Jacob’s Acquisition Of CH2M Poses Risks And Opportunities For Multiple Market Participants

The prospect of a sale of CH2M had been public knowledge for months as the firm’s business model and employee-ownership structure had come under severe pressure from broader changes in the market as a well as a couple of strategic missteps on large projects. On August 2, 2017 the Chairwoman and CEO, Jacqueline Hinman, announced the sale of the business to Jacobs in a cash and shares deal worth $3.27 billion which puts an equity value on CH2M of $2.85 billion against trailing 12-month revenues of $4.4 billion. The deal is reflective of the movement towards the consolidation of consult, design and build capabilities into larger entities. There are implications for many participants in the EHS services and technology market.

Firstly, for other engineering and EHS consulting firms like Arcadis, ERM and Ramboll the deal is likely going to be a positive in 2018. CH2M has a strong and unique culture with an emphasis on values like sustainability. Integrating 20,000 employees into Jacobs will be a huge task. In addition, EHS consulting will be a very small part of the overall business mix for Jacobs with the risk that it receives only minimal attention – and investment -- from the Jacobs executive team. More stable and more nimble competitors will likely benefit in 2018.

Secondly, for many years CH2M has been one of the top three providers of EHS tech services globally which consists of implementing EHS software, advising on tech-enabled process design and sustaining legacy systems. This market is undergoing significant change as witnessed by the acquisition of E2 ManageTech by Arcadis, the partnership between ERM and Infosys and the entry of new players such as TCS into the market. Since CH2M is an important partner and channel for many EHS software vendors, a significant change in direction would negatively impact the growth opportunities for software businesses in 2018.

Following a transitional year in 2018, the CH2M EHS business should find itself in a stronger position than in recent years given the broader market access and improved financial stability. As engineering and EHS consulting businesses continue to digitize their own business activities, the technology expertise and innovation strategy of the CH2M EHS tech services practice will prove to be a valuable asset.