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Jacobs Engineering Group Inc. (JEC - Analyst Report) recently announced its plans to acquire the Australia-based professional services firm, Sinclair Knight Merz for AUS$1.3 billion (or $1.2 billion as on the date of announcement).

Formed in 1964, as a private company, Sinclair Knight Merz is a leading projects firm, providing strategic consulting, engineering and project delivery. The company operates across many regions, including Asia Pacific, the Americas, Europe, the Middle East and Africa, serving markets such as Mining and Metals, Building and Infrastructure, Water and Environment, and Power and Energy.

Sinclair Knight Merz generated revenues of roughly $1.2 billion (AUS$1.3 billion) in 2012. The two companies have compatible cultural values as well as operating philosophy. The merger is expected to be a strategic fit from which both the companies are expected to benefit.

Jacobs and Sinclair Knight Merz have minimal geographic overlap, giving both the companies a scope to gain a greater market share as well as a diversified client base in the future. Moreover, the combined entity will have a stronger balance sheet, giving it a scope to grow further inorganically.

The transaction, subject to the approvals of Sinclair Knight Merz’s shareholders and the Australian Federal Court, is expected to close by the first quarter of fiscal 2014.

Jacobs has been trying to expand its portfolio inorganically. In June, Jacobs acquired a privately-held telecommunications solutions provider, Compass Technology Services, Inc. The financial terms of the deal were not disclosed. This strategic move of purchasing Compass will enhance Jacobs' efficiency in the telecommunications infrastructure design and construction. Not only will Jacobs’ product offerings increase, but the company will also become geographically diverse, since Compass has a significant presence in the Southeastern U.S.

Jacobs is one of the leading providers of professional, technical and construction services to industrial, commercial and governmental clients. The company provides its services through more than 200 offices and subsidiaries located principally in North America, Europe, Asia and Australia. Jacobs currently has a market capitalization of $7.6 billion.

Jacobs carries a Zacks Rank #3 (Hold). Other stocks worth a watch in the construction sector are Michael Baker Corporation , Standard Pacific Corp. (SPF - Snapshot Report) and VSE Corp. (VSEC - Snapshot Report). While Michael Baker carries a Zacks Rank #1 (Strong Buy), Standard Pacific and VSE Corp. carry a Zacks Rank #2 (Buy).

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