黑洞社区

It can sometimes feel like big consultancy mergers are about as regular as political photo opportunities at the moment - and not that much more exciting. And for engineer WSP, its 拢820m 2014 purchase of 130-year old transport and infrastructure consultant Parsons Brinckerhoff from Balfour Beatty wasn鈥檛 even the first time in recent years it has made headlines through its involvement in a corporate mega merger, having been bought in 2011 by Canadian consultant Genivar.

The story, from recent buy-outs of grand old UK names like Scott Wilson, Halcrow and Davis Langdon, is familiar: a big purchaser, usually foreign, and a growth strategy designed around a desire to deliver a broad and consistent range of services internationally for the biggest of global clients. We鈥檝e heard all that before. However, this time, says new UK chief of WSP Parsons Brinckerhoff Mark Naysmith, it鈥檚 different.

Where the likes of Scott Wilson, Halcrow and DL lost their brand identities by selling up to big foreign buyers, WSP has already demonstrated by keeping its name after the Genivar deal that it can do things slightly differently. Now after the Parsons Brinckerhoff (PB) deal, Naysmith says the combined business will retain both WSP鈥檚 exisiting country autonomy and its local focus, and keep on doing the smallest of jobs, despite being part of a 32,000-strong global engineer, and targeting double digit revenue growth in the UK. The purchase of PB adds that firm鈥檚 expertise in public sector infrastructure projects to WSP鈥檚 traditional strength in building engineering, potentially giving it the ability to move up to the next level. But, like all mega-mergers, it also contains big risks. With the two businesses formally starting to work as one in the UK at the start of last month, 黑洞社区 reveals their combined structure, and grills Naysmith on his blueprint for success.

Winning combination

A WSP lifer, and prior to the merger WSP鈥檚 UK MD, Mark Naysmith was named UK chief operating officer of the combined WSP/PB business last month. The Scot now heads a 拢400m turnover business with more than 5,000 UK staff, of which about 40% come from the former PB business. He is still busy carrying out the detailed business planning for its strategy, so can only give broad indications of the expected pace of progress. 鈥淚n the current market I鈥檇 be looking at least double digit revenue growth per annum over the next couple of years. I can say that pretty confidently as WSP grew by 20% in the UK alone,鈥� he says.

I鈥檓 a big believer in being best in class locally. There鈥檚 an element of still being a boutique business despite being 5,150 strong

The idea behind the merger is to leverage the combination of the two firms by bidding and winning jobs that require the expertise of both, with sectors such as rail, energy and aviation, all of which require buildings expertise to complement the civil engineering, seen as key targets for growth. While WSP prior to the merger already had an infrastructure business as well as its buildings structures heritage, the purchase of PB adds a real strength in transport in general and rail in particular, which Naysmith describes as the 鈥渃rown jewels鈥�, alongside an almost totally public sector focus: 95% of PB鈥檚 work was for public clients. WSP, on the other hand, has always been a go-to engineer for private clients and contractors. Even in the two-fifths of its work that has been on public sector projects, the vast majority - around 85% - is as a consultant to private contractors delivering the scheme, rather than the ultimate public sector client itself.

Naysmith says these contrasting focuses mean there will be little direct overlap, and lots of opportunity for teams hailing from both firms to bid alongside each other, as it has already been doing with the Highways Agency鈥檚 Collaborative Delivery Framework. It has already been able to jointly win additionalwork on major residential projects such as Earls Court, where WSP has been able to use PB to deliver specific rail systems consultancy that it would previously have had to outsource.

Of course the potential pitfall of WSP and PB having contrasting roles is if it results in client conflicts which force one side or the other to step away from work. Naysmith says he has so far identified no conflicts of this kind, although he accepts that 鈥渢his is something we鈥檒l need to manage鈥�, given WSP鈥檚 common position advising contractors working on public sector projects on which PB might be retained client-side. 鈥淭he important thing is we identify these at an early stage,鈥� he says. Overall, he says: 鈥淚t鈥檚 truly a two plus two equals five scenario. It鈥檚 very early days, but we are starting to track what we call revenue synergies such as with Earls Court.鈥�

Split structure

If the growth plan is not yet set in stone, one thing that has been decided is the firm鈥檚 structure. It will be split into two key divisions: the core property, transportation and infrastructure, which will be overseen directly by Naysmith as MD, and an energy and industry business which combines the former WSP industrial engineering discipline as well as Parsons Brinckerhoff鈥檚 power and energy arm, and for which Ian McLean will be MD. Within Naymith鈥檚 remit, services will be delivered in one of seven disciplines: development, building structures, building services, rail, highways & bridges, environmental and major project services, with heads appointed to run each discipline. Of these nine principle roles, WSP executives have bagged six, and former PB staff, including McLean, have taken three.

The disruption potentially caused by all this reshuffling seems to be the biggest thing on Naysmith鈥檚 mind. While he says the feedback from PB staff to the deal, who had spent the previous five years being owned by but not integrated into contractor giant Balfour Beatty, has been very positive, he accepts that staff have been living in an 鈥渆ra of uncertainty鈥� which could be unsettling. 鈥淭he reason we鈥檙e doing the integration so quickly is there鈥檚 always going to be underlying uncertainty until people know where they sit within this new bigger organisation. That鈥檚 why I launched my executive leadership team structure very early.鈥�

Even though the acquisition is designed to allow the combined company to grow, as in every merger process the uncertainty for staff is exacerbated by the need to cut back office functions and overheads to deliver the savings promised to investors - in this case 拢25m worldwide - in the merger鈥檚 justification. Naysmith won鈥檛 say how much of this saving he has to make in the UK, but with his business contributing almost a quarter of global turnover, there clearly have to be cuts. 鈥淲e don鈥檛 need two full-size back office support functions, and that鈥檚 where a large part of the savings will come from,鈥� he says. 鈥淥ur objective here is not to lose frontline technical staff. We鈥檙e in a growth market, we鈥檙e continuing to recruit, so it鈥檇 be daft to lose frontline fee-earning colleagues.鈥� The first external sign of this cost cutting was the combining in Bristol of WSP and PB into one office last week, and there will be more of this to come, with at least five or six further mergers from the business鈥� 34-strong office network on the cards this year alone.

But the welcome reality of a growing market means that Naysmith plans to hire upwards of 1,000 people this year. Unlike global engineers such as Aecom and Arcadis, Naysmith is not predicating that growth on winning global clients that take WSP overseas. 鈥淭he most important thing to me is being a top draw consultant in what we do. That doesn鈥檛 necessarily mean big is beautiful. I鈥檓 a big believer in being best in class locally. There鈥檚 an element of still being a boutique business despite being 5,150 strong. Clients come to us for technical intellect - it鈥檚 important to me that we don鈥檛 lose that as part of the growth 鈥� or become a conglomerate mass of general practitioners.

鈥淎 huge strength of ours is country autonomy. I think there鈥檚 a difference between global connectivity and head office domination. For [WSP鈥檚 HQ in] Montreal to tell us what we must do in our markets is slightly naive.鈥�

The way contractors and consultants operate and make money is quite different and they don鈥檛 necessarily mix

Naysmith says there are a few key ways to prove this continued local focus to the firm鈥檚 traditional clients. Firstly, it is by sticking to consultancy, something that PB staff may welcome after five years as an adjunct to a contractor. 鈥淭he way contractors and consultants operate and make money is quite different and they don鈥檛 necessarily mix. You look at the Aecom URS monster merger, they鈥檝e not stuck to a pure-play consultancy model - Aecom are getting involved in contracting and development as well. That differentiates us from Aecom already,鈥� he says.

The second key, he says, is to avoid putting artificial constraints such as minimum contract size on the business, which could stop potentially vital future clients from engaging. 鈥淭o me that鈥檚 a naive approach. Because acorns grow into oak trees. That 拢1,000 commission can end up being tomorrow鈥檚 拢250m commission.

鈥淭he majority of what we do is still through local regional relationships, and that won鈥檛 change. Where some of our competition lost their way during the recession is they took their eye off the local markets and local clients and chased international opportunities. Our local competition who have American parents are pulling out of some of the UK markets because of perceived risk. Which to us, it鈥檚 not risk, it鈥檚 just understanding your local client base. If you become a truly global player where things are dictated by head office, that鈥檚 when you lose that.鈥�

Grow your own

However, for all these stated differences, what makes WSP like its big competitors is its struggle for skilled staff as the economy recovers. To supplement UK skills and keep costs low the firm has 鈥渙ffshoring鈥� offices in India, the Phillippines, Romania and Serbia, and is planning a new one in Bangalore. However, Naysmith, who got his start in engineering after completing a higher antional diploma but was sponsored to take a degree from Edinburgh鈥檚 Napier University by WSP, says he sees a huge benefit in taking on people who come up 鈥渢hrough the tools鈥�. So as well as recruiting in the market, WSP last year had a 150-strong graduate programme and sponsored 50 apprentices (PB took on 50 and 10 respectively), and Naysmith is adamant that the rest of the sector needs to act similarly. 鈥淚鈥檓 a true believer in growing your own, and I wish a lot of our competition would take the same approach. Identifying talent at an early stage is always something WSP鈥檚 been good at, and we have targets for that and for gender diversity.鈥�

With skills shortages the sector鈥檚 biggest collective headache, much of Naysmith鈥檚 success will ultimately be determined by how well WSP does in attracting this new talent. But in the meantime its progress is likely to be more linked to how many of its potential clients value WSP鈥檚 鈥渓ocalist鈥� pitch above the competition.