With Sweett鈥檚 purchase by WSP PB making it the latest venerable UK consultant to be snapped up by a bigger foreign firm, 黑洞社区 considers how such takeover deals - and the spin-off firms that often result - are changing the market
In a few weeks鈥 time, nearly 90 years of independence at Sweett (Cyril Sweett for those with longer memories) will vanish when it is formally taken over by Canadian behemoth WSP PB.
The PB, of course, is the Parsons Brinckerhoff part of the firm that was bolted onto the business following its 拢820m purchase nearly two years ago from Balfour Beatty.
Few shed nostalgic tears when that deal was announced - Balfour Beatty recouped double what it paid for it - but Sweett has an independent history that stretches back to 1928 and the WSP deal has caused some to reflect.
Sweett鈥檚 own website seems to be struggling to cope with the news. It still says the company is an 鈥渋ndependent provider of professional services鈥 but by 8 July, the firm鈥檚 600 staff will be part of an organisation that has nearly 35,000 employees and, thanks largely to its Parsons deal, a turnover of more than 拢3bn.
There鈥檚 a lot of it about. In recent years Davis Langdon and EC Harris have been hoovered up, and Adrian O鈥橦ickey, senior partner of consultant Ridge, says that such deals will continue to happen. 鈥淚nevitably, there will be more. It鈥檚 a trend in the marketplace.鈥
So, what will be left of the original Sweett once the dust settles on the deal - and who will win out in the eternal battle between the big beasts and the upstart spin-offs that often result?
What鈥檚 in a name?
Current chief executive Douglas McCormick is hopeful the Sweett name will remain. 鈥淚t鈥檚 a discussion we鈥檙e yet to have,鈥 he says. 鈥淥ur brand is very strong and well known.鈥
But historians only need to look at what happened to Davis Langdon after its takeover to see the precedent and, for many, McCormick is whistling in the wind on this.
James Clark was one of five partners to set up consultant Core Five back in 2012 when he left Davis Langdon following its purchase by US firm Aecom two years earlier. He thinks the Sweett name is toast. 鈥淭he firm that has bought another feels as passionate about their brand as the firm that鈥檚 been bought feels about theirs. Big engineering corporations are keen to avoid brand confusion.鈥
It wouldn鈥檛 surprise me if a new team came out of Sweett. They won鈥檛 want the bureaucracy that they鈥檒l be saddled with. it would drive me nuts
Steven Barker, RLF
Steven Barker, the chairman of RLF, which has been going for more than 130 years, is more succinct. 鈥淚t won鈥檛 stay,鈥 he says. 鈥淣o merger of that kind ever keeps the name.鈥
Six years after the Aecom takeover, the venerable Davis Langdon name, whose roots stretch back to 1919, has disappeared - but it was a drawn out affair with Aecom even persevering with the rather clunky 鈥淒avis Langdon, An Aecom Company鈥 for three years before seeing sense and ditching such a wordy moniker.
Small but deadly
So, what else is likely to change? Clark predicts more start-ups to come out of Sweett, as staff members decide to jump ship and set up on their own. 鈥淚t feels like an inevitability that when a smaller firm gets subsumed by a larger one, somebody feels like it鈥檚 not the right thing to do,鈥 he says.
Barker, too, says he is expecting at least one new firm to come out of Sweett鈥檚 takeover. He admits he was caught off-guard by the WSP deal. 鈥淸Sweett] got a new chief executive, they were reducing debt and trying to get their house in order. They seemed to be getting to grips with it all.鈥
He thinks some at Sweett were also taken by surprise and will now be looking to emulate firms like Core Five and strike out on their own. 鈥淚t wouldn鈥檛 surprise me if a new team came out of Sweett. They won鈥檛 want the bureaucracy that they鈥檒l be saddled with and there鈥檚 a ton of bureaucracy that big firms have to have. It becomes about filling in forms and they鈥檒l hate it - and rightly so. I鈥檇 hate to come into work every day and fill in forms. That would drive me nuts.鈥
Parker, who spent 26 years at Davis Langdon and a further two years after the Aecom takeover, agrees: 鈥淭he more successful you are in a large corporation, the more you move away from projects and clients and you become more and more internal as you move up the ladder.
鈥淵ou think things have settled and they go and make another acquisition. It鈥檚 like a merry-go-round. The challenge is to keep continuity of management. It will feel very different for Sweett and it鈥檚 inevitable that some people will say 鈥榠t鈥檚 not for me鈥 and move on.鈥
If any Sweett spin-off firms do spring up, they may do rather well. Clark says he helped set up Core Five - which now his close to 80 employees - because there was a gap in the market. 鈥淲hat clients were demanding was not something we felt a big engineering-based firm of QSs was capable of offering.鈥
Relationships seem to be the independents鈥 trump card. 鈥淐lients like the independents,鈥 Barker says, 鈥渂ecause they know they can ring me up and they know I know what鈥檚 going on with a project whereas the poor chap at a bigger firm doesn鈥檛.鈥
Barker also reckons that the crop of new, emerging firms have an advantage. 鈥淭hese smaller firms really get on my nerves,鈥 he admits. 鈥淭hey鈥檙e super smart, they鈥檝e got great contacts and they enjoy a honeymoon period of a few years. They鈥檙e a nightmare because it adds an extra layer in the market that we have to compete with.鈥
Another of these newcomers to get on Barker鈥檚 nerves is Alinea, set up by six former partners at Davis Langdon and EC Harris. But one of its co-founders, Iain Parker, says he is not convinced that Sweett鈥檚 sale will spawn a new firm. 鈥淭here鈥檚 been a lot of Sweett CVs flying around so I鈥檓 not sure who鈥檚 left. They鈥檝e lost a few already.鈥
Making it big
So, with skilled and entrepreneurial staff skipping off to find success on their own, are we seeing in the small spin-offs of today the massive conglomerates of tomorrow? Parker says Alinea, which now has grown to 75 staff in just three years of existence, does not have any plans to become a major player. 鈥淲e have no ambition to grow to a great size. Huge firms do just about everything. That鈥檚 their business model. We just want to do cost consultancy very, very well. All of our projects get lots of partner time and senior input.鈥
In a partnership, people tend to be locked in with a clear line of sight, people in their thirties can find their niche and feel rewarded for their efforts
Steve McGuckin, Turner & Townsend
Parker reckons it鈥檚 those middle-ranking firms - like Sweett - that are the ones to watch in the coming few years. 鈥淭hey鈥檙e not quite big enough to compete with the really big firms and they鈥檙e not quite small enough to compete with the likes of ourselves. It鈥檒l be interesting to see if they try and scale up.鈥
Ridge鈥檚 O鈥橦ickey, which employs getting on for 500 people, is having no talk of becoming a behemoth: 鈥淧eople have been saying that for years. We鈥檙e big enough to deal with any projects that we鈥檙e involved in.鈥
Gleeds chairman Richard Steer, however, does have plans to grow his firm within the next five years, mostly through organic growth. Gleeds currently has a turnover of 拢130m and staff numbers of 1,500, both of which it wants to double by 2020. 鈥淭here are some great opportunities out there. It鈥檚 a pity [about Sweett]. We鈥檝e lost many of the fine old names. It鈥檚 a consolidating sector but life moves on.鈥
And while some small companies may grab the chance to scale up, there is certainly still an ecological niche for the smaller firm. Staff won鈥檛 be jumping in droves to work for larger rivals because independents can give them a career path that鈥檚 clear to see, O鈥橦ickey says. 鈥淚n a company like ours, they can see a way to the top. If individuals can鈥檛 see that, they might take matters into their own hands and set up their own organisation or go elsewhere.鈥
Steve McGuckin, the global managing director for property at Turner & Townsend, says smaller firms give greater clarity on career development.
鈥淚n a partnership, people tend to be locked in with a clear line of sight, people in their thirties can find their niche and feel rewarded for their efforts. Whereas with the larger engineering firms you鈥檙e a bit more of a number and you tend to get rotated around the world and some clients will be trying to invest in relationships but less certain those relationships will last.鈥
And he predicts more firms will indeed begin to replace those taken over by the big corporates. 鈥淚t鈥檚 Darwinian in the sense that the Core Fives, the Alineas will come through. It鈥檚 an evolution. They鈥檒l be the Sweetts and Davis Langdons in their own time.鈥
A few years ago, firms such as Core Five and Alinea didn鈥檛 exist. Together, the pair employ over 150 people. History suggests that someone - or more likely some people - at Sweett will soon be thinking along similar lines and planning to try to do the same.
Sweett dreams
Founded by Cyril Sweett in London back in 1928, the group listed on the London Stock Exchange in October 2007 when it joined the AIM market, raising more than 拢18m and valuing the firm at close to 拢61m. Following the listing, it went on the acquisitions trail, snapping up firms in Australia and Asia and entering the US market.
Its deals included Australian firm Burns Bridge and Hong Kong-based Widnell, which had a number of offices in China. Two years after the Widnell deal, it formed a joint venture in 2012 with New York-based consultant VVA.
The spree eventually persuaded it to drop the Cyril prefix but the renamed Sweett began to run into problems with its Asia Pacific business, following the slowdown in China, announcing last year that it was quitting the region.
In March this year, Sweett said problems in the Middle East and a Serious Fraud Office fine for a bribery offence in 2013 would cost it 拢5.1m.
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