Clients have reacted with a mixture of scepticism and anger to Aecom’s £204m takeover of Davis Langdon, with one senior figure labelling the move “unfortunate” and a “pity”
Their concerns centre on DL’s loss of independence and fears that service levels will drop once it is part of the £3.8bn-turnover US multidisciplinary consultant.
Peter Rogers (pictured), director of Stanhope, said: “The deal is rather unfortunate. Davis Langdon would not be my favourite choice now. I’m a great believer in individuals and I like to have personal relationships inside the companies I work with. That’s possible with smaller organisations but tends not to be with very large ones. The deal marks a worrying trend towards bigger and bigger organisations. What’s happened is a pity.”
Gary Wingrove, head of construction programme management at BT, where DL is an approved consultant, said he was “not a fan of” the principle of larger consultants taking over smaller, ones because the buyer was likely to cut costs at the smaller firm, lowering service standards.
He said: “If a business was doing well, it wouldn’t get taken over, so the firm buying it is bound to come in and make money-saving changes.”
Rob Smith, senior partner at DL, has robustly countered such fears, He said the deal was “transformational”, and outlined the benefits it would bring, including stronger procurement channels and more combined technical know-how.
Tony Jacob, head of construction at John Lewis Partnership, meanwhile, appeared to withhold judgment: “We will work with DL and see what transpires. The key thing we’ve asked for is continuity of service. We’ve asked them to keep staff motivated and focused on their work. If they lose their service ethos they have lost what drives them.”
But some rivals welcome deal…
Tony Williams, chairman of consultant Watts, said the merger was an excellent deal for Davis Langdon and as a result other consultants could sell for a higher price. “DL’s price tag is 75% of its sales [based on Aecom’s figure of $430m, or £274m, for the 2009 calendar year]. I’d expect 100% in a bull market and 50% in a bear market. We’re not in a bear market but conditions are pretty difficult, so this is a good deal for DL.”
In fact, he argues that it is a better deal than American engineer URS’ purchase of Scott Wilson for £223m, which was 66% of its sales. The result? “We’ve seen two deals where consultants have sold for well over 50%. So I’d say the benchmark is 70% for a decent business. Six weeks ago I’d have said 50-55% but now if I were a vendor I’d look for at least 60%.”
Others welcomed the deal for rather different reasons. Richard Steer, senior partner at Gleeds, said: “It may prove to be a good thing that a major competitor has been taken over by a multi-conglomerate monolith based in California.
The headhunters will already have been put on speed-dial by many previously loyal employees, who may wish to move back to practices with a British ethos.