Class Society Bureau Veritas and Swiss SGS in Merger Talks

Two of the leading testing and classification companies, France’s Bureau Veritas (BV) and Switzerland’s SGS confirmed in a brief statement that they are engaged in merger discussions. The acknowledgement came after Bloomberg first reported the deal which is said to be at an advanced stage and possibly weeks away from an agreement.

Analysts highlight the testing, inspection, and certification sector remains highly fragmented having seen little consolidation. Each of the companies has been working to refine their business strategy based on expectations of slowing growth after a surge related to the pandemic. Sustainability is one of the new areas driving the industry.

The deal which analysts value at more than $30 billion would likely be a merger of equals said analysts and has the potential to create a certification giant. Based in Genea, SGS is reported to have nearly 100,000 employees worldwide. BV reports it operates in 140 countries and has more than 83,000 employees worldwide. BV dates to 1828 and while younger, SGS was also founded in the 1800s.

Maritime is a small part of BV’s overall business for the group which describes itself as a leader in inspection, certification, and laboratory testing services working with customers to address challenges in quality, health and safety, environmental protection, and sustainability. SGS also provides marine inspections and fuel testing as part of its overall services.

It would be the first large consolidation in the maritime sector certification societies in over a decade. Det Norske Veritas (DNV) and Germanischer Lloyd merged their operations in 2013. After eight years as DNV GL, the name was again shortened to DNV.

“This is not the first time the companies have engaged in talks,” said Jean-Philippe Bertschy an analyst at asset manager at Vontobel. He wrote the companies “have been eyeing each other for years,” speculating this is “probably the third or fourth time such talks have taken place.” 

It would be the largest transaction for the sector and one of the largest mergers in Europe in the past year. 

Both BV and SGS have been pursuing smaller bolt-on acquisitions to expand their business portfolios. The Wall Street Journal highlights SGS acquired three companies in the last three months while BV has also made several small acquisitions. BV also recently agreed to sell its food testing business.

The companies in their public statement used the typical language to say there were no assurances that a deal could be reached. Because of the size of the transaction and overlapping business segments, analysts speculated about possible antitrust concerns. The deal would require extensive approvals in France and from the shareholders of each company.

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