FMI's E&C Industry Insight

  • FMI's NRCI Executive Summary

    Posted on June 2, 2015 by FMI Corporation

    At 64.9 for the second quarter of 2015, the NRCI score was essentially unchanged from the previous reading of 64.8. However, this result is a case where comparing the bottom line from quarter to quarter can be deceiving. However, it is more instructive to look at the underlying changes in the components of the Index. There the reader will find that panelists didn’t just copy their responses from last quarter. We also discovered some change in the direction of construction projects in response to our current issues questions concerning green construction and construction delivery methods, both reflecting changing owner demands.

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    This post was posted in Research and was tagged with Economy, FMI Corporation, FMI's NRCI, NRCI 2014 Q2

  • M&A Trends in Oil and Gas

    Posted on May 26, 2015 by FMI Corporation

    Shale gasThe energy infrastructure market has gone through a period of unprecedented expansion over the past five years and many companies exhibited exponential growth over this period. Only six months ago, most companies were preparing strategies for talent acquisition/retention and geographic/service line expansion. With the price of oil falling by more than 50 percent, many firms are being forced to cut costs and reevaluate strategy. The decline in oil prices has forced many producers to cut 2015 drilling capex. As a result, demand for upstream services, in particular, will begin to slow and margins will compress. Midstream and downstream markets will also be affected, but likely not until later in the year or until production begins to decline in earnest.

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    This post was posted in Investment Banking, Research and was tagged with Scott Duncan, Inc.

  • Construction Materials

    Posted on May 19, 2015 by FMI Corporation

    ConstructionMaterials497268779Small, strategic, bolt-on acquisition and corporate divestitures dominated M&A activity in 2014 in the construction materials segment of aggregate, asphalt and ready-mixed concrete producers. These small, strategic transactions were successful because the strategic benefits of the deal resulted in pricing that satisfied both buyer and seller. These deals were often among competitors with all the typical benefits associated with eliminating local competition. Additionally, there were continued planned divestitures by some of the major players in the sector to continue balance sheet management to raise capital for targeted acquisitions. We also saw the return of growth acquisitions in new markets for select players.

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    This post was posted in Investment Banking and was tagged with Mergers and Acquisitions, NRCI 2014 Q2

  • FMI's M&A Trends: Engineering and Construction

    Posted on May 11, 2015 by FMI Corporation

    ConstructionSiteBuildings178633737Large, transformational deals defined M&A activity in the integrated engineering and construction (E&C) sector in 2014. The fallout from these acquisitions — some of which had been several years in the works — will spur continued activity into 2015. While we do not believe 2015 M&A activity will surpass that of 2014, we do believe integrated E&C firms (especially the largest firms) will continue to look to acquisitions as a conduit for growth and margin expansion.

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    This post was posted in Investment Banking

  • How to Capitalize on Market Information

    Posted on May 5, 2015 by FMI Corporation

    InvestmentBanking494507603Most successful companies in the oil and gas engineering and construction industry are constantly monitoring the market and staying abreast of the most recent trends. They try to best prepare for what the future will look like in the market and how the company will compete. One of the lessons FMI has learned is that market research must be placed in a proper strategic framework to guide your thinking and ultimately increase your ability to make the right decisions for your company’s future success. Without this framework, it is simply a collection of data points without a unified purpose. As seen in Exhibit 1, the strategic framework we suggest to our clients for implementation is the 4-C approach of climate, customers, competitors and company.

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    This post was posted in Investment Banking, Research and was tagged with Strategy, Oil and Gas Infrastructure Valuations

  • Data-Driven Estimating

    Posted on April 27, 2015 by FMI Corporation

    ConstructionBuilding179255070Create a fact-based filter for project selection and a data-driven mark-up policy that maximizes profitability. Construction is a competitive business. Especially in hard-bid markets, contractors compete fiercely for every project. The price the market will bear is sometimes determined by a few hundredths of a percent. Competition in the construction industry, however, should not be about winning projects; it’s about making a profit. In the construction industry, that profitable competition begins in estimating and pricing work.

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    This post was posted in Research and was tagged with Strategy, construction profitability

  • America's Energy Transformation: Petrochemical Manufacturing's 21st Century Renaissance

    Posted on April 21, 2015 by FMI Corporation

    GasPiplelines119744231Based on exciting trends for the petrochemical production community, the opportunities for firms in the industrial construction segment are especially ATTRACTIVE for the next several years. For the past several years, many eyes have been on the shale gas revolution in the United States. As U.S. oil and gas production has expanded exponentially, the attention has been on the impact on consumer markets, particularly such as natural gas for heating or oil and its attendant price impacts on gasoline at the pump. And while many have predicted a resurgence in U.S. manufacturing driven by cheap energy prices, the fact is that the needed investment in manufacturing facilities here has, for the most part, not been as significant or as quick as we might have hoped.

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    This post was posted in Uncategorized

  • Adapting to the “New Normal” in Oil and Gas Construction

    Posted on April 15, 2015 by FMI Corporation

    Energy170548899How the Market Will Endure Growing Regulatory, Labor and Commodity Pricing Pressures

    On February 24, President Obama vetoed legislation authorizing TransCanada's Keystone XL pipeline.  The 7-year regulatory saga is emblematic of the regulatory and public relations burdens on U.S. energy projects. With the Keystone veto, this burden will grow.


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    This post was posted in Investment Banking and was tagged with FMI Capital Advisors, Oil and Gas Infrastructure Valuations

  • Is Copy-and-Paste Compliance Enough?

    Posted on December 10, 2014 by FMI Corporation

    OilPipelines145194686_ModAn issue that is becoming an ever-increasing challenge in the oil and gas industry is subcontractors qualification. Up to this point in time, contractors have become extremely reliant upon technology and/or contractor management platforms for qualifying subcontractors, essentially “subcontracting” out the qualification process while retaining all of the risk. The industry needs a deeper understanding of risk, and that necessitates looking at the issue through a different lens.

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    This post was posted in Uncategorized, Consulting and was tagged with Scott Duncan, Oil and Gas Infrastructure Valuations, Offensive Risk Management Strategy

  • Ownership Exit Planning: Is Time on Your Side?

    Posted on October 28, 2014 by FMI Corporation

    HandsiStock_000020010614_MediumFMI all too often sees owners waiting until the last minute to formulate and implement an exit strategy. This usually results in limited exit options and an increased probability of failure. However, with proper planning and timing, an owner can realize the full value of his/her business.

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    This post was posted in Investment Banking and was tagged with Ownership Transfer, construction, NRCI 2014 Q2

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