World's Biggest Engineering Firm Plans to Spend Billions to Become Biggest in Infrastructure

  • Firm has $3.5 billion in free cash flow to spend in five years
  • Border wall, Trump infrastructure plans are in sights

AECOM Chairman and CEO Michael Burke discusses President Trump’s call for $1 trillion in infrastructure spending, trade deals and Commerce Secretary Wilbur Ross’ stress on private sector investment into infrastructure. He speaks on 'Bloomberg Markets: European Close.” (Source: Bloomberg)

AECOM, the world’s biggest engineering firm, plans to spend billions of dollars on acquisitions amid expectations for growing U.S. funding of road, rail, water and energy projects, Chief Executive Officer Michael Burke said.

“We’ll look to be the largest infrastructure firm in the world -- both construction and design,” Burke said Monday in an interview at Bloomberg’s Los Angeles bureau. “I’ve got to spend $3.5 billion, and we think it’ll be spent on good, solid strategic acquisitions. We will grow organically also.”

Infrastructure spending by the U.S. government is likely to grow because it’s one of the few priorities shared by President Donald Trump, Republicans and Democrats in Congress, and voters, Burke said. Trump told Congress last week he wants to spend $1 trillion on infrastructure, a proposal Burke expects to be detailed later this year but that will take years to implement.

“I think a plan will be put in place before the end of 2017,” he said in a Bloomberg Television interview later Monday with Vonnie Quinn. “And then it will be implemented over the course of ’18 and ’19 and forward.”

The last major acquisition by Los Angeles-based AECOM, which reported $17.4 billion in revenue in the fiscal year that ended Sept. 30, was URS Corp. for $5.6 billion. The 2014 deal “created synergies” of about $325 million, exceeding projections, while also helping AECOM win more bids because of expanded capabilities, Burke said. AECOM has landed $12.3 billion of new projects over its two most recent quarters, he said, putting it on pace to surpass last year’s revenue.

Acquisition Spending

The company expects about $700 million in free cash flow annually in the next five years, money that Burke said he’ll put to work for acquisitions. AECOM provides project planning, design, construction management, engineering and financing services. Its largest customers are the federal government, including the defense and energy departments.

North America is likely to be the hottest market for construction as China’s economy slows, low oil prices hit the Middle East and Europe faces divisive political disputes, such as Brexit, according to Burke.

AECOM submitted a list to the U.S. Treasury Department of 40 transportation and water infrastructure projects which would cost about $200 billion and generate $700 billion to $1.3 trillion in net economic benefits by providing jobs while improving travel, safety and other efficiencies. The Trump Administration plans to release a request for proposals as soon as Wednesday for a wall along the U.S-Mexico border.

Local Projects

Even without a federal infrastructure-spending plan, local projects are a growing source of revenue, Burke said. The company’s AECOM Tishman unit is building nine towers in New York, AECOM has the contract for a new National Football League stadium in Los Angeles and it’s decommissioning a nuclear-power plant near San Diego.

Trump proposed to increase defense spending by $84 billion this fiscal year and next, another potential source of U.S. business, Burke said.

“We’re in the early innings of a long-term infrastructure boom,” he said.

Shares of AECOM climbed 33 percent from the Nov. 8 election through last week. They were down 2.3 percent to $36.26 at 2:31 p.m. in New York.

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