Is it just me or has the whole of British industry gone outsourcing mad?
Every couple of months or so there is news of yet another massive outsourcing
deal being signed or talked about. The last two months have been no exception.
April brought news of a £1 billion deal whereby Balfour Beatty's facilities
management arm Haden Building Management took a 49 per cent stake in Consignia's
(the Post Office to you and me) facilities management arm Romec.
Essentially what this means is that Haden and Romec have formed a joint venture
company, with a seven-year contract to manage Consignia's (that word again!) £1
billion portfolio of buildings.
There was a time when a £1 billion deal was something special, big news,
especially in facilities management, but this is becoming less and less the
case. As if to prove the point Haden Building Management also just happen to be
one of the founding partners in Monteray, (another joint venture company,
another £1 billion deal!) which holds the much sought after, talked about and
reported facilities management contract with British Telecom - a deal covering
8,500 buildings in all!
With such large amounts of money up for grabs the big three outsourcing
companies, Land Securities, Trillium and Mapeley are quite rightly coming under
increasing competition. Why should only a few reap such large rewards?
It came as no surprise to read in April's newspapers that such a company was
wanting in the wings, eager to get in on the act. Reports started to circulate
that Axa Real Estate Investment Management (Axa REIM) was planning to launch a
rival pan-European outsourcing company. It is currently holding talks with
investors.
Axa has seven operations in nine countries across Europe and is in a good
position, thanks to its infrastructure and foothold in Europe, to compete for
corporate outsourcing deals.
Not wanting to be left out of the current surge in joint ventures, Axa UK
(holding company for Axa Insurance, SunLife and PPP Healthcare) is in talks with
facilities management company Mowlem and property services company Nelson
Bakewell to set up a joint venture to manage its portfolio of 300 properties.
There is also money to be made in the multi-million pound government Private
Finance Initiative scheme (PFI), the type of outsourcing deals that are so
common in public sector schools and hospitals. Consultant, Mouchel is set to
invest £30 million of the money it makes listing on the stock exchange, under
the support services banner, in chasing PFI contracts.
If Land Securities full-year results are anything to go by outsourcing is
definitely the way to make big bucks. Chief Executive, Ian Henderson was quoted
in The Daily Telegraph as saying: "We have identified a compelling case by
companies for outsourcing."
Land Securities announced it would be returning £500 million to shareholders
because it was, "surplus to requirements." The company is also planning to
invest £1 billion in its property outsourcing arm Trillium in the next five
years, in the hope that it will be able to provide 25 per cent of group
operating profits. Land Securities pre-tax profits were up 12 per cent to £364
on last year's figure.
What more proof do we need that facilities management is the place to be?