Wates has taken a major step forward in its ambition of doubling turnover to £2bn, with the acquisition of the bulk of Shepherd Group’s construction businesses, analysts have said.

Wates and Shepherd confirmed last Thursday Wates had bought Shepherd Engineering Services (SES), Shepherd’s facilities management division, and a batch of contracts from Shepherd Construction for an undisclosed price, after building.co.uk broke the news earlier that morning.

According to accounts filed at Companies House, Shepherd Construction and SES turned over £240m and £208m respectively in the year to June 2014. Financial information was not available for the Shepherd FM brand.

Tony Williams, analyst at Building Value, welcomed the deal, saying it was a “big step” towards Wates’ target of doubling turnover from £1.05bn in the 2014 calendar year, although he noted Wates’ chief executive Andrew Davies (pictured) had “cleverly” not put a timeframe on the target.

The deal was also the latest step in Shepherd Group’s strategy of rationalising down its businesses to focus on its fast-growing Portakabin group of modular construction companies, hot on the heels of the sale of Yorkshire housebuilding division Shepherd Homes to Galliford Try earlier this month.

Shepherd Group launched a review of its construction divisions in December, following what it described as “very disappointing” performance in its construction businesses, offsetting strong profit growth in the Portakabin group to drag overall group pre-tax profit down 12% to £11.4m in the year to 30 June 2014, on turnover of £686m.

Earlier last week, Shepherd confirmed that it had made 55 employees redundant from its Shepherd Construction business, including 37 compulsory and 18 voluntary redundancies. A spokesperson said at the time: “We are doing everything possible to prioritise the welfare of staff affected.”

Williams said introducing Wates management at the acquired Shepherd construction businesses could be the “key to turning it around”.

He added: “The challenge for Wates is to get in there and make sure there are no problem contracts and if there are to fix them and then run ahead with the business.”

Commenting on Shepherd’s Portakabin group of businesses, Williams said it was “phenomenally profitable and a fantastic brand name”.

Stephen Rawlinson, an analyst at Whitman Howard, said the deal was part of what appeared to be “consolidation in the sector”, noting that Miller Construction and Morrison Construction have also been bought by Galliford Try in recent years. “It’s interesting to question what likely combinations might happen next,” he added.

Commenting last week, Davies said: “The acquisition […] would complement and enhance our existing construction and property services businesses, with access to additional areas of expertise in off-site construction, design for manufacture and assembly operations and expansion in new markets into the north of England.”

David Williams, chairman of Shepherd Group, said: “The Shepherd Group Board recognises that Shepherd Construction needs scale in order to capitalise on its full potential and the market opportunities arising out of its acknowledged technical capability.”

The transaction is subject to due diligence being completed.

Both parties declined to disclose the terms of the proposed deal and said they would not provide further detail until the transaction closes.