The birth pangs are over

Those in the sector that have carped or questioned over the logic of the merger of Mott MacDonald with Franklin + Andrews three years ago should meet Guy Leonard. The man who claims to have “championed” the merger, which effectively saw the QS and project management practice swallowed into the engineering giant, is not troubled by doubt over the decision to lose the firm’s independence. Not one iota. “There’s not been one day genuinely when I ever thought ‘what did we do this for?’ Or ‘have we done the right thing?’ There’s never been a day when I doubted that it was the right thing to do. That’s a pretty positive thing to say.”

Whilst rival larger QS firms have pointed to post merger staff pay cuts, disharmony amongst senior F+A management which led to high-profile departures and tension between the two firms, Leonard talks of synergies, new corporate disciplines and “phenomenal” career opportunities for F+A staff. And those career opportunities do not preclude himself – the 49-year-old, who first joined Franklins + Andrews as a graduate from Reading University in 1977, has eyes on moving up the corporate ladder within Mott MacDonald, beyond the management economics and consultancy division which he heads up. Leonard certainly doesn’t struggle when it comes to communicating. Where many business bosses may offer monosyllabic responses or evade questions Leonard “can talk for England” according to one colleague. And he does his best to prove the description during one and half hours at his snug fifth floor offices, situated just south of Blackfriars Bridge.

In his first major interview, Leonard comes prepared with copious notes but betrays no nerves. He offers a fresh and honest insight into the origins of the deal, how it was struck and the post merger positives and negatives.

QS News: How did the Mott MacDonald deal come about?

GL: The original approach came from Mott MacDonald. They came to us initially about 18 months before the actual merger.

It was a timely approach – we had gone through a strategic review and decided that horizontal integration (in QSing or project management) had limited value. But a one-stop-shop approach had more potential. We had even looked at joining with a client organisation but it didn’t have the right feel.

QSN: What swung the decision for you to go ahead?

GL: I asked Peter Chesworth (Mott’s group business development director) to write us a letter setting out the principle of why Motts wanted to do this. It was a really important letter for us, probably more important than they thought. If the letter had said ‘we want to grow ahead of a flotation’ we would have said thanks but no thanks. What they did say was that a fundamental tenet of the Motts business was that they would always remain owned by their people and there was a positive resistance to any idea of putting the business up for sale. It was exactly how I felt as an owner of F+A namely that the firm doesn’t belong to you, you hand it on to the next generation.

QSN: Why did it take so long to complete the merger?

GL: The nine months before the deal was spent mainly on due diligence and modelling how the merger would work. The deal was essentially an equity swap – we gave up our equity in exchange for shares in the Motts group. Our lawyers (Mayer Brown Rowe & Maw) said it was the most complicated merger deal they ever worked on.

Our lawyers said it was the most complicated merger deal they ever worked on

There were 200 documents on a huge table to sign when we completed it. In 24 hours F+A had to go from a partnership to an unlimited company, then to a limited company until we finally merged. The logic of that was largely driven by tax efficiency.

QSN: How did the deal affect the F+A management?

GL: It was slow burn in the early stages then a lot more intense. I was F+A chief executive and focused on running the business. There’s the risk of taking your eye off the ball – I will not pretend that didn’t happen. We suffered poor performance after the merger that is the classic merger syndrome. Martin (Bishop, then F+A chairman) led the merger but unfortunately had a stroke three weeks before the deal. I had to step in and conclude it.

I thought we handled the deal well with the staff. We gave senior staff members shares. Martin’s fully recovered now but I think he saw it as a tap on the shoulder and retired later in 2002. It was difficult to lose him but in hindsight it was probably a good thing for the way it (the merger) developed.

Martin by nature is quite combative. I think he would have found it difficult not to pick a few fights. I miss him a lot – he was big loss to the business, he was a larger than life character. His leadership was very important for the staff – for all that he could get up people’s noses.

QSN: What did Mott MacDonald bring to you?

GL: Motts is a very well run business. If I’m honest F+A was a little loose in terms of corporate disciplines. There was a presumption of divine inspiration on equity partners that they always made the right decisions without reference to anyone else. That doesn’t always happen. We have now tightened up the running of the business.

We needed that – we were haemorrhaging money unnecessarily and it’s still a problem of our big (QS) competitors. They are successful businesses but some have nothing like the grip on financial performance that they should do.

QSN: What have you brought to them?

F+A was a little loose in terms of corporate disciplines

GL: As a multi-disciplined consultancy firm we have a different approach to project management. It’s more client facing. We also approached business development differently and brought new client relationships to the group, and we have also brought in new ideas and offered stronger leadership in project and programme management.

QSN: Were some of the departures since the merger (MD Kevin Arnold left in 2003 to Gardiner & Theobald) inevitable?

GL: Big business doesn’t suit everybody. I think with some of the departures people doubted their own ability to advance in Motts. Maybe they thought it would be better being in more of a specific QS, a bigger fish in a smaller pond.

QSN: Motts said your division had a “very challenging year” in 2004. How do you account for that?

GL: The trading performance in 2004 was basically where we budgeted it to be. What happened was that we were still mastering the financial systems and recognised too much profit in 2003. I suppose I could blame myself for not asking myself what’s driving this? Basically £1m of that profit should have been in 2004. It was unfortunate.

QSN: You’ve also had to reduce you overheads. How has that worked?

GL: Motts has a different system for overheads – they are reallocated to the lowest possible level so every project carries its share of the total overhead. It’s a very good business model as it tells you how every project is performing but it’s different to what F+A had before the merger where we held our overheads centrally. Also we pay more professional indemnity insurance – MM has one global one whose cover is higher than necessary for F+A. We could buy it cheaper on the open market but that’s the way the group works.

We have rationalised the business structure. Some people have gone in the business and technology’s division’s defence business as the market wasn’t buying those skills. We have rebalanced the property team that led to two directors going.

We have also had a drive on utilisation levels so as to make sure senior staff are spending more time on fee-earning work (about 70-80%) than on managing. The model we are working on is overhead balance – the MEC (management economic and consultancy) showed an overhead loss of £3.5m but I am forecasting a balance for this year, so it’s worked.

His (Martin Bishop’s) leadership was very important for the staff – for all that he could get up people’s noses

QSN: What is the position on resourcing going forward?

GL: We need more people by the bucket load. They’re hard to find. We are on a drive to bring in around 40 new staff that are either graduates or young professionals.

QSN: Is branding with all the names (F+A, Motts, Osprey) an issue?

GL: It can be confusing. Of the 20-odd brands in Motts I think there are four core ones – Motts itself, F+A, Cambridge Education and HLSP (health business). At the moment I think F+A will survive. My own view is that Osprey (project management) brand will disappear in the next 12 months. It will simply trade as Mott MacDonald.

QSN: So how’s it been for yourself?

GL: I have loved every minute.

In my career I’ve worked in different sectors but not for a different business. Motts has given me a whole new ladder of rungs that I can aspire to climb. I do aspire. Time will tell. The next rung for me is to join the group Motts board and then become group managing director and to finish as chairman of the whole group.

QSN: Have you told many people this ambition?

GL: (laughs) I don’t go round sharing this information with too many people. They would probably think I’m a bit arrogant. But someone’s got to do it (be MD or chairman). I think I could do it well. We will see, I may fail. I’m happy doing this job now.(laughs) I don’t go round sharing this information with too many people. They would probably think I’m a bit arrogant. But someone’s got to do it (be MD or chairman). I think I could do it well. We will see, I may fail. I’m happy doing this job now.