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Building a bigger builder

Suffolk Construction buys William A. Berry & Son in bid to be a national player

Suffolk Construction and William A. Berry have completed some of the region’s most prominent recent projects, including Suffolk’s Mandarin Oriental Boston hotel and condos (above) and Berry’s Shapiro Cardiovascular Center at Brigham and Women’s Hospital. Suffolk Construction and William A. Berry have completed some of the region’s most prominent recent projects, including Suffolk’s Mandarin Oriental Boston hotel and condos (above) and Berry’s Shapiro Cardiovascular Center at Brigham and Women’s Hospital. (David L. Ryan/ Globe Staff)
By Casey Ross
Globe Staff / September 24, 2009

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The two biggest builders in New England are joining forces: Suffolk Construction will acquire William A. Berry & Son, forming a 1,200-employee juggernaut that its principals say will be better positioned to compete nationally and to withstand a recession that has ravaged the construction sector.

The new company, which will use the Suffolk Construction name, will be one of the 20 largest builders of commercial projects in the country.

The merger also offers hope to the region’s suffering construction industry, as it will allow two of its stalwarts to compete for projects that also provide jobs to outside contractors and union laborers, who are out of work in record numbers.

Suffolk and Berry have completed some of the region’s most prominent recent projects, including the Mandarin Oriental Hotel in the Back Bay and the refurbished Fenway Park. The company will have estimated annual revenue of $2 billion and be able to reach into every corner of the building industry, from higher education to shopping centers. Combined, Suffolk and Berry now have $3.2 billion worth of projects in their pipelines.

“Joining these successful organizations will leverage our local strengths on a national basis,’’ said Suffolk’s chief executive, John Fish, who will lead the combined company. “You’ve got to take advantage of a good crisis. We felt this was the time, place, and moment to make this move.’’

The deal will also enable Suffolk to compete for business in Berry’s specialty area, biomedical and health care construction, which is poised to boom because of the huge amount of money the federal government is directing to the sector via the economic stimulus package.

Massachusetts has already received $178 million in new research funding, and its annual allotment from the National Institutes of Health, now at $2.25 billion, is expected to grow dramatically in the next few years

Berry, in turn, will be able to pursue its specialty on a bigger stage by combining with Suffolk.

“This is going to catapult us onto the national scene,’’ said Berry’s chief executive, Peter Campot. “To me, that’s a great reason to do this.’’

Campot will be president of a new Berry division within Suffolk that will specialize in health care and biotechnology development. While it will focus on that niche, Berry and Suffolk employees will collaborate on all future projects, executives said.

The deal, whose financial details were not disclosed, came together in less than a month of fast-moving negotiations. Fish said he initiated the talks to acquire Berry, which is about a third the size of his 900-employee company but is one of the region’s oldest contractors, founded in 1857.

Like other large general contractors, Suffolk has suffered from the slump in commercial building, delaying some of its largest projects in Boston, including the $700 million redevelopment of the former Filene’s block in Downtown Crossing.

Suffolk has laid off 75 employees over the past 18 months, but Fish said it avoided deeper cuts by expanding its work in the public sector, winning more than $250 million in government projects in Boston, Washington, D.C., California, and Florida. He said no layoffs are planned at the new company.

While there has been consolidation in the construction sector recently, it is not common in an industry made up largely of private companies run by executives with sharp elbows who take pride in doing things their own way. Construction industry specialists said the recession has made mergers more attractive, because companies have to find new ways to expand their portfolio of clients.

“Contractors are more open to offers from someone who wants to expand geographically or can help them develop a market niche,’’ said Ken Simonson, chief economist with Associated General Contractors of America.

The construction industry in Massachusetts has suffered mightily during the downturn, its job losses placing it ninth among all states. Overall, construction employment is down to 108,900 jobs from 131,700 a year ago, a 17 percent reduction, according to the US Bureau of Labor Statistics.

The slowdown is tied to not just the recession, but to problems in the credit industry that have made it nearly impossible for developers to raise money to proceed with their projects. In Boston, projects are stalled from the South Boston Waterfront to the Financial District to Longwood Medical Area.

Campot said he is confident a rebound is imminent, especially as higher returns in the stock market buoy the endowments and capital campaigns that universities and hospitals use to finance new buildings.

“There is no doubt in my mind that a year from now our organization will be bigger for doing this,’’ Campot said of the merger. “We’ll be hiring.’’

Casey Ross can be reached at cross@globe.com.