Mergers - but only if the price is right

The big take-overs and mergers that were such a hot topic couple of weeks ago appeared to be cooling rapidly last week, as the WS Atkins-Bovis deal went the way of Mansell-Lovell the week before.

But for those tempted to write obituaries for other deals, the impending Tarmac-AI merger has confirmed that reports of their demise are greatly exaggerated.

So what is going on?

Well, firstly the Mansell deal fell for quite specific reasons. The recent 30 per cent slide in the value of construction shares meant its private shareholders would be out of pocket in the share swap.

Similarly, the Bovis-Atkins merger ground to a halt because Bovis passed its 'best before' date around 16 months ago when its order book was full and the market was still rising. P&O was merely kite-flying by saying Bovis was for sale: it would have snapped up a good offer if one was made, but always knew the chances were slim. At the death, the two sides were reportedly £100 million apart.

Atkins' shareholders feared the merger would have dragged the company back towards the construction sector of the stock market, and eaten up the company's available cash, which could be better spent on more fashionable acquisitions in FM.

The Tarmac-AI deal, on the other hand, continues to look good because the City is desperate to realise the value of Tarmac's quarrying business.

Looking ahead, deals where price is not the main issue can prosper. This militates against a straight sale of Laing construction, but favours Balfour Beatty, if (as expected) industrial conglomerate Wassall bids for its languishing parent BICC, and Kvaerner Construction, whose parent is heavily indebted. And of course deals between private companies have a good chance - as this week's marriage of Totty and Jackson Group proves.