Mergers: Michael Coombs of Alan Baxter & Associates gives the SME view

Michael Coombs, senior partner, Alan Baxter & Associates

Michael Coombs of Alan Baxter & Associates gives his view on what the trend for mergers means for smaller built environment consultancies.

The construction industry is made up of a wide and diverse range of businesses with especially wide motivations and interests.  Most contractors tend to be businesses with shareholders and are mainly driven by their bottom line and their share price if they are listed companies.  Many such organisations are bought and sold for pure business or accountancy reasons.

Consultancy is more complex.  Traditionally, professional practice was about a close relationship between a consultant and his or her client.  The reputation of a consultant was gained by ability and the quality of the service provided.  Most smaller firms still function in this way and, no doubt, some of the larger consultancy organisations would claim to operate with the same values. 

"In a smaller and medium sized consultancy there is a chance that real creativity and imagination can apply to all of that firm’s projects."

However, large consultancies, particularly those with outside shareholders, have to be run as businesses first and professional practices second.  They are mainly focused on their turnover and growth.  Mergers in the consultancy sector are all driven by growth and claims to be able to provide one-stop-shops to clients across a wide range of disciplines.

Very large consultancy businesses are purveyors of technical resources and are appropriate for the implementation of large scale construction projects at the detailed design and production stages.

Creative endeavour which is about ideas and imagination can be thinly spread in large organisations and not always available when seeing projects through.  In a smaller and medium sized consultancy there is a chance that real creativity and imagination can apply to all of that firm’s projects.  Nevertheless there are also some SME firms that operate much more in the technical services areas, rather than in professional services.

For small firms to merge or for one to acquire another, there are some very significant issues to be considered.  These are mainly to do with culture, working practice, IT, location and liability.  These issues seem to be secondary to larger consultancies who merge for reasons of global fit, turnover, efficiencies and client base.

Who is to say which way is right?  The point, in reality, is that the world of consultancy is now as wide ranging as it has ever been.  There are huge firms gobbling up major commissions across the globe, normally on a multi-disciplinary basis.  Smaller creative firms with either a single or a few linked disciplines, will continue to flourish because of the ideas and value they are able to offer.  Sometimes these creative ideas are provided on some of the very large projects where the mega consultancy firms take them forward and implement them.

Merger and acquisition is not really the route for talented SME’s, unless they find themselves in difficulty financially or because of looming retirement of the owners, without any appropriate succession in place.  They can grow organically, sometimes in ability without increasing their size.

Large consultancy businesses will continue to be acquisitive or merge.  It is more natural for these organisations to grow in this way, adding new disciplines or spreading their tentacles more widely across the globe.  Acquisition and merger is part of their DNA.

What do clients think? Find out from Graham Dalton of the Highways Agency and Miles Ashley of London Underground here