Pasadena-based engineering and consulting firm Tetra Tech Inc. late last month announced its largest-ever acquisition: an agreement to buy a British environmental consulting company for $691 million. But not so fast.
Tetra Tech faces a likely bidding war over the British firm, Abingdon-on-Thames-based RPS Group plc. That’s because in early August, Montreal, Quebec-based engineering and consulting giant WSP Global Inc. announced that it had reached an agreement to buy RPS Group for $641 million.
When Tetra Tech’s higher offer came in, six weeks later, RPS Group’s board rescinded its acceptance of WSP Global’s offer and promptly agreed to Tetra Tech’s; RPS and Tetra Tech jointly announced their agreement late on Sept. 23.
On Sept. 26, WSP Global issued a statement saying it was “considering its options.” The company could walk away or sweeten its offer, which would set off a bidding war.
At the center of the looming battle is RPS Group, an environmental and water infrastructure consulting firm founded in 1970 that has grown to 5,000 employees and annual revenue of $757 million. While the company has about 100 offices in 12 countries, its geographic areas of focus are its native United Kingdom, the European Union and Australia.
For Tetra Tech, which has expanded in spurts over the last 20 years, the deal to buy RPS Group – should it hold up – represents an excellent opportunity to broaden its water and environmental management practices in those regions.
“The RPS Group advances our long-term strategy to enhance our position as the premier global high-end consulting and engineering firm focused on water, environment, sustainable infrastructure, and energy transformation,” Dan Batrack, Tetra Tech’s chief executive, said in the Sept. 23 agreement announcement.
If the deal goes through, Tetra Tech would overnight expand to 26,000 employees from its current 21,000. Its revenue would also jump considerably from 2021’s $3.2 billion.
After the RPS Group board approved Tetra Tech’s offer, RPS Group leaders said in the announcement that Tetra Tech offered both more value for shareholders and a better fit with their own company.
“The board of RPS is pleased to recommend Tetra Tech’s offer, which provides our shareholders with even greater value for their shares,” Ken Lever, RPS’s non-executive chairman, said in the announcement. “Our combination with Tetra Tech will provide attractive opportunities and long-term benefits to our associates and global clients.”
John Douglas, RPS Group’s chief executive, said the deal will allow RPS Group more opportunities to achieve its vision.
“Tetra Tech provides RPS and its employees with a strong and culturally aligned platform that creates a pre-eminent consulting and engineering firm addressing climate change and all its effects.”
Strong contender
But if WSP Global enters the fray with a sweetened offer, it would represent a formidable opponent for Tetra Tech. The company is much larger than Tetra Tech: 57,000 employees and 2021 revenue of $8.1 billion. And it has a much more aggressive expansion plan: the company stated in its 2021 annual report that it intends to double in size over the next several years. Its stated goal is to become one of the world’s major environmental and infrastructure consulting firms.
WSP has made several big acquisitions in recent years, most notably New York-based Parsons Brinckerhoff in 2014 for $1.3 billion and Toronto, Ontario-based Golder Associates in late 2020 for $1.1 billion.
And just three months ago, WSP announced it had agreed to buy the environmental and infrastructure business of Aberdeen, Scotland-based John Wood Group for $1.8 billion; the deal closed on Sept. 21.
Tetra Tech, meanwhile, has pursued much smaller deals that are generally strategic in nature and made on a case-by-case basis.
“WSP has an aggressive reputation in M&A, while (Tetra Tech)’s is historically conservative,” Andrew Wittmann, senior research analyst with Milwaukee, Wisconsin-based investment bank and research firm Baird, said in a Sept. 26 research note.
Wittmann said in his note he “won’t rule out another offer” from WSP Global for RPS Group.
Learn about other recent news from Tetra Tech on Page 10.
