Hill International’s decision to spin off its claims consultancy business has cleared the way for major acquisitions in the UK and US over the next couple of years, chief executive David Richter told GCR.
The company’s dispute resolution arm is being sold to Bridgepoint Development, a UK private equity investor, for $147m in cash. This capital injection will allow Hill to pay down its debt and operate as a pure project manager.
“We were certainly more leveraged than we wanted to be and that was having an effect on our ability to grow the business by acquisition,” Richter said.
“The sale dramatically changes our capital structure and it has improved our share price, as you’ve seen over the past couple of weeks, and it puts us in a position to be an active acquirer. I would guess that over the next two years we’ll be making an acquisition in the UK, either of a project manager or a quantity surveyor.”
With the Republicans controlling the House, the Senate and the White House for the first time in my lifetime I think you’re going to see a significant amount of pro-growth policies– David Richter
Hill’s UK business has been 90% concerned with dispute resolution, leaving ample room to grow its project management arm. However, Hill’s main focus once the sale is completed in February will be the US market, particularly in the transport sector.
Earlier this week the company picked up a $35m deal to manage the Santa Clara Valley Transportation Authority’s highway projects, a deal that Richter said it had been chasing “a long time”.
“The US market is our home market, it’s the safest market with the most growth opportunities,” he said. “There are lots of regions in the US where we have either a small presence or no presence, so we want to rectify that.
“We decided to focus on the US long before the election, but with the Republicans controlling the House, the Senate and the White House for the first time in my lifetime I think you’re going to see a significant amount of pro-growth policies enacted.
“You’re going to see taxes come down, you’re going to see regulation come down, you’re going to see things put in place designed to promote domestic economic growth.”
Other areas for growth are Germany, Africa and Asia, where Hill hopes to announce two big wins in the near future. Its operations in Brazil and the Middle East, where it is working on the Riyadh and Doha metros, will probably shrink. Â
Richter said the claims business’ executive team was happy to make the move to Bridgepoint. For one thing, project management makes up 75% of Hill, so it has tended to receive the lion’s share of the attention and the investment. For another, the claims group sometimes had to turn away work if it would be acting against the project management group’s clients. “Our PM group primarily represents owners and our claims group primarily represents contractors, so that was an issue,” Richter said.
“Our claims group employs almost 1,000 people so the management team felt that they could stand alone as an independent company and had a desire to do so.”
Richter declined to enumerate any growth targets for the new-look Hill International, beyond a long-held goal of becoming a billion-dollar-turnover company in the next five to 10 years.
Image: David Richter, active acquirer (Hill)
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