Facilities Management UK Market Outlook 2016€¦ · The current UK Facilities Management market is...

UK MARKET OUTLOOK

FACILITIES MANAGEMENT

BDO MERGERS & ACQUISITIONS | 2016

CONTENTS

INTRODUCTION 2

EXECUTIVE SUMMARY 3

CLIENT DELIVERY MODELS 4

MARKET PRESSURES 6

M&A TRANSACTIONS REVEAL

MARKET OPPORTUNITIES8

RISE IN BUILDING

TECHNOLOGY AND

REGULATION FUELS DEALS

10

TECHNOLOGY AND

INNOVATION ARE DRIVING

CHANGE IN FM

12

BDO LLP 14

INTRODUCTION

Welcome to the latest edition of BDO’s

Facilities Management sector update

which provides current insights into how

FM is evolving from a “people” business to

a “people and data business”.

The current UK Facilities Management market is one of

the most challenging ever for outsourced service

providers. Relationships are becoming more strategic

and less transactional which presents opportunities for

investment to innovate and drive change.

This report by BDO examines the sentiment, changes in

business models operating in the facilities management

industry and developments in M&A.

SATVIR BUNGARHead of Facilities Management Sector

BDO LLP

+44 (0)7814 707 952

[email protected]

3FACILITIES MANAGEMENT | UK MARKET OUTLOOK

EXECUTIVE SUMMARY

The outsourcing of everyday activities required

for businesses to function has led to the growth

of a £11.9bn Facilities Management (“FM”)

market in the UK. Whilst non-core, these

functions are often critical to the operational

and reputational performance of companies.

However, the current UK FM market is one of the most

challenging ever for outsourced service providers.

Relationships are becoming more strategic and less

transactional which present opportunities for investment to

innovate and drive change.

Our analysis of M&A transactions reveals that just over half

of deals between January 2014 and March 2016 were of

Building Management Systems, M&E and Compliance

services businesses, signalling growing opportunities in

regulatory-driven markets and exciting developments in

building technology which aim to revolutionise service

delivery. In addition, new listed entrants were noted, such

as Marlowe plc and Bilby plc which are undertaking a buy

and build strategy in many areas.

Despite the pressures faced by FM players, our clients have

muted optimism for the year ahead, and according to IBIS,

the market is expected to grow by 3.2% Compound Annual

Growth Rate over the next five years to reach a value of

£13.9bn in 2021. Private sector demand is expected to be

the primary driver of growth, while the public sector is

likely to remain a challenging market.

Our clients see a wealth of opportunity in the sector,

including stickier Total FM (“TFM”) contracts, the

development of strategic relationships and brand, and

initiation of new service lines. In this highly competitive

environment, operators see an ongoing need to exceed

client expectations: looking at how they can run the

business more efficiently, presenting new ideas, new

service lines and continuing to challenge the status quo.

Market consolidation is inevitable and there is a great

opportunity to add both technological solutions and

geographical presence, as well as delivering a step change

in cost reduction through economies of scale. For example,

there is great appetite for investment in smart metering

and telemetry, smart phones, smart watches and the

analysis of all the data these generate. The possibilities

derived from smart analysis are fundamentally changing the

industry and the services provided by FM players, as they

evolve from “people” businesses to “people and data”

businesses.

Companies need to act now to avoid being

left behind.

0

10

20

30

40

50

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016

FIG 1: TRANSACTIONS VOLUME BY SERVICE LINEQ1 2014 – Q1 2016

Integrated services Soft services Hard services

• 278 transactions completed between January 2014 and March

2016, with a steady rising trend overall, quarter on quarter.

• 2015 saw 137 transactions, a 43% increase on 2014.

• M&A growth has been fuelled by hard services, which

accounted for 77% of transactions overall.

FACILITIES MANAGEMENT | UK MARKET OUTLOOK4

The potential for cost-savings has been the primary driver

of contracted-out FM services. Figure 2 illustrates how the

cost advantage can be achieved. The delivery of a single

contract has quickly evolved into bundled services running

alongside each other, easing the administration required by

the client. The bundled delivery model has further evolved

towards Integrated or Total FM (“TFM”) which promotes

skill sets and added value, where the client is offered a

single point of contact with the service provider, who is

responsible for managing a large number of facilities

services.

Today, the FM industry has developed to offer increased

value for customers as success is increasingly measured by

the way things are done:

• Contracts have evolved, moving from input based (e.g.

headcount) to output based (e.g. 100% up-time for

building)

• Transfer of risk to the FM provider has become more

common, valued by customers given increasing

regulations regarding labour conditions and compliance

• Innovation is increasing: for example several FM

companies have developed software to give real time

data to customers about their assets (such as cost and

performance).

Most FM relationships are becoming more strategic and less

transactional, with some embedding themselves more

closely in their customers operations through the

integration of asset management. As shown in Figure 2,

this evolution towards a people and data business model

adds further value, as data-led services typically return

higher margins and create valuable insights into client

organisations.

The FM delivery model is further evolving in the public

sector with joint ventures becoming more common. With

austerity applying steady pressure, local authorities are

looking to these alternative models, which promote

collaboration while ensuring that profits made are returned

to the public purse.

However, this is not a simple evolution: in the uncertain

market environment, there are benefits to keeping services

in-house, bundling them, or using a TFM provider,

depending on current business priorities. These in turn

have their own unique set of challenges and financial

implications, as explored overleaf in Figure 3.

Whichever delivery model is deployed, it is apparent that

strategic relationships are fundamental to the success of

outsourced FM providers: relationships at boardroom level

can make the difference between winning and losing a bid.

A good relationship at senior management level will also

help when issues arise. A number of Directors we speak

with have recently restructured their operations to ensure

that there are strategic as well as operational touchpoints

with clients, and some have stripped out layers of

management to ensure that any Director leading a bid

subsequently manages any escalation points. Good

relationships can help relieve pressures on FM businesses,

opening doors for tricky conversations around necessary

price increases. Relationships handled well can lead to

growth, for example, Mitie plc started to work with Rolls

Royce some 20 years ago on a small scale cleaning

contract, and are now their single supplier of FM services

across Europe.

CLIENT DELIVERY MODELS ARE EVOLVING TOWARDS STRATEGIC PARTNERSHIPS

FIG 2: OUTSOURCED COST ADVANTAGES TO A STRATEGIC FM MODEL

CLIENT DELIVERY MODELS

VALUE

DIVERSIFICATION

PEOPLE

AND DATABUSINESS

EXAMPLE SERVICES:• Predictive maintenance

• Asset management

• Energy management

• Sustainability management

• Space optimisation

• Risk management

• Building lifecycle management

COST

100%

ACTIVITY

MARGINAL

COST

DENSITY

TAX

PRODUCTIVITY

EFFICIENCY

TOTAL

FM

ADDED

VALUE

PEOPLE

BUSINESS


DELIVERY MODEL SERVICE BENEFITS PROVIDER CHALLENGES FINANCIAL IMPLICATIONS

IN-HOUSE DELIVERY MODEL

• Staff continuity

• Ongoing opportunities to improve service

delivery

• Ongoing service delivery and standards

generally accepted by customers.

• Wage inflation due to recent legislative changes

risks retention of key staff and skills

• Limited specialist resource in some services

• Multiple management layers can slow decision

making

• Less able to deliver change quickly and effectively

• Access to intelligent software that can accurately

measure and analyse spend pattern levels

• Risk of redundancy.

• Minimal cost to change

• Value for money a regular

challenge

• Limited opportunities to unlock

procurement savings

• Less agile in delivering

organisational agenda.

BUNDLED CONTRACTS (OR SINGLE SOURCED SERVICE)

• Increased expertise in all services

• Meets specified targets

• Less operational focus required

• TUPE benefits, i.e. staff and management

costs removed from financial performance

• Service improvement a priority

• Benchmarking becomes possible

• Reduces the risk to continuity of service.

• Multiple engagement lines required with providers

• Single service providers can become commoditised

offerings and be very price driven

• Trend towards shorter contracts

• Less flexibility and control over service delivery

• Consistency of service amongst service providers

• Possible duplication of effort

• Single solutions will be challenged due to the drive

for technology to enhance transparency around

delivery

• Ongoing innovation limited

• Low barriers to entry

• Difficult to deliver strategic FM.

• Procurement programmes

require investment in

management resource and can

be costly

• Duplication of contract,

management time and costs

with several providers

• Bundling needs may not be

available amongst certain

providers.

TOTALFACILITIES MANAGEMENT

• Tailored design improves FM service delivery

• Scope for innovation and longer term savings

through continuous improvement initiatives

• Access to a mature deployment model

• Contracts tend to be longer and stickier due

to closer, partnership-type working

• Barriers to entry are high and further

strengthened by technological advances

amongst large players

• Access to providers’ IP and data capabilities

allows forecasting and smart analysis around

when to invest in capex, for example

• Enhanced MI reporting benefits

• Robust approach to contract negotiation

• Greater experience on TUPE matters

• Transfer of risk makes TFM attractive to local

authority clients

• Synergies can be made, so increasing margins

• Greater career opportunities for staff.

• First generation outsourcing has huge demands on

quality information to ensure bid success

• A more robust client relationship management

approach required with enhanced KPI reporting

tools

• Complex contracts, interaction with client

transitions into a partnership

• Flexibility of the model

• Transfer of risk to the service provider; enhanced

staff risks and legal rights, including TUPE

requirements

• Can become reliant on one service provider.

• Increased legal costs given

more onerous contractual

documentation

• Cost of bidding is much higher

due to increased sophistication

and complexity of bids

• Investment in KPI reporting

tools expected

• Enhanced technology and audit

capabilities required to ensure

data protection standards are

met

• Can apply supply chain

rationalisation and

incentivisation strategies to

drive savings.

FIG 3: BENEFITS, CHALLENGES AND FINANCIAL IMPLICATIONS OF CLIENT DELIVERY MODELS


NEW ENTRANTS INCREASE

Barriers to entry to the FM market are relatively low, and

in spite of the tough business environment, more players

are entering the market. Sectors are converging as

companies look to provide a broad range of property–

related services to their clients, resulting in new entrants

to FM from adjacent sectors, and increasing competitive

tension.

M&E and technical services contractors have integrated

themselves into the FM sector, also construction

companies, such as Wates Group Ltd, which have been

attracted by less volatile revenue streams, positioning

themselves to offer FM services over the operational

lifetime of a newly constructed building.

An example of a new entrant from an adjacent sector is

utilities infrastructure company Fastflow Group Ltd’s

acquisition of DW Contractors Ltd in 2014, a £25m turnover

provider of property maintenance and refurbishment

services.

US-based ABM Industries Inc also entered the sector, with

the acquisition of £40m turnover GBM Support Services

Group Ltd, a platform for the company to expand

internationally with new and existing clients in the retail,

leisure, public sector and commercial segments. The

acquisition of £54m turnover Westway Services Ltd

followed in 2015, allowing ABM to expand into adjacent

markets, opening up cross-selling opportunities and the

ability to deliver complete solutions, including deep

technical services.

COMPETITIVE ENVIRONMENT

Our clients currently cite competition as the biggest issue

they face in the FM market. There is a high volume of

players, competition on pricing is fierce and margins are

slim.

The trend towards TFM is driving more players to extend

their service lines, often by acquisition, to offer a broader

range of services and expand geography. A number of

international business have extended their reach to the UK

recently, including idverde SAS, a French landscaping

business, which acquired £50m turnover The Landscape

Group Ltd in March 2015, and consolidated this with

Quadron Services Ltd a year later, growing to a £90m UK

business. The Company continues to explore new

opportunities to become Europe’s leading green services

specialist.

We expect to see ongoing consolidation as stronger

companies take advantage of opportunities to pick up well

priced assets and to enhance their competitive position

through further extensions of service and value proposition.

MARKET PRESSURES

The FM market is subject to a range of pressures which create challenges for service providers


CONTRACT PRESSURE

Austerity in the public sector is making it difficult to win a

contract on any factor other than price. It can be very

hard to persuade clients of a better service and future

savings for a higher upfront cost. Few contracts are rolled

over and undercutting is highly prevalent, making margin

sustainability and delivery of a quality service highly

challenging. Cost savings on new contracts are hard to find:

they are already priced low, credible information is often

limited at bid stage which can lead to underestimating

requirements, and staff are typically TUPE’d across to the

new provider, so terms cannot be renegotiated.

Contracts are also continually reviewed, often retendered

and sometimes taken back in-house. Contract recycling is

another theme and challenge, as clients ask their FM

suppliers to do something different under the existing

contract terms.

Uncertainty around BREXIT slowed the contract pipeline,

especially from international clients, and fuelled the current

trend towards shorter, more flexible contracts.

In this climate of cost scrutiny, efficiencies need to be found

in-house. M&A transactions can be a key route to achieving

economies of scale and efficiency savings to help insulate

pressured margins and position for future growth. An

example is CH&Co’s merger with the HCM Group in June 2015

to create a combined £200m turnover business. The

accompanying press release describes how the deal “came

together against a backdrop of an increasingly competitive

industry where consolidation is the perfect answer for mid-

sized independents ready to take on the largest competitors.”

A key ingredient of success for players can be learning

when to say “no” and being more selective in bidding for

contracts to achieve sustainable profitable growth. We

expect to see more companies restructuring their operating

models and leveraging technology to deliver contracts more

efficiently.

REGULATORY PRESSURE

Slim margins in FM are being further pressured by the

introduction of regulatory requirements such as pensions

auto-enrolment and the introduction of the National Living

Wage and the Apprenticeship Levy.

The FM sector has a large population of staff earning the

minimum wage, so the National Living Wage affects those

providers which rely on unskilled labour. Their ability to

pass on increased costs will depend very much on the

client. While some clients have set a standard of paying

the London Living Wage, other service providers are

proactively working with clients to assess the impact of this

on existing committed budgets. Some operators comment

that it is currently difficult to pass on increased costs. In

the public sector, the impact on previously approved

budgets can be significant and many local authorities are

only just starting to evaluate this, meaning service

providers are having to re-appraise their agreed scope of

services. The impact on future margins is leading operators

to look at innovative measures they can introduce to

deliver contracts more efficiently.


Building management systems, 18.7%

M&E, 17.6%

Compliance services, 15.1%

Other*, 12.6%

Building maintenance, 9.4%

Cleaning, 6.8%

Catering, 6.1%

Security, 5.4%

Integrated services, 5.0%

Landscaping, 3.2%

FIG 5: TOTAL UK DEALS BY SECTOR, JANUARY 2014 - MARCH 2016

M&A TRANSACTIONS REVEAL MARKET OPPORTUNITIES

HARD SERVICES DRIVE GROWTH IN M&A TRANSACTIONS

0

5

10

15

20

25

30

35

Building m

anagement

systems

M&E

Compliance services

Other*

Building m

aintenance

Cleaning

Catering

Security

Integrated services

Landscaping

• 51% of transactions over the period were acquisitions of businesses

providing Building Management Systems

services, M&E services and Compliance

services

• Building Management Systems have recorded the highest number of transactions overall. M&E services experienced a four-fold increase in

transactions in 2015 compared to 2014,

while Compliance services transactions nearly tripled. These sectors in

particular are underpinned by strong

market drivers which are attracting

investors

• Management buy-outs, which often

involve Private Equity investors,

accounted for 18% of FM deals in 2014,

rising to 22% in 2015. 39% of M&E services deals were MBO transactions,

signalling the attraction and growth

potential seen in this sector.

TECHNOLOGY AND INNOVATION ARE DRIVING CHANGE IN FM

*Other includes onsite waste services, removals & storage, records management

2014 2015 2016

FM PLAYERS ARE DIVERSIFYING INTO TECHNICAL AND ENERGY SERVICES

INCREASING REGULATIONS ARE DRIVING THE GROWING MARKET FOR COMPLIANCE SERVICES

FIG 4: UK TRANSACTION VOLUME BY SECTOR, JANUARY 2014 - MARCH 2016


FIG 6: EXAMPLE STRATEGIC TRANSACTIONS IN BUILDING MANAGEMENT SYSTEMS, M&E AND COMPLIANCE

KEY THEMES ACQUIRER TARGET(S) RATIONALE

BUILDING MANAGEMENT SYSTEMS AND ASSOCIATED TECHNOLOGY DEALS

ENGIE SA • C3 Resources Ltd ENGIE acquired C3 Resources in March 2016, a digital energy management specialist. C3’s digital platform can link data from a variety of sources and will be used to enhance the way the business

analyses data, enabling energy and FM teams to predict energy usage and take proactive action to better control it.

Trimble

Navigation

Ltd

• Amtech Group Ltd Trimble Navigation acquired Amtech Group, producer of software products for the electrical and

mechanical building services industry in the UK, enabling specification, design, procurement,

construction management and operation, aligning with Trimble’s vision for integrated solutions covering a building’s full lifecycle.

Laundrapp

Ltd

• Washbox Ltd In the apps market, Laundrapp, provider of on-demand laundry services acquired competitor

Washbox to solidify its market leading position in the rapidly evolving digital on-demand market. A similar transaction was Handy Inc’s acquisition of London-based Mopp Ltd, which

operates a platform to book a professional cleaner online.

DIVERSIFYING TO TECHNICAL SERVICES

ISS A/S • GS Hall plc ISS acquired GS Hall for £53m in January 2015, its first major acquisition since 2010. GS Hall is a

leading technical services company focused on M&E engineering, energy management and compliance. ISS commented that technical services are emerging as a central component of integrated facility services, and are an increasingly important and deciding factor for the

customer in choosing the right partner, often on an international basis.

ABM

Industries Inc

• Westway Services

Ltd

ABM, an international provider of FM services acquired private-equity backed Westway Services in

December 2015, a £54m turnover provider of technical engineering services in the UK. ABM was keen to add higher margin activities, and grow its ability to offer complete FM solutions. ABM is

now focused on cross-selling Westway’s deep technical services to its existing client base, and

leveraging Westway’s client base to offer additional services.

FM AND ENERGY SERVICES CONVERGE

SSE plc • Energy Solutions

Group Ltd

SSE acquired Energy Solutions Group in 2014 for £72m, which designs, supplies, installs and

maintains building management systems, from exiting investor Bridgepoint Development Capital.

SSE is bringing together M&E contracting, lighting services, private energy networks and telecoms

into a new “Enterprise” division, to meet the energy and related need of clients in an enhanced

and co-ordinated way.

UtilityWise

plc

• t-mac Technologies

Ltd

Utilitywise, which provides utility cost management consultancy services, acquired t-mac

Technologies for up to £22m, developer and marketer of an intelligent system for remote, internet monitor and control of assets including heating, ventilation, air conditioning and refrigeration, fire and security systems and utilities. t-mac's cloud-based technology provides Utilitywise with the assets and skills to offer new value-added subscription services to its

customers as part of a complete Utility Management Plan for electricity, gas and water.

Servest Ltd • Llewellyn Smith

Holdings Ltd

Servest acquired Llewellyn Smith in August 2015, an energy efficiency compliance and consultancy business, a lead assessor for the Energy Savings Opportunity Scheme. Servest had

already established an energy management arm, but the acquisition brings in additional

expertise, services and recurring revenue streams.

BUY AND BUILD

IN M&E AND

COMPLIANCE

Bilby plc • P&R Installation

Company Ltd

• Purdy Holdings Ltd

• Spokemead

Maintenance Ltd

• DCB (Kent) Ltd

Bilby acquired P&R Installation, a gas heating and building services provider in March 2015, and complemented this with Purdy Contracts, a gas and electrical contractor in July 2015, to expand

service range and geographical scope. Acquisitions of Spokemead and DCB followed in March

2016, further consolidating electrical and building services. Bilby continues to target complementary businesses servicing housing associations and local authorities in London and the

South East.

Marlowe plc • Fire & Security

(Group) Ltd, t/a

Swift

• WCS Environmental

Group Ltd

Marlowe is a critical assets maintenance services business. Its first acquisition was of Swift Fire

and Security for £13m in February 2016, a £21m turnover provider of Fire Protection and Security Systems installation and maintenance services. In April 2016, Marlowe went on to acquire WCS Environmental Group, a provider of integrated water treatment, hygiene, testing and engineering services. Marlowe plans to expand and develop both of these businesses into market leaders across the UK, accelerated through further targeted acquisitions. Marlowe plans

to diversify and broaden the services that the group delivers by acquiring and developing

specialist support service businesses in complementary sectors to build a group of companies that

provide critical asset maintenance services throughout the UK.


BUILDING MANAGEMENT SYSTEMS DOMINATE M&A ACTIVITY

Transactions of businesses providing Building

Management Systems services accounted for 19% of FM

deals seen between January 2014 and March 2016.

These include installation of fire and security systems,

smart gas and electricity solutions, and technology for

monitoring assets such as HVAC. It also includes

integrated solutions which link building management

systems with mobile applications for tracking and

scheduling activity, linking with management reporting.

This M&A activity reflects client demand for intelligent

data sharing, building lifecycle management, energy

and sustainability management and mobile technology

enablers. We expect that Building Management Systems

transactions will continue to dominate the FM market as

demand for smart buildings and sustainability drive

ongoing technology adoption and integration.

SMART BUILDINGS AND REGULATIONS DRIVE CONVERGENCE OF FM AND ENERGY SERVICES

Transactions also reveal the emergence of new

competition from the traditional energy suppliers,

who are extending into building management systems

through acquisition: SSE plc acquired building

management systems business Energy Solutions Group

Ltd for £72m from Bridgepoint in 2014, while Centrica

plc acquired AlertMe.com Ltd for £44m from Index

Ventures and npower Ltd acquired RUMM Ltd, an energy

monitoring business in 2015.

At the smaller end of the market, Utilitywise plc and

Smart Metering Systems plc have also been active

acquirers of smart energy technology and services.

Many FM providers are also diversifying from core M&E

services and building management systems installations

to provide higher-margin energy management and

technical services, which help customers comply with

regulations while saving them money. The strict

regulation and technological trends in energy services,

such as the policies for carbon emission reduction, are

likely to increase the maintenance requirements for

building systems and push the installation of renewable

energy equipment. Alongside this, new technologies

such as smart devices for monitoring and controlling

energy consumption should drive demand. Smart

devices also have great advantages for FM businesses,

reducing the need for site visits and significantly

reducing costs.

Facilities managers are ideally placed to develop these

adjacent, higher margin service lines: some businesses

such as ENGIE SA and Bouygues Energies & Services have

long provided energy and carbon management services,

while some have recently launched energy divisions,

such as BAM FM Ltd and Robertson Group Ltd. As

competition intensifies and demand increases for

energy compliance services, we expect to see further

businesses diversify.

RISE IN BUILDING TECHNOLOGY AND REGULATION FUELS DEALS


REGULATORY DRIVEN M&E AND COMPLIANCEMARKETS REPRESENT A THIRD OF DEALS

Mintel estimates that M&E services accounted for 36% of

the contracted out FM market in 2014, so it is not

surprising that this and the related Compliance services

sectors account for 33% of M&A transactions since

January 2014.

M&E and Compliance services are driven by stringent

legislation and regulation, they remain obligatory

regardless of budgetary pressures and other demands.

It is a resilient sector, insulated from economic

fluctuations and is therefore highly attractive to

investors.

These services also tend to have a degree of operational

and technical complexity which favours outsourcing.

Austerity in the public sector has led to new

procurement frameworks, and multi-discipline contracts

with “one stop shops” that are able to provide a broad

range of building services. These frameworks typically

have minimum pre-qualification revenue requirements

which favour larger groups.

EXAMPLE REGULATIONS DRIVING DEMAND

• Decent Homes

Standard

• Right to Repair

Scheme

• Gas Safety

• Electricity at Work

• F Gas Regulations

• Control of Asbestos

• NPCC Requirements

for Security Systems

• Fire Safety Order

• Water Supply

Regulations

• Working at Height

Restrictions

• Construction Design &

Management

• Lightning Protection

• Portable Appliance

Testing

• Part L Building

Regulations

• Energy Act

All these factors combine to drive acquisitions, with

businesses wishing to compete effectively in this market

completing transactions to build scale, breadth of

service and geographic coverage. Smaller businesses

often find the high operational costs associated with

health and safety regulations make consolidation

attractive to achieve economies of scale.

Three companies of note are Bilby plc, Marlowe plc and

Premier Technical Services Group plc, which have all

listed on AIM in the last year. They have each chosen a

niche, extended into adjacent sectors via acquisition,

and are undertaking buy & build strategies to further

extend their reach, service range and strengthen

financial position. As larger Groups, they are now

eligible to tender for larger, more profitable public

sector framework agreements.


TECHNOLOGY AND INNOVATION ARE DRIVING CHANGE IN FM

BIG DATA NEEDS TO BE HARNESSED BY FM

Clients are demanding intelligent data sharing, it builds

transparency and trust, and can help optimise operations.

However, a number of Directors we have spoken to

comment that while this is requested by clients at bid

stage, client usage of it is low in practice.

There is a huge opportunity for FM players to harness data

to advise their clients and move up the value chain. The

Internet of Things (e.g. smart metering) and the resulting

Big Data are two game changers that will only add weight

to this opportunity. The sustainability agenda and the rise

of smart buildings will proliferate data further. According

to the Royal Academy of Engineers, by 2020 there will be

an estimated 50 billion networked appliances and sensors

worldwide, constituting a vast global network of data-

generating devices.

The ability to effectively gather, analyse and disseminate

useful data to clients, can move FM providers on from

reporting on contract KPIs and factual analytics, to

predictive analytics, and asset management, where they

advise clients on their asset funding cycle, for example. It

can also be used to measure staff productivity wherever

they are based and enhance workplace wellbeing.

In this scenario, FM can no longer be viewed as a

commodity purchase, but as a provider of demonstrable

added value and therefore worthy of a higher contract

value.

Large market players tend to have teams focused on

leveraging these benefits. The challenge for resource-light

small and medium sized businesses will be choosing which

data they should analyse in order to drive the highest

benefits.

The cost-saving implication of developing this service line

should also attract FM players: a number of BDO clients

report cost savings in reactive maintenance of 15-20% since

they had focussed on planned preventative maintenance

with the help of telemetry.

MOBILE TECHNOLOGY TRENDS

Mobile applications are facilitating the capture and

dissemination of data, allowing FM providers to track their

workforce and measure productivity. Most companies have

already invested in smart phones for their employees, with

downloadable apps that direct their work and capture real-

time data.

Other providers have invested in trials of wearable

technology such as smart watches, so that their cleaners,

security staff and mobile operators can receive schedules

and task information and feedback very quickly on

progress. It is also a smart way of monitoring the safety of

lone workers.

While mobile technology achieves efficiencies for the FM

provider, it also creates useful data that could harnessed

for clients. FM companies may need to invest in staff who

are able to provide this added-value service for clients, as

businesses which have not done so may find themselves

lagging behind.


OPPORTUNITIES FOR FULL LIFECYCLE MANAGEMENT

A further innovation gaining traction in the market is

Building Information Modelling (“BIM”), an intelligent

model-based process that provides insight to help plan,

design, construct, and manage buildings and infrastructure.

The Government has made BIM a requirement of all central

government construction contracts from April 2016, and in

time, it is anticipated that BIM will be adopted across all

construction projects, and used to manage the entire

lifecycle of a building.

It makes sense for facilities to be designed with their end

use in mind. Involving FM providers from the design phase

will create efficiencies and position businesses to offer full

lifecycle management. BIM will hold spatial, sustainability,

energy, and asset information in a ready state for analysis,

which will facilitate data-driven decision making, including

accurate bidding for contracts.

FM players which already form divisions of construction

firms are in a strong position to leverage this opportunity,

but all companies in the sector should be looking at how

they can position themselves. Hosting of BIM data is a

further opportunity, including the monetisation of this data

to other service providers.

THE FUTURE OF FM?

DRONES REDUCE RISKS

• Further innovations driving efficiencies and promoting

safety include the increased use of drones. For

example, security patrols can be undertaken by drones

and monitored from a computer; they have also been

used to undertake window-cleaning of high-rise

buildings. These innovations reduce the number of

skilled staff needed on the ground and reduce the need

for expensive insurance.

• Recent high-profile police investigations into the use of

drones could slow the pursuit of this technology, but it

could revolutionise the delivery of certain FM services.

• Where it can be effectively leveraged, we expect to see

an ongoing switch-out of manpower in favour of

technology.

• As well as providing predictive maintenance and

asset management services, FM providers could also

branch into consulting-style improvement services

such as energy management, sustainability

management, space optimisation and risk

management.

• We expect to see further integration of building

management systems, including integration with BIM,

as companies in the FM, construction and energy

sectors converge to provide solutions to effectively

manage a building through its whole lifecycle.


RECENT SECTOR TRANSACTIONS

Sale of Quadron Servicesto idVerde Group

Sale of The Landscape Groupto idVerde Group

Sale of Sure Maintenanceto Lakehouse plc

Merger of CH&Co and Host Management and investmentby MML Capital Partners

BDO MERGERS & ACQUISITIONS

OUR UK CORPORATE FINANCE TEAM COMPLETED…

236UK DEALS IN 2015

VALUED AT

OVER £10.6BN

154COUNTRIESWITHIN OUR

GLOBAL NETWORK1. Independent research (Mid Market Monitor 2012-2015)

undertaken by Meridian West shows BDO has the highest

client satisfaction rating among its peers

2. Client Listening Programme 2014/15


BDO presence

WE HAVE THE INTERNATIONAL CALLING CARD TO REACH OUT TO GLOBAL OPERATORS

BDO INTERNATIONAL

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written in general terms and should be seen as broad guidance

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situations and you should not act, or refrain from acting, upon the

information contained therein without obtaining specific

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matters in the context of your particular circumstances. BDO LLP,

its partners, employees and agents do not accept or assume any

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SATVIR BUNGARHead of Facilities Management Sector

m: +44 (0)7814 707 952

e: [email protected]

Facilities Management UK Market Outlook 2016€¦ · The current UK Facilities Management market is...

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