Wood Group's M&A Misstep: The Amec Foster Wheeler Acquisition Examined

In the corporate world, high-profile mergers and acquisitions are often remembered, either for their success or for the pitfalls that ensued. The Wood Group's acquisition of Amec Foster Wheeler in 2017 is one such case that falls into the latter category. At the time, Wood Group, known for its engineering prowess in oil and gas, sought diversification amid industry pressures due to the 2014 oil shock. The $2.2bn deal with Amec, intended to strengthen their portfolio with environmental and infrastructure projects, instead resulted in significant financial strain. The energy services sector's predefined contract rates were affected by rising inflation, deteriorating revenues. Despite the strategic shift in 2022 to counter these challenges, internal governance issues persisted, leading to an independent review revealing material weaknesses. Furthermore, Wood Group's dire financials, notably its $1.1bn net debt, deterred prospective acquirers, including Apollo, who rescinded a considerable bid valuing Wood at over $2.2bn. Now, Wood Group's pathway to recovery might rest in attracting another acquisition offer, even if at a diminished valuation.