The head of Lendlease Europe’s construction operations says he wants to find a buyer for the business “at pace”
Simon Gorski is a man in a hurry.
As the boss of Lendlease Europe’s construction operations, he is looking to line up a buyer for the UK business by the end of the year – well ahead of the originally-stated deadline.
Lendlease group chief executive and managing director Tony Lombardo fired the starting gun on 28 May, when he announced that the UK and US contracting businesses would be sold by the end of 2025 under a strategy to focus on the Australian market.
But Gorski wants to move faster. “We’re going to move at pace,” he tells Construction News in an exclusive interview.
“And I’d like to think that we’re going to have made significant headway in this calendar year. Although we talked about an 18-month directional timeline, I would expect it to move far more quickly than that.”
Gorski says the team that will manage the sale is already in place “and working to fairly aggressive timelines, if just to remove uncertainty”.
The investment team is preparing a sales prospectus – “then we’ll engage interested parties and work through the process to its conclusion”.
Lendlease Europe’s most recent accounts for the year ending 30 June 2023 revealed a 37 per cent slump in pre-tax profit to £11.9m. Revenue also fell from £553.5m to £509m and the pre-tax margin was 2.3 per cent.
The accounts also mentioned that the firm had £2.3bn of external work “at the preferred bidder stage, some of which has since converted”.
The accounts described this pipeline as “enviable” and one that “provides a solid foundation for future growth in line with our strategic targets”.
Gorski could not say exactly how many potential bidders have already thrown their hat into the ring.
When asked about reports that around five firms are interested in acquiring the firm, Gorski says: “The number isn’t getting smaller – we’re not engaged with any organisations yet but it’s interesting to see the interest.”
However, a tier one contractor would be an unlikely buyer, according to a high-level source in the financial sector.
“Scarcely any [tier ones] have the desire, muscle or firepower to be acquisitive,” the source tells CN on condition of anonymity. “Most contractors are more focused on organic growth than growth through acquisition.”
It’s difficult to estimate the acquisition price for Lendlease Europe and Gorski would not be drawn on the topic.
He isn’t ruling out private equity, a management buyout or even an employee-owned model at this stage, but he would prefer a direct sale.
“I’ve got to think about our clients, staff and the Lendlease group itself. It’s like a Venn diagram – whichever model we go for has to suit all of these parties,” Gorski says.
However, the financial source CN spoke to doesn’t believe that private equity firms would be interested, saying: “There’s more of a chance in infrastructure services as the margins are higher, but the traditionally low margins in contracting make it less attractive.”
One reason for Lendlease Europe’s profit slump last year was a failed legal attempt to recoup millions of pounds on a Leeds hospital PFI construction project.
Gorski insists that PFI issues belong in the past. “But there were some emerging issues at the back end of our contract liability period… It’ll be interesting to see what the government and the private sector’s relationship will be in the future. How that might play out is probably a lot different to traditional PFI contracts.”
In February this year, the Australian parent firm put aside an additional £11.4m to deal with historical UK fire safety liabilities. But Gorski would not be drawn on whether Lendlease Europe’s buyer would be expected to take on the firm’s legacy liabilities.
“That all falls into the [sale] process,” he says. “It will come out in the wash to see where liabilities sit. We’ll have a much clearer understanding of that at the back end of this year.”
Has Lendlease made itself a hostage to fortune – if it can’t find a buyer in the tight timeframe, could a savvy would-be buyer simply bide their time to drive down the price?
“As the eternal optimist, I can’t envisage that scenario. I don’t think that’s a bridge we’ll ever need to cross,” Gorski says.
“When we get to the point where organisations have expressed an interest and are looking under the covers and doing their due diligence, I think they’re going to be pleasantly pleased at what they discover in terms of how the business is governed. I don’t think there are any particular things to be concerned about. I think we run a very, very tight ship.”
Gorski is a 19-year veteran of Lendlease, having joined the firm after a 10-year stint as a British Army officer. He says he is staying on to lead the construction business through the transition to its new owner.
The latest official figures from the Insolvency Service show that 4,401 construction firms collapsed in the 12 months to April 2024 – more than any other industry.
But Gorski believes that “things are about to take off” for the UK construction sector. “With the election coming up, it actually creates an opportunity for major public spending on hospitals, prisons and defence. There’s going to be a huge impetus for spending on major capital projects, and we are one of the very few organisations capable of delivering them.
“And with the economy, we are seeing inflation drop slowly. It does seem like there are going to be two or even three base [interest] rate cuts [from the Bank of England] in the second half of this year, which might unlock some private sector developments in London and the regions.”
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