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SKM's Santo Rizzuto: buying to grow

Santo Rizzuto took over as chief executive of Australian engineering firm SKM last October. Antony Oliver finds out about his plans for global domination.

While the UK and European infrastructure markets grapple with public spending cuts and the need to deliver increasingly more for ever-increasingly less, Australian engineering group SKM - formerly known as Sinclair Knight Merz - continues to ride the wave of booming global demand for natural resources.

And new SKM chief executive Santo Rizutto intends to continue taking full advantage of the buoyant mining markets in Australia, South America and Africa.

However, he has the future in mind. Along the way he sees SKM using this growth to build up cross sector skills which can be easily deployed into other emerging markets or with new clients.”If you look at SKM, we are still doing 70% to 80% of our business in Australia and while we have a really buoyant market right now, my view is that that is not going to last forever. If we look at our strategic position for the future of SKM globally you would want to have that figure down to around 50%.”

Mining sector skills

Rizzuto’s strategy is to gradually migrate the infrastructure design, management and operation and decommissioning skills honed the mining sector to create a global capability across other sectors such as rail or marine engineering.

The purchase of the UK-based Mouchel Rail division from its ailing parent last October was core to this approach. While Rizutto accepts that Network Rail’s £2bn annual UK spend is an interesting potential workstream, right now the Mouchel business gives SKM an in-house capability to serve its existing portfolio of clients in the even more lucrative and demanding mining sector.

At the moment, the former Mouchel Rail business is, for example, crucial to SKM activities in West Africa with staff deployed in the UK and on site. Down the line, this activity will also provide a very credible springboard into the growing global rail market.

“We don’t really care where we get a design done. We have a team of 150 in Chile doing work for the iron ore market in Australia”

“The [UK] market is clearly going through a difficult time, but growing capability in the UK is not just about working in the home market - strategically it is important for us to get the best skills wherever they are. They have got to be deployable across multiple business units and multiple geographies,” he explains.

“We don’t really care where we get a design done. [For example] we have a team of 150 in Santiago, Chile doing work for the iron ore market in Australia and we have civil and structural teams here in London doing iron ore work in Australia and West Africa.”

For SKM, building up its skills in these different sectors has been the driver for its
acquisition strategy over the last couple of decades. Around 60 mergers and acquisitions in the last 15 years have created a company with 7,200 staff and with annual revenues of A$1.2bn (£700M).

Rizutto insists that this scale of acquisitions is not unusual in the sector and is underpinned by extensive consultation with clients. It has not been unusual, he says, for SKM to consult with clients behind closed doors ahead of a potential deal to check whether a particular merger adds to their offering.

Santo Rizzuto cv

October 2011: Chief executive and managing director, SKM

2008, General manager of SKM’s Mining & Metals Business Unit. Joins SKM board

2006 Major client manager (Global), responsible for the SKM’s relationship with its client BHPB

2005 Led acquisition of Chilean firm Minimetal

1997 Joins SKM

Bachelor of Electrical Engineering (Hons), University of Sydney, Graduate Certificate of Management (Technology Management), Chifley Business School, attended Advanced Management Program at INSEAD, Fontainebleau, France

Married with three boys, practices Karate and kick boxing

“There is a strong drive for consolidation [in the engineering sector] and a lot of that is about positioning in markets or with clients,” he says, highlighting the fact that there is a huge number of potential deals that SKM passes over.

“Some people believe bigger is better but I’m not sure that we believe in growth at any cost - it’s targeted growth for us. We don’t have to grow for growth’s sake - it’s a more strategic approach.”

Rizutto points to the acquisition of environmental consultancy Enviros as another example of SKM’s drive to serve clients with multidisciplinary skills that are globally transportable. It wasn’t just about Enviros doing work in the UK.

“There are a handful of clients in the world that we are going to work for,” he says. “The question is: what do we have to do to remain relevant to those clients over the next 10 years?”

Consolidation and growth

So how big is SKM likely to get in future? Rizutto’s answer is that nobody has the answer. While clearly critical mass has a minimum size, the scale of modern engineering projects, he says, means that even the very biggest firms are now being asked to work in joint venture.

“Consolidation is all about ‘how do I get all the right skills in my own house?’ But there will always be a bit that you cannot do,” he says. “We are 7,200 staff at the moment and it is clear that we will need to be bigger than that - the question is do we need to be 50,000?”

One answer might be for SKM to merge with a firm of the same size. But Rizzuto is also clear about the need for organic growth and to invest in the next generation of engineers. He also fears that in the past “we have smothered and protected the younger generation by constantly saying that they are not quite ready for major projects,” he says.

“I think that we need to get back to giving younger people responsibility earlier - with support of course,” he adds.

His message to the SKM graduate community is: “don’t expect to be spoon fed - define your own future”.

Key mergers

1964 Bruce Sinclair & Jack Knight form Sinclair & Knight in Sydney, Australia.
1994 Sinclair Knight Merz formed from merger with Merz Australia
1999 Kingston Morrison of New Zealand.
1999 Stadium specialist Modus Consulting Engineers.
2000 Malaysia consulting engineer, HS Liao.
2002 Kirkman & Bradford Buildings in Scotland.
2004 UK structural engineer Anthony Hunt Associates.
2005 Chilean engineer Minmetal.
2006 Perth -based engineering consultant HBH
2008 South Australian environmental consultancy REM
2008 UK-based Environmental Design
2009 Sustainability specialist Enviros Consulting Group.
2010 Strategic consultancy McLennan Magasanik Associate.
2011 Transport consultant Colin Buchanan & Partners
2011 Architect S2F.
2011 Chilean water consultancy IRH.
2011 Mouchel’s rail business.

The firm is just rolling out a pilot programme to help graduate mobility by highlighting opportunities to gain real experience around the world.

This year he expects to take on between 100 and 150 graduates and promises - in the nicest possible way - “to light fire under young engineers” so that they readily put their hands up for opportunities.

SKM was formed in Sydney in 1964 and remains a private company through employee ownership. It operates in three regions across 40 offices in Asia Pacific, the Americas, Europe, the Middle East and Africa.

The business now works in multiple sectors grouped as buildings & infrastructure, mining & metals, power & energy and water & environment.

“I think we need to get back to giving young people responsibility earlier - with support of course”

Rizzuto was appointed chief executive and managing director in October 2011, taking over from long-standing former boss Paul Dougas who retired after 15 years at the helm.

An Australian with Italian roots, Rizzuto is based in Brisbane. When not travelling the world between SKM offices, projects and clients he practices Karate and kick boxing.

He also plays piano, having moonlighted as a semi-professional pianist until his mid-30s. and also gets through a large number of books, particularly on subjects such as philosophy and comparative religion.

Electrical engineer

Rizzuto has spent a large part of his engineering career in South America and his current role is the culmination of a 15 year career at SKM. He is an electrical engineer by training, and joined the firm in 1997 to lead its initial foray into South America, on projects in Chile, Bolivia and Argentina.

Rizutto compares the UK market to that of South America in the early 2000s - a market he says that forced SKM to make bold decisions knowing that the downturn wasn’t going to last forever.

Survival of the fittest, he says, forces you to make decisions for the longer run. There are two clear drivers for SKM - the resource based economies - Africa, Australia and South America - but also the emerging economies like Indonesia, Malaysia, the Philippines, parts of Africa and of course China.

Chinese influence

“The influence of China is immense - we don’t consider China as a region, but as an economic force. It has its tentacles in everything,” he adds.

Right now, SKM has around 200 people in Shanghai, mainly as result of the acquisition of transport planning specialist Colin Buchanan and of S2F architects in 2011. Rizutto describes the presence as “a base for something bigger” - increasing access to new clients and funding.

“Whatever you want to do in your career as an engineer the emerging markets are the answer,” he says. “China, is going to be the world leader in sustainability - because it has to survive. So that is where the ground breaking will be done.”

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