A New Era For Aecon
The rationale behind selling the company to CCCI
by John Beck, President and CEO of Aecon.
As the president, chief executive officer, and founder of Aecon, I have worked in the construction industry for more than 50 years. Over that time, our company has been involved in the building of a number of iconic Canadian landmarks and has shared our expertise on projects around the world. I am proud of our rich history and the contributions we have made to the industry and the country, but I also see the need to change if we want to continue to make a meaningful contribution to the next wave of infrastructure development in Canada and abroad. This is why I welcome the opportunity to join with CCCC International Holding Ltd. (CCCI), part of China Communications Construction Co., Ltd. (CCCC).
The changing environment for infrastructure projects has been well documented by ReNew Canada. Hundreds of billions of dollars have been committed across all levels of government to invest in rebuilding and strengthening Canada’s infrastructure. Not only are the number of projects much greater, so too is the size and complexity of each. Of the largest infrastructure projects in Canada in 2017, the top 50 are each valued at $1 billion or more, with nine topping $5 billion. This new reality has also seen significant change in procurement and delivery models, with many projects now using Public Private Partnership structures such as Design-Build-Finance, Design-Build-Finance-Maintain, and Design-Build-Finance-Operate-Maintain. In order to respond to the demands of a growing infrastructure market proponents need significant scale in human and financial resources to compete.
The construction industry is highly fragmented in North America with an estimated 710,000 engineering and construction firms, only two per cent of which have more than 100 workers, while 90 per cent have 10 workers or fewer. In response to this, governments and others looking to build complex, very large projects have been actively recruiting the biggest international firms to stake a presence in Canada, to ensure a competitive marketplace of qualified bidders, with the required scale and financial capacity.
Yet, recruiting international players has not always worked. Domestic industry leaders have long been able to point to examples of larger projects where global firms, unfamiliar with local conditions, labour markets and construction practices and regulations, failed to deliver as promised. We strongly believe we have found the right solution for this challenge in our partnership with CCCI– one that combines international technology and resources with domestic know how and capabilities. This is a partnership that will benefit the people that work for Aecon and the clients we work with.
Joining with one of the world’s largest construction companies gives us immediate scale, which would have been nearly impossible to achieve organically. We will have increased access to capital and an ability to bid for larger and more complex projects in Canada, thereby enhancing domestic competition for construction services while also enabling our company to compete for more international projects. Our unparalleled experience working across Canada, on a wide spectrum of infrastructure projects including highways, bridges, airports, tunnels, public transit systems, hydroelectric generating stations, and wastewater treatment facilities, ensures our local understanding translates to local successes.
I am especially excited about CCCI’s impressive track record of acquisitions that has helped the acquired entity achieve their strategic vision and reach new levels of growth. This is supported by their 2015 acquisition of John Holland Group, one of Australia’s leading construction companies. When CCCI acquired John Holland the Australian market was very similar to Canada’s, a fragmented local industry competing with some of the biggest players in the world. The growth in size, costs, and complexity of local projects put domestic businesses at a competitive disadvantage, but the need for local knowledge and experience was as much an issue in Australia then as it is in Canada today.
Since being acquired, John Holland has seen a remarkable surge in its business. Over the course of 2017, it secured a record $23 billion (Australian) in tenders for large public infrastructure projects, and is on a 15-month hiring drive that will see the business grow by more than 45 per cent. A rich pipeline of work and potential for growth led the company to open its first office in Singapore not long after it had been acquired. In short, John Holland was competing for projects that had previously been out of reach in both Australia and beyond, all while being led by an Australian management team, continuing to operate under the John Holland brand and staying true to the company’s core values. The acquisition worked because it created unique value in the Australian market. We see a similar outcome in Canada with our arrangement–one that will continue Aecon’s legacy of being the partner of choice for Canadian infrastructure development.
As much as I see this transaction enabling Aecon to be a more competitive player in Canada in the immediate future, joining a global leader also provides us an appropriate platform for long-term success in an industry that is poised to go through transformative changes. The North American construction industry has generally been slow to innovate and adapt, but the tides of change are coming. In my opinion, a more globalized economy with a faster paced work environment and increased urbanization will demand innovation. Aecon embraces this challenge by adopting an innovative lens in all we do. With the support of CCCI we will continue to prioritize technology and innovation to reduce project delays, improve safety, working conditions, and environmental compatibility.
As I reflect on the past 50 years at Aecon I am proud of our people, our projects and the company we have become. Looking to the future I want Aecon to be at the forefront of applying new technologies and new methodologies to building better outcomes at home and abroad. Joining a global leader opens the door for us to be part of this transformation, making profound change to improve lives around the world. Now that’s something to be proud about.
This article originally appeared in ReNew Canada magazine.
