It seems that the economic downturn is finally impacting on the M&E contracting sector. According to a recent report released by industry analysts at Plimsoll, tightening of credit and a reluctance of the money markets to finance the next phase of development are forcing small M&E contractors to consider selling to their large rivals.

Meanwhile, many of the large players in the sector are looking to acquire smaller companies in order to diversify their businesses. “With the current climate, costs are being cut and business development is being slashed. So [the large players] need options to help them protect their futures and tap into existing revenue and profit streams,???? explained the Plimsoll report.

Financing small acquisitions at key niche players in the market is a quick way for large M&E contractors to increase sales for relatively low costs. It also allows them to gain a foothold in the emerging sectors of the market. For example, the past few years witnessed the emergence of approximately 200 small but highly focused M&E contractors. These companies have been able to carve out niche markets, with some of them reporting sales increases of 43.6 percent every year and profit margins of 5.7 percent.

In sharp contrast, many top players in the M&E contracting sector have been losing money, surviving only on thin profit margins of 3.3 percent or less. It makes sense that these companies seek to acquire their small but attractive counterparts for the purpose of branching out their businesses. Selling their businesses also helps small companies secure financial stability and extra resources.