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Global gains

Consultants File

Globalisation is not just for companies like Gap or Microsoft.

Consulting engineers are getting in on the act. Andrew Bolton reports on Mott MacDonald's strategy.

Whenever globalisation is mentioned, US businesses like Microsoft and McDonald's spring to mind. But in construction, the bigger British consultants are also establishing strong regional presences in key markets worldwide.

Multi-discipinary consultant Mott MacDonald is one. It has always worked on projects in different parts of the world, but has only recently started to develop regionally based businesses across the globe. Important acquisitions in the US and India over the last 12 months have underpinned the consultant's ambition to become more than a British-based international firm.

And chairman Tim Thirlwall now believes his business has become more global than those of his major US competitors.

The buying started a year ago with east coast-based water and wastewater consultant Killam, adding 450 staff and complementing Mott MacDonald's growing presence in the burgeoning US transportation market, developed through its Mott Hatch joint venture.

Next came the purchase last summer of Dalal, the third largest firm in India with a staff of 750. At home Dalal's most significant project is the US-400M Delhi metro where it is working as civil, architectural and mechanical and electrical consultant for a 6.5km section. In the commercial sector Dalal works for a strong blue chip client base which includes Unilever, Cadbury, Siemens, Pfizer, Rhone Poulenc and ICI - all useful additions to Mott MacDonald's portfolio of global customers.

Dalal staff also work in the Middle East, complementing Mott MacDonald's presence there. At the moment the Indian firm is providing engineering design and construction supervision services on the US-200M Dubai Marina complex.

For Mott, globalisation, combined with its growing multidisciplinary skill base insulates the firm from regional and sectoral downturns.

'Our strategy is to have sector and geographical diversity so that if for example there is a slowdown in Asia, other places will not come down so much, ' says Thirlwall.

Indeed, multi-disciplinary global presence is more important to Mott MacDonald than its size. 'Our ambition is to grow further through organic growth and alliances. We don't have an ambition to have 10,000 people, although we are have 6,000, ' says Thirlwall. 'We are not focused on being big. We are focused on offering a range of services.'

This strategy rules out merger with another major firm in the quest for some kind of global critical mass, in the manner of the Maunsell/Aecom tie up.

'If we were to merge with someone our size, there would be problems of integration, ' says Thirlwall. Mott MacDonald already has most of the engineering skills associated with civil and structural work, so a merger with another similarly sized firm would inevitably create a hard - to-integrate overlap of disciplines.

Mott's two acquisitions and some organic growth have boosted the consultant's annual turnover from around US-320M to US-500M, still dwarfed by US giant Aecom with annual fees of -1.5bn following last year's acquisition of Maunsell and of another UK firm Oscar Faber.

But Thirlwall believes Aecom to be less of a global business than Mott MacDonald, despite Maunsell's extensive overseas operations.

'Up to the Maunsell acquisition they were mainly in the US.

Now they are only something like 20% outside, in places like Hong Kong and Australia, ' he says. 'I would think we are more global than they are, ' he adds, pointing out that only Parsons Brinckerhoff has a comparable worldwide presence.

Thirlwall says that his firm's globalisation programme is still evolving. 'I'm quite sure that there is not one kind of event that gets you there - it's a continual process, ' he says. 'We would say that the acquisition of Killam and Dalal was a big step, but there is still a long way to go'.

South East Asia is one area where Thirlwall is keen to build another hub. Although Mott MacDonald has a large Hong Kong office, the high cost base makes it difficult for Mott MacDonald to use it as an entry point to the Chinese construction market, where salaries are much lower. Instead the firm is looking to build up its South East Asian presence from its Thailand office which currently employs around 200 staff.

At the same time Mott MacDonald is looking to strengthen its regional presence in Europe and in the US. Mott has made some forays into Europe, notably on projects like the Storebolt tunnel in Denmark, but has still to establish a permanent presence on the Continent.

'We have had companies in Portugal and Spain, but they have not been as successful as we would have liked, ' says Thirlwall. He acknowledges that expanding through acquisition will not be easy. Most independent consultants in Continental Europe are small specialist design firms and checking engineers which, in Thirlwall's view, value themselves too highly. 'The prices of these companies are pretty unrealistic, ' he says.

Mott MacDonald is also keen to tap into an expected upsurge in US power sector work on the back of the electricity shortages which hit California earlier this year. Killam has recently set up in Houston and is bidding for work on oil pipelines which will feed new power stations. Its order book is already 300% over budget. Thirlwall says he also wants Mott MacDonald to get involved with power station construction and operation, something it already does in other parts of the world.

Thirlwall is bullish about US prospects, despite predictions of recession following the West's retaliation against the World Trade Center attacks of 11 September. He believes the expected boom in transportation work will continue because federal money for much needed road upgrades and bridge repairs is already committed.

'We have a two year order book in transportation and most of the work is pre-funded.' He says that Americans are driving more and avoiding air travel since the terrorist attacks and that this is boosting petrol tax revenues which are ploughed back into road improvements.

Locally funded US water projects could suffer if individual states decide to divert funds into anti-terrorism work, but the power sector is expected to go from strength to strength as America seeks to tackle severe electricity supply shortages.

Thirlwall believes the property market will suffer as a result of the attacks as developers scale down or cancel plans for high rise buildings.

In the UK Thirlwall also expects transport market to grow as the government's 10 year plan takes shape. But he predicts a slowdown in rail spending as the government works out a rescue package for failed track operator Railtrack.

He is less optimistic about the South East Asia, where economic growth is already starting to slow. He says a 3.3% third quarter contraction in the Singapore economy is typical of the region and there are signs of worse to come as US businesses scale down investment in the region.

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