One step beyond

The sale of Precept Programme Management, a UK firm started in 1998 by an ex-boss at an EC Harris subsidiary and a former European head of project management group O'Brien Kreitzberg, in March came as a major surprise.

There was the buyer to start with, US group Navigant Consulting, a relative newcomer to these shores. And there was the price, approximately £30m - this for a 60-strong £12m-turnover outfit, which raised some in the sector's eyebrows. Both parties however couldn't be happier, admitting it was "spooky" how similar the two firms were, how easy it was to strike the deal and why their combined forces can take on the world in offering both dispute and programme management advice.

QS News spoke to the three main protagonists in the deal, Navigant international boss Don Harvey (DH) and Precept founders Brian Norton (BN) and David Barry (DB), at their city office to fill us in on how the acquisition came about and their ambitious plans for the new business.

QS News - How did the deal come about?

DH - We had a beer on 23 December...

DB - And the deal closed on March 23, which was extraordinarily quick for a deal like this. We were working on a project together so met in December - within minutes we were having a chat about other things.

DH - We set up over here in January 2005 and our chief competition was Precept. All of the jobs we were pitching for, Precept's name came up. We thought it would be a good fit (doing the deal). We both see ourselves as competing against the big four accountants in what we are doing.

BN - That's been our position. Not to compete with the big QS practices but against PWC and KPMG. Ours is very much management consultancy rather than a more straightforward project management role.

DB - We have had a lot of approaches but most of them never went past a phone conversation. They would have been dilutory for us. We were also clear that we didn't want to be bought by just a dispute resolution firm, but someone with a broader service offering.

BN - The other thing about the deal that was important for us was the next step for us. We had got to a £12m business in six years. The next step was to get to £100m - that's quite a gap. Strategically it made a lot more sense to fit with someone bigger. There was also a cultural fit - David spent 10 years in the US and I was over there for six years. It was almost spooky the similarities between the two firms. We are bringing together the best of the US and UK.

Why were the negotiations so swift?

DB - It was a natural fit. Precept is also a clean business. We have never borrowed money, never had bad debt and had no subsidiaries. It's a simple well-run business. There were no emotional obstacles stopping it. We flew to Chicago after I met Don and it cemented it. We met 10-12 of the Navigant leaders and we were blown away. There were some bright, articulate and impressive people.

All of the jobs we were pitching for, Precept’s name came up

Don Harvey, international boss, Navigant

DH - There was a real personality fit. The corporate personnel at Navigant very much see ourselves as David Barrys and Brian Nortons.

The cost of the acquisition surprised some in the sector

DH - We have published as much as we want to do on that. We viewed it as a reasonable and fair price. Since the deal has been done we have already seen a significant uplift in our international business. We have picked up a number of engagements outside of London in the Far East (since the deal). Many of the service lines have benefited from the Precept acquisition. It's like David (Barry said) when we were doing the deal - two plus two will equal seven.

DB - I was never that good at maths.

Who do you see as your competitors now?

DH - It's an interesting question. My CEO asked me this last week. This is going to sound arrogant but when you look around it's hard to spot natural competitors. It probably is the QS firms or the big four accountants. We have positioned ourselves between them and are offering something slightly different. The other thing that is incredibly similar between us and Precept is that our people are not just technically focused but business focused as well.

BN - We do have QSs, but many have MBAs.

DH - Those different skills allows us to offer consultancy right through the lifecycle, from conception all the way though to disputes.

DB - The point about working on disputes is you can learn from other people's, and our own, mistakes when you are offering front-end advice. You put that straight into your business case and programming advice.

How has Navigant developed as a business?

DH - In the US the business advisory market has been significantly affected by Sarbanes-Oxley (a 2002 US government act post the Enron scandal that imposed stricter accounting standards on American companies). A lot of the big accounting firms are now concentrating more on audit work rather than advisory services - they are often conflicted out of offering advice to a client that they audit. It's not impacted the market so much globally, but many clients are going down that route. It means independent advisors such as us are in a strong position. There's a void there that's growing.

We have had a lot of approaches but most never went past a phone conversation. They would have been dilutory for us

David Barry, Precept founder

BN - I also think that clients perceive the quality of service offered by the big four accountants has eroded substantially over the last decade.

Companies in this sector are struggling to get good people. Are you finding this a problem?

DH - The exciting thing about Navigant is that it's attracting talent. We have recently recruited several people from PWC and KPMG.

DB - It's been great for our people. The firm is no longer a small pyramid with Brian and I at the top. There are ambitious growth plans for the people to aspire to.

DH - A number of headhunters have called our people and the feedback from them is that they want to stay. I think it's partly down to culture - we have a meritocracy here.

BN - It's very transparent and people are well rewarded.

DB - It's a place where young people are doing well. There are also a lot of female professionals here - about 30-40% of our staff are women.

BN - There is also a purposeful strategy to move people through different business streams. They can move from technical areas to business areas in the company.

Some of Precept's work has been heading up consortia bidding for public sector work. Is this work you are still going for?

BN - No. We have already made that shift to supporting consortia rather than running them. That was primarily down to the high bid costs and to the increased size of the jobs.

What is the growth plan for the combined Navigant/Precept entity?

DH - Navigant has a target to reach $1bn (£530m) of turnover by 2010. We are currently at just below the $600m mark. We are now quite dominant in our markets in the US so a majority of the growth will come from the international side of the business. There is a void out there in the marketplace to offer the services we do globally. We are not there yet, but we are looking to fill that void.