Gulf Island expands and diversifies services business with acquisition worth $8 million

Gulf Island expands services business with $8 million worth takeover

Houston-based steel fabricator and service provider to the industrial and energy sectors, Gulf Island Fabrication, has acquired the business assets and operations of DSS from Dynamic Industries in a deal worth $8 million, which allows it to grow and diversify its services business, increase skilled labour workforce, and create new revenue synergy opportunities.

Gulf Island's facility (for illustration purposes); Source: Gulf Island Fabrication

The company announced the acquisition of the services and industrial staffing businesses on Wednesday. This was done for a cash purchase price of $8 million and the working capital of the business is excluded from the acquisition.

Richard Heo, who became Gulf Island’s President and Chief Executive Officer in November 2019, explained: “Two of the key initiatives in the current phase of our strategic plan include growing and diversifying our services business, and expanding our skilled labour force, and this acquisition will help accelerate our progress on these important objectives.

“The transaction further strengthens our services business by adding long-standing customer relationships to our existing customer base, as well as providing new services offerings and creating attractive revenue synergies.”

Gulf Island expects to experience an increase in working capital after the acquisition of approximately $5 million to $8 million (depending on revenue volume) over the next three to six months.

Westley Stockton, Gulf Island’s Chief Financial Officer, commented: “An expanded services business also provides a more predictable revenue stream and the reimbursable nature of the services work further improves our overall risk profile.”

The firm claims this acquisition will allow it to expand its services offerings to include coatings, scaffolding, and specialty services such as torquing and hydro-testing while growing its geographic footprint for craft labour to include South Texas and Western Louisiana.

“One of the biggest challenges facing our industry is the availability of skilled craft labour, and this acquisition will nearly double the size of our workforce and extend our geographic reach for personnel,” added Heo.

Gulf Island believes this deal provides entry into the industrial staffing market, which will further help to attract and retain craft personnel. In addition, the acquisition will provide opportunities for the potential to cross-sell expanded service offerings to a broader customer base, while providing the opportunity to pull through fabrication work to DSS’s customers, thus, generating new revenue synergies.

“I continue to be encouraged by the trends in our end markets, and the addition of DSS’s skilled workforce, customer base, expanded offerings and extended geographic reach put us in an even stronger position to take advantage of these improving market trends,” concluded Heo.