Davis Langdon - An Aecom company

When it completed last Thursday, Aecom’s £204m purchase of Davis Langdon was presented by the participants as a pragmatic tie-up. UK consultants like Davis Langdon may be highly skilled, but they are too small to be truly global players, and too big to be specialised boutiques. Others saw a faceless American behemoth swallowing a national treasure. Some even likened it to the takeover of Cadbury’s by American food giant Kraft in January.

“That’s not a comparison anyone has been brave enough to make to my face,” laughs Rob Smith, Davis Langdon’s senior partner, who put his retirement on hold this April to oversee the deal.

On a conference call with Bill Hanway, Aecom’s managing director for the UK and Ireland, and a media minder each, the pair set out a compelling case for the pragmatists. They are, however, more reticent on speculation that it was the downturn that forced the £208m-turnover partnership to hook up with the £3.8bn-turnover San Francisco corporation.

The question on everyone’s lips since Building broke the news in February that a deal was being discussed was whether this was a distressed sale. “I’m not going to talk about numbers, but the sale price speaks for itself,” Smith begins in his steady estuary drawl. “Anybody who knows how these things work would know that a deal that has taken this long to put together is not a fire sale.”

Neither he nor Hanway will go into details about the consultant’s results for the year ended 30 April but Smith says turnover is down, profit is up slightly and the £32m net debt position has improved. “Nobody could look at the 2010 numbers and come to the conclusion this was forced,” he reiterates.

Curiously, he adds: “We have suspicions of one or two sources outside the organisation putting negative stories into the market. It is not something we indulge in and we’re not happy about it.”

At this point Hanway chips in: “I just want to emphasise that this is a time to focus on celebration.” And you are reminded that Smith, a voice of authority for so long in the UK industry, now serves American masters.

The deal does not include the Davis Langdon Seah Asian arm of the business, which has 33 offices and employs 3,000 people in 13 countries, including Malaysia, the Philippines and China. Smith falters when asked why not: “You’ll have to ask them but they decided it was not quite the right time for them.” Whatever the reason, it is the financially healthier part of the business that Smith had previously used as proof that DL as a global entity was not being forced into anything.

Whatever the motives, it will create some rich individuals at Davis Langdon, although Smith is also coy about how much the partners will walk away with. He says the complex partnership set-up makes even back-of-the-envelope calculations meaningless although given the price tag, and the fact there are more than 100 equity partners, it’s probably safe to assume those at the top will earn seven-figure sums.

“This is not like the URS Scott Wilson deal,” Smith says. “Nobody is planning to leave the business. People won’t be getting up in the morning to decide whether to play golf or go sailing; this is an exciting career.” Except for Smith himself of course, who will retire from the company in April.

Then there’s the thorny subject of the name. From 1 October, DL business cards will include the words “an Aecom company”.

Both erupt into laughter when asked which will be in the bigger font and Smith adds: “Aecom will certainly be discreet in the first instance.”

And beyond that? Given Aecom’s track record with the likes of Faber Maunsell and Savant, it doesn’t look good for the survival of the 91-year-old brand. The pair deny they have talked about what will happen in the longer term and say any decision will be aligned to the needs of the client, which sounds awfully like “goodbye Davis Langdon”.

On a more practical level, DL will continue to be based in its Holborn offices in London, although Smith says staff in all corners of the business will be brought together. Between now and October, Aecom will also go through its bid pipeline to ensure neither company is up against the other.

Moving into sales pitch mode, Smith runs through a five-point summary of why the deal makes sense (“in no order of priority”). The first is that a firm with a massive parent has better market information, and advice on procuring globally will allow DL to extend cost savings to more of its clients.

Second, there is knowledge sharing. Smith says: “I’ve lost count of the number of times we’ve been asked questions with an engineering scope - we can now dip into that knowledge. The knowledge-sharing network Aecom has is something we would have loved to set up on our own in the past.” Like his American counterparts, and unlike his British peers, Smith stresses the “e” (for engineering) in Aecom’s acronym.

He then talks about “buildability” benefits and says DL can go to Tishman, an American contractor that was bought last month by Aecom, for ways to help clients that are “looking for ways to chip away at price”. There is also the splicing of Davis Langdon’s cost capabilities and Aecom’s design and technology know-how.

The fourth argument is an increased ability to provide integrated solutions. Smith cites the example of supermarket frameworks and asks: “Why don’t we come up with integrated solutions we can offer back to the client?”

And finally, there is the geographical imperative. Davis Langdon will provide Aecom with a way into markets where it has a low or no profile, such as Africa and Asia.

Hanway is certainly keen for Aecom to lose its “American” tag, saying it does more than half its business outside the US. Smith adds: “This business has to move past the point of thinking of itself as run from London or by the British.” Asked whether he fears losing DL’s national treasure status, he shoots back: “We want to be a global treasure.”

The staff must feel an overwhelming sense of “thank God it’s all over” after six months of media speculation that a tie-up was happening. Smith concedes “one or two” may feel uncomfortable with it - this is after all a company that has to provide quarterly updates to Wall Street analysts.

And at least two rivals have reported receiving a healthy flow of CVs from DL employees in recent months. The transaction was the trigger for the exit of Neil Morrison, managing partner of DL’s commercial Blue Team in London, although Smith says he had always planned such a change in his mid-fifties.

Those that remain will operate under London-based chief executive Jeremy Horner, who will report to the Aecom Enterprise Management team in the US. Richard Baldwin, who had been tipped to take over from Smith as senior partner, will head the European and Middle Eastern arm of the business. Mark Beattie will oversee the Australian area, Nick Butcher will lead the US business and Indresen Pillay will be in charge of Africa. When asked what he plans do next, Smith laughs like a man who needs a long holiday, but offers no clues.

On the plus side, there is some excitement among DL staff about the possibilities of global travel. The World Trade Centre rebuild in New York, with which Tishman is involved, would doubtless be a popular choice, although Smith says: “We won’t disrupt existing client relationships.” DL will also help Aecom crack Latin America, especially Brazil. “This is good news for QSs that speak Portuguese,” he says.

More takeovers will no doubt follow and Aecom is thought to be on the hunt for a big UK architect, although Hanway trots out the no comment line favoured by the New York press machine when asked about M&A plans.

Mystery also surrounds how many Davis Langdon partners voted for the deal. Smith says: “I compiled the votes on a spreadsheet but I’ve deleted the file. Actually, that sounds like a good one for your Hansom column.”

It’s the sort of self-deprecating wit you hope won’t disappear from Davis Langdon’s DNA, however it is eventually known.

Big fish, little fish