Surbana Jurong kicks off Asia expansion drive with two acquisitions

SINGAPORE — The newly merged urbanisation and infrastructure consultancy, Surbana Jurong, has completed its first two acquisitions, kicking off an aggressive expansion strategy to widen its capabilities and deepen access to the booming infrastructure sector in Asia.

The 100 per cent acquisitions of homegrown engineering firm KTP Consultants and China’s Sinosun Architects & Engineers helped boost Surbana Jurong’s staff strength by 25 per cent to 4,000. The investment amount was not disclosed, but chairman Liew Mun Leong said yesterday the company would continue to have a “very big appetite” for acquisitions to reach its target of 6,000 employees within the next three to five years.

“Most of the expansion will come from acquisitions, but not all because we will also continue to hire good people — but hiring takes a longer time. If there are good companies to acquire, we will find the funds for it. We have very good and supportive shareholders,” Mr Liew said at a media briefing.

Surbana Jurong was formed by the merger of operating units from Singapore investment company Temasek Holdings and government industrial developer JTC.

The first two acquisitions were a result of several months of searching, during which Surbana Jurong’s management team looked as far as Scandinavia for the right companies to acquire. It will expand its market reach in China from nine to 16 cities, Surbana Jurong chief executive Wong Heang Fine said. Analysts TODAY spoke to said that besides being a faster way to grow in size, acquisitions can provide ready customers as well as local expertise and experience in markets that Surbana Jurong wants to expand into.

SIM University’s professor of finance Sundaram Janakiramanan said: “The major reason for acquisition is the synergy factor. Synergy means that the company’s position in the market improves through the acquisition. In the case illustrated, it is clear that the acquisitions will provide a bigger market, so that it becomes a leader in Asia.”

Independent economist Song Seng Wun said that while it is not necessary for Surbana Jurong to have deep pockets to go on a buying spree, a large balance sheet would help it take in bigger players that can put the company in a better position to compete for projects.

Surbana Jurong was formed following the high-profile merger earlier this year of Surbana International Consultants and Jurong International to tap opportunities arising from Asia’s spending boom on infrastructure development.

A recent report by business consultancy PwC estimated that infrastructure spending will grow from US$4 trillion (S$5.3 trillion) per year in 2012 to more than US$9 trillion per year by 2025. It also said that the Asia Pacific market will represent nearly 60 per cent of global infrastructure spending by 2025.

“We have large economies like China, India and South-east Asia urbanising rapidly, but some infrastructure development are lagging behind, so Surbana Jurong will take advantage of this demand. On the basis that the Asian Infrastructure Investment Bank has been formed and the Japanese government has also announced their commitment to financing infrastructure projects, I think the market opportunity is vast,” Mr Liew said.

Surbana Jurong aims to grow its consultancy fees of around S$500 million currently to between S$1 billion and S$1.5 billion in the next three to five years to rival top companies in the industry, such as Britain’s Mott MacDonald and Atkins.