement, there are, naturally enough, more questions than answers right now. But the consensus is that the move is a good one for UK construction.

“It’s great that it will keep going,” says one rival. “Somebody is actually buying a contractor. But fancy paying £285m in 1999 and selling for, at tops, £35m in 2025.”

There is another factor in all this. For much of last year, the perception was that only Mace and Multiplex were prepared to bid the really big commercial stuff in London. Everyone – clients, consultants, even Mace and Multiplex themselves – agree that there needs to be another candidate prepared to make the shortlists.

“If you had taken Lendlease out of the picture,” one relieved client admits, “it would have made things very difficult. Lendlease have kept their resource and their experience. They still have the ability to deliver major projects.”