A year ago next month British consultant Gibb changed hands for the second time in less than a decade. Andrew Bolton reports on how the firm has begun to thrive.
California-based Jacobs Engineering's decision to buy Gibb from Georgia's Law Group a year ago seemed logical enough. Jacobs is one of the largest consultants in the world with a turnover of around $4bn (£2.8bn), and wanted to use Gibb's strong European base and international presence to bolster its increasingly global operations.
But why Law Group wanted to sell was something of a mystery.
The large US consultant, based around environmental engineering, had originally bought Sir Alexander Gibb & Partners back in the early 1990s because it too had wanted to become more of a global player. Had it lost interest in the global consultancy market? Did it need the money? Had Gibb become a liability?
The reason for the deal, according to Jacobs Gibb managing director Peter Brettell, go back to the mid-1990s when Law ran into financial difficulties.
Law staff held substantial shareholdings in the business, and after the firm breached its banking covenants, its bankers prevented it from buying shares back from its staff, making the shares worthless.
Eventually the firm managed to cut its debts to the point where its shareholders, including two major investors, decided they wanted to cash their shares in to get a return on their investment. The long term aim was to find a single buyer for the entire group.
But, having recovered financially, Law was under no immediate pressure to sell. 'They were not desperately seeking a merger or buyer, ' says Brettell.
In 2000 Jacobs expressed an interest in Gibb, whose $100M (£69M) turnover accounted for a third of Law's business. Law initially rejected the approach, still hoping to get an offer for the whole group.
Eventually Law's owners decided that a deal could be done, as the Gibb business was sufficiently self-contained to be easily separated from its US parent. Law's investors used the proceeds to reduce its remaining debt burden substantially. At the end of last year, Law was bought by Colorado-based MacTec, enabling it to pay off its debts and allow shareholders to finally cash in their shares.
Brettell exudes enthusiasm about Jacobs Engineering, whose approach to business is markedly different to that of Law. No longer is the firm the ring fenced outpost of a US business. Instead Jacobs Gibb is part of a huge global team which is encouraged to draw on resources throughout a group involved with pharmaceuticals factories, civil and structural engineering, process engineering, food manufacturing, defence and vehicle testing. As well as Gibb, Jacobs has 900 staff in India, plus offices across the globe.
'In the 12 years we were part of Law we did perhaps only 12 projects together, ' says Brettell.
'Even before we completed the Jacobs deal we had found 12 projects to work on together, ' he adds.
'Now there is an endless stream and we have some of our people in the US and American people working on projects over here'.
The Pasadena-based senior management team fosters this teamwork approach by discouraging the formation of internal fiefdoms based around division profit centres. Brettell says this is partly achieved by linking management performance bonuses directly to the profitability of the whole company rather than their individual divisions. Internal squabbles over which part of the business takes the profit or cost associated with individual projects are also frowned on.
Perhaps the biggest transformation for Jacobs Gibb been the adoption of Jacobs policy of focusing on key clients. 'Jacobs has 20,000 employees worldwide and 65% of them work for just 49 clients, ' says Brettell. As a result he has spent the last 12 months developing a more selective approach to UK workload, concentrating on building long term client relationships.
Jacobs, and now Jacobs Gibb, are consequently less interested in just designing projects. They want to offer a cradle to grave service which involves developing business cases for projects, designing them, selecting contractors, programme managing work and even arranging finance for privately funded schemes.
At the moment efforts are focusing on Britain, where Jacobs Gibb expects to tap into the much touted transport spending boom. Particular emphasis is being given to the rail sector where Brettell sees opportunities in programme managing major projects.
He hopes to capitalise on the growing perception that competitors Bechtel, Fluor Daniel and Parsons Brinckerhoff have struggled to get to grips with major upgrade projects like the West Coast Main Line. Aware of the skill shortage in this sector, Jacobs is ready to use rail engineers from its South African company on UK projects. It has also brought in a senior rail engineer from across the Atlantic to talk to Railtrack and the train operators about future projects.
Jacobs Gibb is also looking to expand in other European countries, notably Poland, Portugal and Spain, where it is already present. The firm is also strong in Greece and has recently won a contract to monitor construction of 30 sports facilities for the 2004 Olympics and to advise on temporary facilities including media centres and temporary seating.
Despite the need to adapt to a new corporate culture, the Jacobs Gibb operation has thrived. Last year's profit growth of 20% well exceeded New York Stock Exchange-listed Jacobs Engineering target of a minimum 10% a year.
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