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Merger latest: AECOM/URS and ARCADIS/Hyder deals sealed

Newly combined consulting groups both face major integration challenges to retain value of purchase price.

This week represented a major milestone in the history of UK consulting as two of the biggest merger deals in recent history were ratified by shareholders.

AECOM stockholders met in San Francisco at 10am on 16 October to vote on the proposed $6bn (£3.7bn) merger with URS Corporation and to create a new combined business with 95,000 staff, annual revenues of $19bn (£12bn) and pretax profits of around $1.3bn (£800M). The deal is expected to be fully finalised today.

Meanwhile, also on 16 October, Dutch consultant Arcadis concluded its merger deal with Hyder Consulting which valued the UK business at £296M.

In both cases loss of fee earners following the mergers would undermine the reasons for purchases of the businesses for both buyers so expect managers at AECOM and ARCADIS to be targeted on staff retention.

The board of Hyder had agreed terms to sell the business to consultant ARCADIS on 21 August after the Dutch firm increased its cash offer to 730p a share to buy the firm. It subsequently increased this offer to £750 to fend off any further bids. 

Once the purchases are finalised both firms face major integration challenges as they bid to secure so-called “business synergies” and ensure that staff and skills obtained in the deals are retained.

At AECOM Steve Morriss will lead the combined Europe Middle East and Africa Design and Consulting Services business once the merger with URS is finalised under a new operating structure revealed in September by AECOM president and CEO Mike Burke. He said he expected “to be operating as one unified company by January 2015”.

Both mergers have been underway since the summer leaving staff at all the organisations in a state of uncertainty for months. 

Merger rules preclude overt conversations between merging businesses and the first priority for AECOM and ARCADIS will be to reassure the consultants and engineers in their URS and Hyder acquisitions of the value they have for their purchasers.

In both cases loss of fee earners following the mergers would undermine the reasons for purchases of the businesses for both buyers so expect managers at AECOM and ARCADIS to be targeted on staff retention.

Both firms also have a federalist rather than centralist approach to running their groups so it is unlikely that there will be early focus on combing business and accounting processes, generally regarded as one of the most off putting thing about mergers by most consulting engineering staff. 

Concentration instead is likely to be on maintaining business momentum in terms of delivering existing work and bringing in new contracts  to help underwrite the costs of the mergers. The processes issue could be put on the back burner for a year or two.

Quick wins in terms of obvious synergies and opportunities in the newly combined firms will be a focus.

For instance in the UK expect the largely civils based AECOM rail business to be very enthusiastic about working with the m&e signalling and electrification specialists at URS allowing the combined firm to offer a complete end to end design service in rail.

Meanwhile however, AECOM's global head of engineering David Glover has announced he is leaving to join Intelligent Engineering.

 

Click here for details of the AECOM/URS deal

Click here for details of the ARCADIS/HYDER deal