Alexandre L'Heureux, CEO of WSP, in Montreal on Oct. 7. Since joining the company in 2010 as finance chief and becoming CEO six years later, WSP has completed more than 90 takeovers – expanding its geographical footprint and payroll to more than 73,000 employees.Boris R. Thebia/The Globe and Mail
Canadian engineering giant WSP Global Inc. WSP-T is eyeing more multibillion-dollar takeovers as chief executive officer Alexandre L’Heureux pushes on with a growth strategy that’s already made the company one of the world’s five largest design consultancies.
WSP’s $2.4-billion cash acquisition of U.S. energy specialist Power Engineers, completed earlier this month, is one of the latest moves and precedes several more potential deals as Mr. L’Heureux reshapes what was once a boutique engineering business into a company with a global reputation and multipronged capability. Its market capitalization now stands at $30.7-billion.
The industry is consolidating as projects become larger and more complex while design companies – which include engineering and architecture outfits and planners – navigate technological change, the CEO said. That could present more opportunities for WSP.
“For what will be required in terms of investment in digital transformation in the next few years, I think you need size,” Mr. L’Heureux said in an interview this past week with The Globe and Mail, adding that the company will continue to make acquisitions that boost its earnings power. “If there was a large opportunity, we’re clearly open for business.”
The comments shed some light on Mr. L’Heureux’s thinking as he and his management team prepare to unveil their next three-year strategic plan in February. Since he joined WSP in 2010 as finance chief, becoming CEO six years later, the company has completed more than 90 takeovers – expanding its geographical footprint and payroll to more than 73,000 employees.
Deals such as the $2.3-billion purchase of the environmental and infrastructure division of British company John Wood Group in 2022 and the $1.4-billion takeover of Golder Associates in 2021 are helping WSP toward its goal of boosting revenue by at least 30 per cent over three years to the end of 2024.
The other two main financial objectives in its current strategic plan – grow adjusted earnings before interest, taxes, depreciation and amortization by 40 per cent and adjusted net earnings per share by 50 per cent by the end of the year, are also on track, Mr. L’Heureux said.
The Montreal-based company is benefiting from several major trends. Governments in the United States and other Western countries plan to invest billions of dollars in infrastructure over the next few years, tapping the kind of expertise WSP has sharpened over time. Those same countries are also trying to figure out how to decarbonize their economies in part through renewable energy, electricity system revamps and other projects – and WSP is booking that type of work as well.
The company, perhaps best known for its transportation projects and super-skinny skyscrapers, recently won the largest contract in its history. It will provide its expertise for Britain’s Great Grid Upgrade, the biggest overhaul of the electricity network in England and Wales in decades.
Still, the political instability rocking the world at the moment is “hard to ignore,” Mr. L’Heureux said. It’s the first thing he mentions when asked what could slow the company down.
“If the world is going into war, perhaps governments would be more tempted to invest in their departments of defence rather than infrastructure,” he said. “It’s about choices.”
There has been no impact to WSP’s business prospects so far from geopolitical events and government change in the countries in which it operates, Mr. L’Heureux said. Both the federal Liberal and Conservative parties in Canada support infrastructure investment while in the United States, the company has fared equally well in the past under a Democratic and Republican president, he said.
Meanwhile, investors appear to have shaken off a negative report on the company this past spring by prominent short-seller Spruce Point Capital Management, which criticized WSP’s accounting and leadership. The shares have gained about 20 per cent since.
Mr. L’Heureux, an accountant by training, is particularly buoyed by the work WSP could win now that Power Engineers and its 4,000 employees are under the same corporate umbrella. Power brings a list of blue-chip clients to the table, including many of the major utilities in the United States, and a new skill set that will allow WSP to offer more end-to-end solutions for customers, he said.
For example, WSP currently does work on the design of data centres for Microsoft Corp. With Power Engineers, it will also be able to offer solutions to connect those data centres to existing grids or other power sources, Mr. L’Heureux said. “We have a lot of velocity with this acquisition and we’re going to continue to grow” it, he said.
Despite the fact that WSP has been an active acquirer over the past 10 to 15 years, there are still more takeover opportunities in what remains a fragmented industry, said analyst Maxim Sytchev of National Bank of Canada. He said the company has by far the best track record in the sector on mergers and acquisitions as measured by metrics such as profit-margin improvements and share-price performance.
In a 2022 report on the company, Veritas Investment Research analyst Dimitry Khmelnitsky identified 62 major public and privately held engineering and consulting-design companies doing business in WSP geographies that might be potential acquisition targets for the Canadian corporation. Power Engineers was on the list, together with much-bigger companies such as Jacobs Engineering Group, Aecom and Stantec Inc.
WSP and Aecom were in talks at one point to merge but abandoned the effort because of uncertainty created by the COVID-19 pandemic, trade publication Engineering News-Record reported in 2020. Neither company has ever publicly confirmed that information.