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At the beginning of August, just as much of the construction sector in the Gulf region was slowing in the run-up to Ramadan, an announcement of a major merger sent a bolt of excitement and intrigue through the industry.

AECOM, the giant technical and management support firm from Los Angeles building its presence in global construction, shook hands with Davis Langdon on an AED324 million purchase of the UK-based project consultant.

For a relatively subdued buy-out market across a number of sectors, it was a big deal. Now, as financial statements and contract wins separate the top performers from those merely surviving, the GCC will have a significant new player that combines a global reach, a specialism in project cost management, and a neatly complementary presence in the major markets.

David Barwell, regional chief executive of AECOM, tells Construction Week that the deal is very much a global acquisition, rather than one dedicated to a specific region, and insists that Davis Langdon can benefit from its global reach and deep resources.

In turn Davis Langdon’s market-leading attribute in project assessment should satisfy a growing demand from clients.

“Our clients had required more and more expertise in the commercial management of projects, including very complex projects requiring a disciplined approach,” he explains. “Their main concerns are still cost, time and quality.

“Our operations in the region had been more partnering with companies like Davis Langdon. Then you ask: ‘what would an integrated offering look like?’

He adds that AECOM looked at the list of clients of possible acquisitions, and found that the list of those who had worked with Davis Langdon was particularly eye-catching.

“With Davis Langdon and AECOM there are a lot of companies we have both worked with, but there were also a number we had not. So we have been able to broaden our client list and with it develop in the region.”

Davis Langdon’s visibility in the market had made it “the go-to company and the number one brand,” he says.

“When we came to looking at companies Davis Langdon was top of the list and we were very pleased with the response when we approached the company, and the clients have been pleased too.”

Barwell says part of this good response is down to the fact that some clients prefer to sit opposite a single entity in the meeting room, rather than a joint venture – the most popular model of business for any company entering the region.

“Clients are effectively saying: ‘we want you to manage this risk on our behalf’. Some clients prefer to dealing with a joint venture – they like to know who is boss. They like to know who is in control. With a single-front company it is clear who has responsibility.”

The logic of the merge partly lies in the companies’ respective presence in the different markets. Davis Langdon, for example, has a significant business line in Kuwait, a country in which AECOM has less presence.

In Saudi Arabia, by contrast, AECOM has 800 employees against the 10 representing Davis Langdon. This is not exactly a trade-off, says Barwell, more an ability to leverage existing contacts and clients for mutual gain.

Kevin Sims, head of Middle East for Davis Langdon who has been at the firm since 1986, adds that the company can offer access for AECOM into the Levant region.

“We have 40 employees in Jordan, as well as Lebanon,” he says, “and we have presence in Kuwait, where AECOM used to have a business - we’ve been undertaking an initiative in that country for the last three months.”

The merger presents opportunities for Davis Langdon wider than just market presence. The company has been successful as a project and cost manager in the GCC focused on buildings, as Sims sees it.

But a link with AECOM gives experience and access to what Sims calls social infrastructure” projects, such as roads, transport and water.

AECOM has long been competitive across the spectrum of infrastructure worldwide, covering design and planning, building and architecture for transportation, water, environment and energy.

“This area [social infrastructure] is very different. We’re looking to take people and expand into that space, and the merger has given us that ability. The heads of Davis Langdon and AECOM are talking about opportunities and we can support them for growth in a way that is sustainable.”

With billions of government investment announced just this summer from Saudi Arabia, Qatar and Oman, it seems neat timing. At the beginning of August Saudi ministers endorsed a US$373 billion five-year plan for spending on its infrastructure and public welfare, to supplement the headline-grabbing projects such as the development of the Haramain High Speed Rail project.

Qatar too, is set to surge in its infrastructure spending, taking US$9.7 billion of the US$11.9 billion dedicated to major projects for the 2010-2011 fiscal budget. A report from Business Monitor International estimating a 9.9% economic growth over the next four years. In Oman, news of an extra OR68 million dedicated for road and water projects were followed by plans to extend the proposed rail network to include Salalah.

Sims is particularly excited by the opportunities in Oman, a country Davis Langdon had been discussing with clients and in which the merger had “solved the problem” of a lack of market presence there. But in terms of the sheer volumes of projects in which the joint entity can offer its services, Saudi Arabia is the towering market. “And not just Riyadh based,” he adds. “Jeddah, for example, is an absolute must.”

The merger will see Davis Langdon receive 80% of the purchase value in cash, with 20% in AECOM stock. Sims says this is a typical method of purchase as it allows the bought company to feel part of the fused entity immediately, with a mutual interest in increasing the stock value of the purchaser.

Though Davis Langdon itself was created through a merge – in 1988, when UK firms Langdon & Every combined with Davis, Belfield and Everest in a bid to go global – there are few companies in any sector more accustomed to mergers than AECOM.

The company is 20 years old this year and was founded by Richard G. Newman and a handful of employees from Ashland Incorporated, the industry-facing chemicals company.

The merger of five Ashland entities created the firm, and since then its acquisitions have included Spanish transportation, water and architecture firm INOCSA Ingenieria, the architecture and interior design firm Ellerbe Becket and most recently Tishman Construction. It has been a listed company for three years.

Barwell laughs off the suggestion that the company could develop a separate business line in M&A advice given its success with smooth acquisitions, though acknowledges the company has been in the buying game “for quite a while”, helping the efficiency of the process.

“The first thing that happens with a merge is to bring people together. People must move out of their space: it’s not what we are but what we can be.”

One of its big regional deals is the Saadiyat Island Cultural Centre in Abu Dhabi, in which it is leading the programme management. The project will comprise seven districts integrating high art, waterfront resorts, regional corporate headquarters, extensive residential development and a new marina. The Louvre Abu Dhabi and the Guggenheim Abu Dhabi are just two of the eventual features.

Barwell says the project is a good example of the international scope of AECOM, which can draw on abilities within the group across continents.

“The Saadiyat Island Cultural District had a lot of people from the US working on it, so it was a real AECOM International project. But the Khalifa University project was very much a local project, and the Cleveland Clinic was very much local as well as some UK expertise.”

The local-international combination within AECOM is an enduring dynamic. “There is a very strong local Arab content and local knowledge,” he says. “Then the other part is the global expertise in the rest of the organization.”

Once day-to-day details and communications with employees of the current merge are complete, company executives can get together and assess opportunities.

For this to work effectively, he says, the companies must have a complementary culture: assessing this is crucial at the early stages of selecting target companies.

“If there is not an underlying similar culture then the deal is dead immediately. So we’ve always looked at that and it makes the process a lot easier.”

Sims adds that the process can be complex, as these are “two very big companies”, and also include integrating different facets of the companies, such as IT, human relations and of course finance, ensuring they can seamlessly work on one system.

Sims – who transferred to Doha from the company’s Milton Keynes office in January 2009 after 12 years - has been active in the human aspect to the merger too. At the time of interview he had finished relevant meetings in the company’s Bahrain office, which has 70 people and will grow to 150 people upon full integration.

Though full assimilation is an ongoing process, the “fully integrated solution” envisaged by Barwell cannot be far off.

Sims emphasises, however, that the deal is more than synergy: everyone wants to be bigger.

“The most important thing here is growth,” he says. “That’s one of the key words we’ve found in the AECOM dictionary.”

BIOGRAPHY
Both David Barwell and Kevin Sims seem to be men who are used to adapting to change and new environments, and indeed both entered the Middle East at the same time.

Barwell achieved an engineering degree from Brighton University in the United Kingdom, and is a Fellow of the Institution of Engineers, Australia as well as a corporate member of the Institution of Civil Engineers.

He was regional director for Maunsell AECOM in Queensland, Australia, where he led the rapid organic growth of the business to become the top professional technical services firm in the state.

He then became chief operating officer for AECOM in Australia and New Zealand. He moved to Abu Dhabi to assume his current role in January 2009.

During that time AECOM’s purchases within construction include buying Guy Maunsell International in April 2000 and the remaining two-thirds of Halpern Glick Maunsell in 2001, an Australian engineering firm in which AECOM had picked up a stake in the Maunsell acquisition a year later.

In October 2001 it bought Oscar Faber, another United Kingdom engineering firm, which was mostly involved in design and transportation planning. In 2006 the Maunsell operation bought out Cansult, creating one of the largest consultancy firms in the Middle East in the sector.

In 2008 the company swooped for Earth Tech, which gave it access into a number of new markets, including Mexico. It soon after bought San Diego-based Boyle Engineering.

Sims trained as a quantity surveyor but practices mostly in project management. He joined the firm in 1986 in the firm’s Cambridge office, transferring to run the Milton Keynes office in 1996.

Over the following 12 years, the Milton Keynes office was very successful and grew to be the largest office outside London since 2006. By January last year he moved to the Middle East.