WSP's Greg Kane on client selection and the Louis Berger acquisition
Middle East MD talks integration with Louis Berger, client selection, and the group's portfolio as it moves into 2019
The past 12 months have marked a busy year for WSP. The Canadian consulting giant ended 2018 with the $400m (AED1.4bn) takeover of the professional services firm Louis Berger, and was named Consultancy of the Year at the Construction Week Awards 2018.
The acquisition of the US-based company, which delivers services related to transport, infrastructure, water, environment, and master-planning, is set to add approximately 700 people to WSP’s workforce in the Middle East. Yet, despite the size of the deal, it remains business as usual for the consultancy in the region. Greg Kane, managing director of WSP’s Middle East business, notes that one of the firm’s guiding principles is to ensure that WSP’s existing projects and clients are not affected as the company implements its merger and integration plans.
It helps that WSP is no stranger to major acquisitions. November 2014 saw it complete the $1.1bn takeover of Parsons Brinckerhoff – creating one of the largest multidisciplinary consulting firms in the world, with a combined revenue at the time of $4.8bn. With this in mind, Kane – who took on his current role in May 2016 – outlines what the Louis Berger merger means for the group in the region.
“The [Louis Berger] deal is complementary from a geography and a services point of view,” he tells Construction Week, adding that the acquisition brings more project management capabilities to WSP’s business, as well as effectively doubling the size of the firm’s business in Saudi Arabia.
One of our guiding principles around integration is that ‘business as normal’ precedes integration.
He continues: “Louis Berger has a good footprint in Abu Dhabi – probably a stronger footprint than WSP – so that benefits us. [The acquisition is] something we’re quite positive about, and it has bigger implications for WSP globally. It adds 2,000 people to our American business in an economy that’s doing very well, and it gives us greater exposure in Central Europe.”
Kane says WSP continues to focus on targeting projects where it “can add value and make a difference”. However, as with any merger, acquisition, or new business strategy, the need to convey its benefits to existing and prospective clients is paramount, as he explains: “You have got to espouse the values and the virtues of the deal – to win hearts and minds, and to help people understand why coming into the business will hopefully be good for them.
“One of our guiding principles around integration is that ‘business as normal’ precedes integration. So, anything that is going to impact our clients or have an adverse impact on any of our projects is a primary [concern],” he explains.
“About 77% of our work comes from around 20 clients in the Middle East. We’ve got hundreds of clients in the region, but these 20 clients give us the lion’s share of our work, and they’re really important – they are our lifeblood. We have to make sure they’re satisfied with our services.”
This need to ensure continuity of business is even more significant in a period that some analysts have characterised as challenging for the region’s building market. Kane says this atmosphere is “only intensifying”, with the level of competition in the market at times outpacing the volume of work available in the sector.
He adds: “In spite of that, WSP has done reasonably well in 2018. It has been what we would categorise as a successful year for us. That’s really [due to] us being selective, disciplined, and not chasing projects just to win and feed a volume.”
So, what does 2019 hold for a construction giant that has deepened its already solid foundations in the Middle East over the past 12 months? Going forwards, Kane says he wants WSP to continue to be selective about the projects it targets.
We have to stay disciplined and targeted in terms of the types of projects we pursue, otherwise we will end up competing in a way that’s not going to serve our interests.
“That means we will possibly be chasing fewer projects, which becomes a bit of a challenge when one of your group-wide global mandates – one of the primary focuses – is organic growth,” he admits.
“It’s a bit harder to achieve in the Middle East, but we have to stay disciplined and targeted in terms of the types of projects we pursue, otherwise we will end up competing in a way that’s not going to serve our interests.”
This approach to client selection is even more critical given the well-documented challenges surrounding payment delays in the region, as Kane explains: “A perennial problem in this region is getting paid. Certainly, if you asked any member of our industry – consultant, contractor, or sub-contractor – they would say that getting paid is a challenge.
“We have to be realistic about this. To get paid, you have to do good work – you have to earn the right to be paid. And, in this region, maybe that is not always the case for every player in the market. If you have done quality work and helped your client capture and deliver value, then getting paid seems only fair and equitable.
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“If we look at our day sales outstanding rate – the number of days it takes us to get paid – the Middle East’s is the highest in the world for us. So it is a challenge, but we have good relationships and great clients who pay us on time.”
“It goes back to being selective and trying to find the clients that you are well aligned with, who appreciate value, and are willing to pay for their desired quality – and they are definitely out there. We have got some superb clients, but there are instances where getting paid is becoming increasingly challenging.”
Payment issues have not gravely impacted WSP’s regional business, but the Middle East chief expresses “disappointment” that the situation has yet to improve significantly.
“I have definitely seen elements of this market mature,” he says. “I arrived here 12 years ago. Dubai, the UAE, and the Middle East are more mature markets than they were then – there is no doubt about that.
“I have seen great advancements in our industry and in what we do, but the one area that maybe has not improved – and one that WSP would like to see improved – is our ability to be paid in a timely manner.”
I arrived here 12 years ago. Dubai, the UAE, and the Middle East are more mature markets than they were then.
However, Kane is optimistic about the regional market, and particularly believes in the continued strength of Dubai’s hospitality sector: “Plenty of people have opinions about where we are [in terms of] supply and demand [in the residential market]. We still see hospitality as being quite strong, and we are still involved in a lot of hotel projects. They appear to open, trade, and perform well. Dubai has become quite a strong destination.
“Looking at Abu Dhabi, [WSP] is involved in a large development on Yas Island, working for Miral, and there is still demand in the UAE capital,” he adds.
“Saudi Arabia is opening up now. We have won a lot of work in 2018 that would perhaps have been less readily accessible in previous years, because of some of the changes we’re seeing in the entertainment and hospitality sectors [in the kingdom]. We’re involved with the new ski slope at Majid Al Futtaim’s mall in Riyadh, [and with] a number of cinema roll-outs and some hospitality projects,” Kane continues.
“Hospitality, entertainment, and retail – in spite of the growth of e-commerce – as well as the associated food and beverage sector, are areas where we are still seeing opportunities.”