WYG decided to go into Ireland shortly before its economy imploded; worse decisions were possible (a Reykjavik office?) but only just
Growth and success are not the same thing. Unless expansion is carried out by a skilled management team working to a plan as shrewd as it is lucky, opening overseas offices and gulping down rivals like cocktail party canapés is often a way of getting fatter, not stronger – although it may take a recession to reveal that. Two consulting engineers, WYG and Mouchel, illustrate the dangers. Both are lagging behind their peers. In WYG’s case that is because it decided to go into Ireland shortly before its economy imploded; worse decisions were possible (a Reykjavik office?) but only just. It also entered the commercial sector rather than public and infrastructure and spent £85m on buying 18 companies. Mouchel bought firms too – without working out how to keep their key people. It also tried to move into outsourcing and become a mini-Capita, which looked good in theory but turned out less well in practice. Finally, its relationship with Dubai’s state-owned developer Nakheel went sour. Now Mouchel is the subject of a bid by VT Group, the defence contractor led by Mike Jeffries, the former chairman of Atkins. The deal makes sense in terms of fit – and if anyone can make it work, Jeffries can. Meanwhile WYG is continuing its uphill slog to financial fitness (page 16). It seems that it still has weight to shed, so let’s hope its markets don’t worsen.
Firms such as Atkins that have stuck to doing what they do well (that is, engineering) are faring better, but throughout the sector, share prices have dropped and with public spending cuts in the offing are unlikely to rise any time soon. It is this fall that is making UK firms vulnerable to takeovers. US firms’ market capitalisation is about eight times greater than their UK counterparts so they can easily afford to turn them into a European beachhead. Listed Dutch and Scandinavian firms are similarly well placed. Then there are powerful European contractors such as Vinci and Spanish firm ACS who are contemplating Balfour Beatty’s swoop on Parsons Brinckerhoff and the success of Bechtel’s integrated engineering approach. Costain, which is something of a mini-Balfour, is no doubt thinking likewise. And it’s not just consulting engineers that are targets: QSs, particularly those exposed to the commercial sector, are in some pain. Consolidation here won’t be driven by share price so much as the argument that firms need more capital than they can generate themselves to fund the hardware and training they must have to take advantage of the upturn; so a bid from a wealthy transnational with a large book of contacts is bound to be tempting.
One thing is discernable in the fog covering 2010: there will be consolidations. So by this time next year you might have seen a story headed: “Vinci snaps up Hyder” or “ACS eyes WSP”. Or how about “Laing O’Rourke takes over Davis Langdon” and “Aecom buys G&T”? Our guess is we’ll be writing at least one of them …
What teachers have learned
“It has transformed our learning and teaching.” “Pupils feel valued, and this has improved their self-esteem and will improve outcomes.” “We have a set of learning spaces that will enable a generation to prepare for the 21st century.” These are some of the comments from the 87 heads who responded to our survey into the benefits of Building Schools for the Future (page 15). Four out of five agreed strongly that attainment was linked to the physical state of the school, and nearly all felt improving buildings had a positive effect on pupils. These findings echo those of a similar survey carried out in the summer by Partnerships for Schools, but still serve as a timely reminder that to cut back on the programme now would be a false economy.
Denise Chevin, editor