In yet another deal that will see an international engineering firm acquire a local industry player, Johannesburg-based consulting engineering specialist PD Naidoo & Associates (PDNA) will, subject to Competition Commission approval, be bought out by global engineering, management and development consultancy Mott MacDonald Group.

The acquisition would see the activities of the two companies in Southern Africa uniting to create an 800-person strong entity providing extended, multisector capabilities for the sub-Saharan Africa region.

The proposed new practice would provide multidisciplinary design, implementation and management services across the property and infrastructure, transport, water, industrial, mining, energy, communications, health and education sectors.

The announcement by the two firms followed their collaboration on several major projects, including the Eastern Cape Infrastructure joint venture, which provided State-owned group Transnet with engineering, procurement and construction management services for port infrastructure upgrade projects in Port Elizabeth, East London and the Port of Ngqura.

Mott MacDonald Group chairperson Keith Howells said the addition of PNDA to the group would provide the scope and scale to tackle more complex and strategic next-generation projects.

PDNA chairperson Dempsey Naidoo concurred, adding that the merger would reflect the progression of the local firm’s global growth strategy.

“Through this union, we will create a powerful single-source, end-to-end service – backed by in-depth understanding and knowledge of Southern Africa’s social, economic and technological environment,” he commented, noting that the group expected to have an initial combined broad-based black economic-empowerment Level 3 rating.

Acquisitive Trend

The announcement by the two firms came as the industry was increasingly observing the acquisition of well-established domestic engineering and construction entities by international groups, with the aim of creating new Africa-focused organisational platforms.

Similar deals included the merger of local consulting engineering firm BKS and US firm Aecom Technology Corporation last year; the merger of consulting engineering, project management and implementation firms Hatch and Goba, also in 2012; and the 2009 merger of Africon, Connell Wagner and Ninham Shand to form Aurecon.

Engineering News reported in February that a common feature of most, if not all, of these transactions was a desire to leverage South Africa as a gateway for accelerated and expanded activity into the rest of Africa, which was increasingly regarded as an important new engineering and infrastructure frontier.

Good economic fundamentals in Africa, most specifically the growing population, the continent’s mineral resources, as well as new market opportunities for international companies, made it an attractive destination for expansion.

Consulting Engineers South Africa CEO Graham Pirie told Engineering News Online on Monday that this phenomenon was not exclusive to South Africa, but was rather indicative of the consolidation of the global engineering and construction sectors.

“Consolidation of the industry is occurring at an international level, primarily through increased merger and acquisition activity and is, in my view, a normal reaction to the demand of the market as projects become larger and more complex,” he said, adding that firms now needed to extend their geographical footprint in order to survive.

Pirie said firms were increasingly observing vast opportunities on the African continent as the middle class emerged and believed that local value would not be lost through increasingly acquisitive market action, as it would expose local firms to different markets and various market cycles.

“This is a trend that is in the interest of the firms, the industry and the country,” he commented.