The engineering and consulting firm John Wood Group PLC disclosed Monday that it’s under investigation by the UK’s Financial Conduct Authority, adding another layer of complexity to an already tumultuous year for the Aberdeen-based company. The revelation sent shares tumbling nearly 6% in early trading as investors grappled with the potential implications for the company’s future, including ongoing takeover discussions.
According to Wood Group’s statement to investors, the FCA investigation relates to “the company’s activities, including in respect of Amec Foster Wheeler” – a firm Wood acquired in 2017 for £2.2 billion. While details remain sparse, the company confirmed it’s cooperating fully with regulators, though the timing couldn’t be more problematic for the FTSE 250 constituent.
This regulatory scrutiny emerges against the backdrop of Wood Group’s rejection of multiple takeover approaches earlier this year. The company rebuffed four separate proposals from Apollo Global Management before entering exclusive talks with the US private equity firm in May regarding a potential £1.66 billion all-cash acquisition.
“The FCA investigation introduces significant uncertainty into what was already a delicate negotiation process,” said Marcus Williams, senior analyst at Berenberg Bank. “Potential acquirers typically shy away from regulatory complications, especially when the full scope and potential liabilities remain unclear.”
The Amec Foster Wheeler connection proves particularly troubling given the subsidiary’s previous regulatory issues. In 2021, Amec Foster Wheeler agreed to pay £103 million to settle a UK Serious Fraud Office investigation concerning the use of corrupt agents in the oil and gas sector. This settlement followed a related $41 million resolution with US authorities over violations of the Foreign Corrupt Practices Act.
Wood Group’s financial position makes this regulatory complication even more precarious. The company has struggled with approximately £1.4 billion in debt while attempting to streamline operations following a challenging period in the energy services sector. Last year, Wood Group reported a narrowed loss of $6 million on revenue of $5.4 billion, showing modest improvement but highlighting ongoing financial pressures.
“What’s particularly concerning for investors is the unknown scope of potential financial impact,” noted Eleanor Hughes, equity strategist at Peel Hunt. “Regulatory investigations of this nature can result in significant fines, especially if they uncover systematic compliance failures.”
The timing of the disclosure raises questions about the ongoing acquisition talks with Apollo. Both Wood Group and Apollo have maintained silence regarding whether the takeover discussions remain active following this revelation. Market analysts suggest this regulatory development could provide Apollo with leverage to renegotiate terms or potentially walk away entirely.
Industry observers note that engineering and consulting firms operating across multiple jurisdictions face increasing regulatory scrutiny regarding business practices. The investigation adds to the growing trend of heightened oversight in sectors connected to large infrastructure and energy projects, particularly in developing markets.
“Companies with complex global operations face a patchwork of anti-corruption and financial regulations,” explained Richard Foster, compliance director at Norton Rose Fulbright. “Any investigation involving historical acquisitions compounds this complexity, as acquirers inherit not just assets but also potential liabilities.”
Wood Group has undergone significant transformation in recent years, pivoting from its traditional oil and gas focus toward renewable energy and sustainable infrastructure. This strategic shift, while potentially positioning the company for long-term growth, has created short-term financial pressure during the transition.
According to data from the International Energy Agency, global investment in energy transition technologies reached $1.8 trillion in 2023, representing a growing market that Wood Group hopes to capture. However, this regulatory investigation may distract management and divert resources at a critical juncture in the company’s strategic evolution.
For employees and shareholders, the investigation introduces unwelcome uncertainty. Wood Group employs approximately 35,000 people across 60 countries, with significant operations in the UK, US, and Middle East. The company’s shares have experienced considerable volatility over the past year, trading between 135p and 240p before this latest announcement.
As the investigation unfolds, market participants will be closely monitoring any statements from Apollo regarding the potential acquisition. Private equity firms typically build substantial contingency provisions into acquisition agreements to address regulatory risks, but the emergence of an active investigation rather than a hypothetical risk could alter the calculus significantly.
Wood Group’s next scheduled trading update in July will likely provide greater clarity on both the investigation’s impact and the status of the Apollo discussions. Until then, investors face an uncomfortable wait as regulatory and corporate development uncertainties converge around one of the UK’s prominent engineering firms.
