US consultants are huge, they’re rich and they’re looking to cut themselves a big slice of the UK market, but what does that mean for UK firms …
Aecom bought its first UK firm nine years ago, but until last week the name of the US consultancy giant had barely been whispered this side of the Atlantic.
That’s unlikely to be the case for much longer. Last week Aecom, a consultant with a global turnover of $5.6bn (£3.7bn), decided to rebrand. As a result Faber Maunsell, one of the best-known consulting engineers in Britain, is to lose its name. The industry may have shed a nostalgic tear at the loss but, for Aecom, it was a natural way to strengthen its brand in Europe. In the same week, the firm announced the purchase of Savant, a 600-strong QS.
Aecom is the latest US consultant to make a noise in the UK. An earlier example was Hill International, which was the UK’s fastest growing consultant in 2007; it snapped up firms in Britain, Spain and Poland last year. CH2M Hill has management roles on the Olympics and Thames Tideway, as well as Crossrail, on which fellow Americans Bechtel, Aecom and Jacobs have secured contracts.
Of course, ties between the UK and the US markets are nothing new. CH2M Hill first came to the UK 19 years ago, Bechtel won the Jubilee Line Extension in the nineties and Aecom bought Maunsell and Oscar Faber – later Faber Maunsell – in 2000 and 2001.
But the US giants are becoming increasingly dominant, thanks in major part to the large rail upgrades and the tempting prize of nuclear new-build. All of which raises the question of how many more will come in the future, and what their impact will be on domestic firms.
Aecom: More growth on the cards
Steve Hodkinson, Aecom’s managing director of Buildings in Europe, says his firm sees further growth in European markets – including the UK – as essential to its positioning as an international business.
“Aecom would be horrified to be described as an American company. It is global,” he says. “The firm looks for opportunities in markets across the world and Europe stands out as the biggest opportunity – it’s as simple as that.”
The Savant purchase is part of this developing European strategy. The acquisition’s primary goal was to gain access to markets in eastern Europe and former Soviet states, where Savant has 19 offices.
“We have previously sold technical expertise to those markets with limited success,” says Hodkinson. “We want Savant to take the lead in project management, so that we can use its local standing and connections.”
In the UK, where Aecom is well established through subsidiaries including Faber Maunsell and EDAW, it says growth will be largely organic. But its route into mainland Europe is likely to come through acquisitions. “If we are going to be an Aecom business in western Europe of a commensurate size, we are going to have to look at ways of merging with firms,” says Hodkinson.
Buyers and sellers
David Richter, Hill International’s president and chief operating officer, says buying UK firms as a base for European expansion is the natural strategy for US companies – and not just because of linguistic and cultural ties. “The UK has a large construction market with a fragmented business model. It’s easier to come in.” He says the firm wants to buy “a household name” UK QS in the next two years.
He predicts further consolidation among consultants, with a “handful of truly global firms” emerging. It is, he says, more likely that these will be American than British. “The biggest and best firms in project management globally are American. There are lots of good British firms, however, I don’t see them being the buyers, but the sellers.
“The QS firms that have been primarily partner-owned and UK-based are going to become parts of much bigger companies, and not necessarily ones based in the UK.”
This is exactly what some in Britain fear. Steve Mole is managing director of project management firm Capital Project Consultancy and currently on secondment to London Underground. He believes the British market must change fast if it is to avoid US domination. The first move would be to create large-scale project management firms to compete with the likes of Bechtel.
“We have a lot of SMEs but to be able to compete against the Americans, you have got to have organisations of 1,000 people plus,” he says. “Companies have got to think about getting skills together and getting economies of scale through merging. While everyone was enjoying growth, there was a tendency not to think about it. Now is the time for an alternative plan, and consolidation gives us a better chance of survival.”
Not everyone is as pessimistic as Mole. Nelson Ogunshakin, chief executive at the Association for Consultancy and Engineering, says engineers such as Mott MacDonald and Halcrow have been expanding in the US and says the opportunities in the global market are as strong for Brits as anyone.
Moreover, not every US company is guaranteed success in Britain. Parsons Brinckerhoff and Fluor both failed to secure Crossrail contracts. And America’s $787bn (£514bn) federal stimulus package is drawing firms’ eyes back to the domestic market – even Hill International says its first priority is the US public sector.
Also, some of the biggest US firms will not need to buy to work in the UK – Bechtel, for one, is understood to favour bringing its own people over from the US and sub-letting small packages of work to UK firms.
But in the long term, international firms are unlikely to take their eyes off Europe. Roy Hill, European managing director at CH2M Hill says: “If you are going to be an enduring organisation, you have got to be global. In Europe and the UK specifically, you have got to be present and committed.”
Global mega-consultancies look like the future. The question is, how many British firms will be among them?
Turnover $5.6bn (£3.7bn)
Entered UK 2000
British buys Maunsell; Oscar Faber, Bullen Consultants, Mulholland & Doherty, Hamilton & McGregor Acoustics and Savant
Jobs include Crossrail programme partner
Strategy Plans “significant” growth in Europe to push up the region’s revenue from current level of 10% of group turnover. It plans to grow organically in the UK, possibly with niche purchases, but is looking to make acquisitions in western Europe
Turnover $6.4bn (£4.2bn)
Entered UK 1990
British buys None so far
Jobs include Part of Olympic delivery partner CLM. It is also a Crossrail programme partner and a Thames Tideway programme manager
Strategy To grow more quickly outside the US than within it. Emphasis is on the UK, but it is increasing its presence in 13 European countries. European growth so far has been largely organic, but the firm says it would like to make acquisitions. Key growth sectors include nuclear, water and sustainability
Turnover $380.5 (£252m)
Entered UK 1998
British buys JR Knowles, Maple Consult, Pickavance Consulting and John Shreeves & Partners
Jobs include 27 university campuses in Libya. Its UK work is currently focused on dispute resolution
Strategy The immediate focus is on the US public sector market, but it is looking at two small acquisitions in Europe and plans to buy a major
UK-based QS firm in the next one to two years
Turnover $11.2bn (£7.4bn)
Entered UK 1993
British buys Humphreys
Jobs include Project representative on Crossrail
Strategy Guarded about strategies but said to be planning expansion through acquisition. Recent buys indicate its main focus for growth is infrastructure in US and Middle East
Revenue $10.1bn (£6.6bn)
Entered UK 1999
British buys Thorburn Colquhoun
Jobs include Leading the consortium that manages and operates nuclear reprocessing and waste storage facilities at Sellafield
Strategy Appears to be showing increasing interest in the UK. The firm opened a new office in Liverpool last year as a base for expansion in the north, suggesting entrenchment