Scottish civil engineer business takeover evokes touch of sadness

They are true stalwarts, and there is a real stability about businesses such as RJ McLeod, which has bases in Glasgow and Dingwall.

RJ McLeod (Contractors), which has been bought by private equity backed OCU Group, employs about 450 people and has focused increasingly on renewable energy in recent years. It made pre-tax profits of £18.6 million on turnover of £210m in the last financial year for which accounts are available, the 52 weeks to October 30, 2022.

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So it is a business of real scale, which has diversified astutely.

To say that the sale evoked some disappointment is not to question in any way the fact that business owners are perfectly entitled to sell up whenever they want.

And in this case they have done a deal which, certainly for now based on what the buyer said last week, is preserving the jobs and the RJ McLeod business.

Asked whether all RJ McLeod employees would transfer to OCU Group, which describes itself as a “leading UK energy transition and utilities infrastructure services company” and is based in Greater Manchester, a spokeswoman for the purchaser said: “There are around 450 individuals working on RJ McLeod projects on any given day across the UK - based out of Glasgow and Dingwall. Following completion of the acquisition, RJ McLeod will continue to operate under the same name and legal entity, with the same staff, same locations, and same work.”

This is heartening, as far as it goes.

And the two joint managing directors of RJ McLeod, Graeme Clark and Bruce Clark, who filings at Companies House indicate were the largest individual shareholders in the business ahead of the sale, were upbeat about the deal and what the future holds.

Encouragingly, OCU Group has confirmed that Graeme and Bruce Clark “will continue running the business”.

Graeme Clark said last week: “RJ McLeod has been operating across mainland Scotland, the Western and Northern Isles for more than 70 years. Specialising in civil engineering, often related to complex projects, we have established a valued client base. We believe that joining OCU Group today has increased our ability to provide a more comprehensive service to existing and new clients.”

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Bruce Clark said: “Since the business was founded by Roderick John Macleod in 1951, we have carried the ethos of enabling people to give their best and we are very proud of the team that has brought us to where the business is today. Looking forward, we see even greater opportunities to maintain and grow the impact of our people and delivery for our clients within the OCU Group family.”

Among the positives here is that RJ McLeod looks to be operating in sectors with healthy activity levels and prospects, and it has been involved in some major projects.

OCU Group, which was acquired by private equity outfit Triton Partners in August 2022, noted: “Over a number of years, RJ McLeod has increasingly focused on renewable energy, particularly with regards to onshore wind developments such as the Viking and South Kyle wind farms. This work is a vital part of the Scottish Government target to create 20GW (gigawatts) of onshore wind capacity by 2030.”

So the purchaser does seem to be focused on growth opportunities.

It also seems acutely aware of RJ McLeod’s strengths.

OCU Group said: “Beyond wind farms, RJ McLeod also has specialist capabilities in battery storage and hydro-electric projects as well as in grid and substation construction. The business also has a strong market presence across the Scottish marine sector, having completed a number of transformative projects in recent years, as well as being a key provider for other civil engineering services such as roads, flood prevention and coastal protection.”

This certainly seems like an important and valuable skill set.

Oftentimes, as history shows, private equity purchases lead to cost-cutting. This is often not right for the businesses acquired or ultimately for the value of the private equity buyers’ stakes in them.

We must hope, in the context of RJ McLeod, that the private equity buy and build approach that seems to be evident here does feature a genuine build mindset.

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The horizons of private equity players are generally, of course, quite different from those of long-established businesses in which the individuals who have for years or decades been at the helm of the operations are the key shareholders.

The RJ McLeod business has been built over many decades.

Both joint managing directors of the Scottish company emphasised this heritage last week as they gave their views on the deal.

Graeme Clark noted the business has been going for more than 70 years.

And Bruce Clark cited its founding by Roderick John Macleod in 1951.

RJ McLeod, while long-established, has clearly not rested on its laurels and looks to have ensured it is in prime positions in key sectors offering much potential.

Hopefully, OCU Group and its private equity backer, Triton Partners, have decided on the RJ McLeod acquisition because of the great value in the company.

And hopefully they will nurture the business in a way which enhances this value.

Only time will tell, of course.

In the meantime, it is good to hear OCU Group declare that RJ McLeod will “continue to operate under the same name and legal entity, with the same staff, same locations, and same work”.

And the positivity of RJ McLeod’s joint managing directors also provides some reassurance, as does the company’s undoubted expertise.

Hopefully, this will be a happy tale as we move forward, even though it is at least a touch sad to see “one of Scotland’s largest privately owned civil engineering and building contractors”, to use Glasgow-based RJ McLeod’s own description of itself, lose its independence.