{"id":529298,"date":"2025-09-24T12:45:24","date_gmt":"2025-09-24T11:45:24","guid":{"rendered":"https:\/\/www.constructionnews.co.uk\/?p=529298"},"modified":"2025-09-24T11:17:33","modified_gmt":"2025-09-24T10:17:33","slug":"analysts-warn-of-mbo-pitfalls-after-henry-boot-sells-construction-arm","status":"publish","type":"post","link":"https:\/\/www.constructionnews.co.uk\/financial\/ma\/analysts-warn-of-mbo-pitfalls-after-henry-boot-sells-construction-arm-24-09-2025\/","title":{"rendered":"Analysts warn of MBO pitfalls after Henry Boot sells construction arm"},"content":{"rendered":"

Henry Boot\u2019s announcement yesterday (23 August) that it was selling its construction arm reflects the tension between development and contracting operations, experts have argued.<\/p>\n

The Yorkshire-based developer announced a \u00a34m sale of its contracting division<\/a> to a newly formed vehicle in a management buyout (MBO).<\/p>\n

Henry Boot said the disposal would simplify its group structure and reduce headcount by 21 per cent. Additional consideration may be payable if the business is sold or exceeds profit thresholds within specified periods.<\/p>\n

\u201cThe skills and resources required to run a development business are different to the management of a construction company,\u201d said Heather Powell, head of property and construction at business advisory firm Blick Rothenberg.<\/p>\n

\u201cHaving an in-house construction team, giving control and prioritisation to your own developments, is attractive,\u201d she told Construction News<\/em>.<\/p>\n

\u201cBut for a listed company the mismatch in margins and capital required can cause tensions.\u201d<\/p>\n

Powell added that MBOs could provide fresh opportunities but warned the economics may prove prohibitive.<\/p>\n

\u201cThe key for any management teams in construction businesses that have an opportunity to complete a buyout is to ensure that their pipeline is priced correctly and the working capital that is retained in the construction business is sufficient \u2013 with contingency \u2013 to fund a successful, profitable business,\u201d she said.<\/p>\n

\u201cIn the current economic climate these conditions may be the stumbling block that halts an avalanche of similar deals.\u201d<\/p>\n

Her comments echoed remarks last year from Terry Moore, real estate tax partner at accountancy firm BDO, who said that MBOs have declined in popularity because they often involve taking on debt that appears on a balance sheet.<\/p>\n

\u201cUnless structured very carefully, MBOs are difficult to achieve within this kind of sphere,\u201d he said.<\/p>\n

Henry Boot\u2019s construction MBO announcement follows a series of ownership shifts in the contracting sector. Vinci completed its acquisition of FM Conway in January this year, for instance, and Sisk announced earlier this month that it was acquiring Farrans.<\/p>\n

And in May, Tarmac sold Alun Griffiths Contractors<\/a> to a company owned by the civils contractor\u2019s original founder Alun Griffiths.<\/p>\n

But the outlook for smaller firms remains difficult, said Max Hayes, research associate at investment bank Cavendish.<\/p>\n

\u201cThe current environment increasingly favours tier one contractors who can secure large, complex multi-year projects, while opportunities for smaller, competitive work remain limited \u2013 reflected across lacklustre construction output and purchasing managers\u2019 index readings,\u201d he told CN<\/em>.<\/p>\n

RSM head of construction Kelly Boorman said more restructuring was on the horizon. \u201cThe construction industry is likely to see both demergers and consolidation in the coming months and years as it gets ready for substantial growth,\u201d she said.<\/p>\n

Boorman predicted that contractors would increasingly acquire suppliers to secure labour and a steady flow of materials.<\/p>\n

Announcing the construction arm\u2019s MBO, Henry Boot group chief executive Tim Roberts said the sale would enable his business to focus on its core development activities and \u201cenhance prospects for long-term growth with a more focused portfolio of activities\u201d.<\/p>\n

The group\u2019s construction division recorded \u00a349.7m in revenue in 2024 but made a \u00a32.7m operating loss.<\/p>\n","protected":false},"excerpt":{"rendered":"

Henry Boot\u2019s announcement yesterday (23 August) that it was selling its construction arm reflects the tension between development and contracting operations, experts have argued. The Yorkshire-based developer announced a \u00a34m sale of its contracting division to a newly formed vehicle in a management buyout (MBO). Henry Boot said the disposal would simplify its group structure …<\/p>\n","protected":false},"author":87938,"featured_media":504166,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ep_exclude_from_search":false,"footnotes":""},"categories":[553],"tags":[],"class_list":["post-529298","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ma"],"yoast_head":"\nAnalysts warn of MBO pitfalls after Henry Boot sells construction arm | Construction News<\/title>\n<meta name=\"description\" content=\"Henry Boot\u2019s announcement yesterday (23 August) that it was selling its construction arm reflects the tension between development and contracting\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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