EC Harris tied the knot with Arcadis a year ago and since then its chief executive has used their combined strength to win work worth £40m. Philip Youell tells Iain Withers the secrets to a successful takeover and where he intends to pitch for work in the future
EC Harris is finally achieving the rapid expansion it has so long desired - and in some style. The UK-based consultant, which was never shy about its growth ambitions and once considered floating on the London Stock Exchange to achieve them, was taken over by one of the world’s fastest growing construction companies, Amsterdam-listed giant Arcadis, a year ago this month.
The Dutch powerhouse is on course to grow turnover by a third to around £2.5bn in the current financial year, fuelled by a buying spree that has included EC Harris and the former Asian arm of Davis Langdon, the £79m-turnover Davis Langdon & Seah, which it bought in April.
Philip Youell, EC Harris chief executive, now enjoys access to a global workforce of 21,000 people. But from his perspective the hard graft starts here. “We joined in order to create a bigger, powerful, global-leading business. It’s not going to be done in one year.”
Speaking in the top floor boardroom of the consultant’s swankily converted former railway warehouse near King’s Cross station, north London, Youell reveals how EC Harris aims to capitalise on the takeover, learn from the mistakes of past industry deals and integrate and re-brand its divisions.
EC Harris, an Arcadis company
Youell says EC Harris has secured a “unique” takeover arrangement with Arcadis, protecting its limited liability partnership status and a degree of independence.
EC Harris remains a separate operating company within the Arcadis group and its partners retain 30% of the company’s profits. Along with several other Arcadis subsidiaries - including US-based architect RTKL and Asia-based Langdon & Seah - the operating company reports to Arcadis’ global management, the most relevant director to EC Harris being Arcadis’ global director of buildings Matt Bennion, himself a promoted former EC Harris director.
While there’s an emphasis on devolved responsibility, the process of integration within the Arcadis group’s international markets is well under way. The operating company with the most dominant position in each international market will take the lead and absorb the workforces of the others. In the UK, 450 Arcadis staff are being absorbed into EC Harris from December, with offices merging in Bristol, Exeter, Birmingham, Manchester, Leeds and London. In Europe EC Harris staff are being absorbed into Arcadis. Asia is an exception, where EC Harris and Langdon & Seah will continue to remain separate, but collaborating, operating companies. Youell says he’s confident of a smooth transition: “We put six months aside to really try and understand each other. We didn’t dive in and make the decisions.”
The integration process will result in 20 support staff redundancies, with no reduction in technical staff numbers at EC Harris and Arcadis, Youell says. EC Harris will begin marketing itself as “EC Harris, an Arcadis company” from January.
But has the takeover helped EC Harris commercially during the first year? Youell says there are already “clear” commercial gains, including £40m of wins he says “would not have been won” without the combined expertise of both firms. These include a deal to project manage the expansion of Guarulhos International Airport in São Paulo, Brazil, combining EC Harris’ airport demand analysis and Arcadis’ engineering skill.
In addition the companies have identified £200m of “specific opportunities where our joint capabilities will be the reason we win”, Youell says.
The benefits are beginning to show on both companies’ balance sheets. Arcadis’ third quarter results, published earlier this month, revealed EC Harris and Langdon & Seah contributed 26% of the firm’s 34% growth over the period. Youell discloses EC Harris is on course to achieve organic growth of 6-7% this financial year and predicts 12% organic growth next year. He adds that the firm is set for a 25% rise in profitability this year to an operating margin of “about 8.4%”, which he partly puts down to some “pretty neat approaches to commercial management” learned from its parent company.
But the most important thing for Youell is that Arcadis shares EC Harris’ vision for building a global “built asset consultancy”. EC Harris launched the concept of built asset consultancy four years ago, which essentially means offering consultancy across the whole life cycle of a building, through planning, design, building, operation and potentially back round to redeveloping an asset. Youell says Arcadis is able to plug some of the gaps in this cycle, using both its engineering and environmental expertise. But critically he adds Arcadis is “extremely keen to roll out the built asset consultancy approach across the whole of Arcadis,” not least because it gets the firm involved at the “front-end working directly with clients”.
Perhaps unexpectedly Youell says the “most exciting” potential growth market for EC Harris’ built asset consultancy concept is the mature market of the US. He says there is an opportunity for the firm to leverage Arcadis’ 6,000-strong business in the country and “great relationships with global [US-based] clients”. The demand is there, he says:
“I think there’s a real change in the US market that we were smelling before, but we’ve got evidence of it now. The traditional US supply chain doesn’t have the answers to new challenges - PPP is only just landing, as is the idea that you should think about the whole asset life cycle - so there’s a gap in the market for us.”
EC Harris is also targeting further growth in Qatar - where it’s working with Qatar 2022 World Cup delivery partner CH2M Hill - Saudi Arabia and Asia, particularly in the south-east. As for London’s commercial and residential sectors, the company has recently increased market share with major project wins including the Kohn Pedersen Fox-designed “Scalpel” tower and the planned Renzo Piano-designed extension of Selfridges’ flagship Oxford Street store. Youell also expects the firm’s two-year-old £4m-turnover investment consultancy business - EC Harris Investments - to continue to grow on the back of “great demand for supporting clients to find money for new deals”.
Keeping everyone on side
Youell says the takeover will ultimately work out as the two firms are a good match and praises Arcadis’ “collaborative approach”. But he has his own pet peeves, particularly that Arcadis is “a bit behind” EC Harris in integrating its own business, which he says EC Harris achieved through internal restructuring prior to the takeover. This leads to “doing the rounds with lots more people than you would have had to do otherwise” which he finds “frustrating”.
He also admits that despite EC Harris’ best efforts, not everyone is convinced the Arcadis takeover was the right option for the company. He says there are fewer doubters than before the deal, but “you still have partners saying ‘it’s different round here’”. He says before the deal a number of partners “who had worked for other organisations that were acquired” warned him about the potential pitfalls of a takeover. “I had a number of those people telling me what it would be like [if we were bought by a listed firm] and that this would drive us all short term and we’d lose our values”. Youell says he succeeded in swaying most of the detractors by allowing them to influence the takeover discussions. “They were actually very helpful in telling me how we could avoid those pitfalls and in the way we structured the deal,” he says. Last November all but one of the firm’s 183 partners voted in favour of the deal.
Youell is not complacent about the potential dangers of losing key staff - particularly now as some of the restrictions preventing partners from selling Arcadis shares they were issued are lifted. The final restrictions are to be lifted next year, two years after the takeover deal was signed. He adds there’s been a surge in recruitment agents and headhunters “ringing up our people on behalf of other organisations”, ahead of the release of some rewards this month.
The key to keeping partners and staff on board is good communication, Youell says. “We work hard to make sure they’re informed, that they know what’s going on, that they feel part of it,” he says. In the case of partners he says “you have to continue to allow them to influence” and let them know “there’s something in it for the people and their teams - to become partners and earn”. He argues the 30% profit share is “still a sizeable amount of money for people to aspire to” and the set-up is “different in a good way” as partners no longer have to put their own money into the business in the form of equity - with potential risk - to reap the rewards, as the business is now funded by the stock market.
Despite Youell’s minor frustrations it’s clear on balance he feels the acquisition was good for the firm, allowing it to expand, service an array of new international clients and provide the integrated service he says is hotly demanded. EC Harris finally has access to the scale it’s been striving for and Youell is clearly eager to capitalise on it.