ÅF acquires Pöyry: part 1 – shape of the combined firms

/ December 10, 2018/ ÅF Pöyry / AFRY, M&A (large, with revenues above $50m), Pöyry

ÅF and Pöyry have provided some light on the combined ÅF Pöyry. ÅF Pöyry will have revenues of SEK 19.2bn (~USD 2.1bn), a decent margin with 8.5% in adjusted EBIT, and 14.5k FTEs. ÅF Pöyry will be a sizeable organization.

Pöyry brings a process industry specialization (~38% of its revenues), with a historical focus on the pulp and paper industry, to ÅF. ÅF will accordingly carve out its process industry capabilities from Industry Division and create a Process Industries division. This Process Industry Division will have SEK 3bn (~USD 330m) in revenues and represent 15% of the revenues of ÅF Pöyry.

In parallel, ÅF will merge its remaining Industry Division with its Digital Solutions Division and focus on the software side of ER&D services. The new division, Industrial and Digital Solutions will have revenues of ~SEK 5.9bn (USD 650m) and is also sizeable. It will be comparable regarding capabilities to the Alten of this world.

Pöyry’s second-largest unit is infrastructure engineering. Pöyry brings a significant presence in its home market, Finland. It also has a presence in Germany, Austria, and in Switzerland. This will complement the footprint of ÅF’s Infrastructure Division, in Sweden and Norway. The specializations are different: Pöyry had a focus on water, transportation and real estate, while ÅF expanded tp specialty services such as sound, light, and architecture, on the back of its core buildings, road & rail capabilities. Pöyry adds revenues of SEK 1.3bn to the SEK 5.1bn of ÅF. ÅF’s challenge is that Pöyry has a low margin (~4% in H1  2018).

ÅF will benefit from Pöyry’s capabilities in energy engineering. Pöyry (SEK 1.2bn) almost doubles the revenues of ÅF (SEK 1.5bn) in this space. More importantly, Pöyry will bring operations which have now stable revenues and improving margins. It brings an energy business, that is more international and more profitable than ÅF’s Energy Division.

Finally, Pöyry brings a capability that is entirely new to ÅF, i.e., a management consulting unit serving the pulp & paper and energy industries. The group is small with SEK 700m (USD 75m) in revenues but strategic, especially in pulp & paper. The performance of Pöyry’s management consulting in H1 2018 was impressive with an 11% revenue growth and a 14% adjusted operating margin. The name of its new leader raises, however, one question: it is Martin à Porta, Pöyry’s current CEO. We are guessing that Mr. à Porta will aim to keep the management consulting unit stable and avoid high attrition during the transition period. In all likelihood, Mr. à Porta will be gone one year after the acquisition. This suggests that both ÅF and Pöyry are favoring a smooth transition. This is pleasing.

We will be commenting further on the ÅF Pöyry transaction in the coming days

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