You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Twice daily
MoneyWeek
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Four times a week
Look After My Bills
Sign up to our free money-saving newsletter, filled with the latest news and expert advice to help you find the best tips and deals for managing your bills. Start saving today!
Construction services firm Carillion's (LSE: CLLN)proposed merger with Balfour Beatty (LSE: BBY) has hit the rocks. Carillion wanted the deal to include Balfour's Parsons Brinckerhoff business, which would bring stable profits and strong cash flow. Balfour Beatty had already put this business up for sale and said "no".
Carillion is a well-managed business and does a good job building things for the government and then looking after them. However, it has struggled to grow its profits organically over the last five years. The company has a record of growing by buying other companies.
During the last decade, it has hoovered up rivals, such as Mowlem and Alfred McAlpine,and benefited from big cost savings by combining them withits own businesses. Without these deals, Carillion's profitswould probably have been a lot lower. Balfour Beatty wouldhave undoubtedly given it the option to do the same again.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Yet, growing by acquisition and mergers is a difficult way tomake shareholders richer and many companies fail to do so.Carillion's shares are not much higher than they were five yearsago. Until it can prove that it is capable of sustainable profitsgrowth from its existing businesses, the market is unlikely toplace a higher value on the stock.
Verdict: avoid
-
How a ‘great view’ from your home can boost its value by 35%A house that comes with a picturesque backdrop could add tens of thousands of pounds to its asking price – but how does each region compare?
-
What is a care fees annuity and how much does it cost?How we will be cared for in our later years – and how much we are willing to pay for it – are conversations best had as early as possible. One option to cover the cost is a care fees annuity. We look at the pros and cons.
