FINANCE A SUPPLEMENT OF THE ZWEIG LETTER
OCTOBER 31, 2011, ISSUE 933
M&A PROF I L E
Like having a big brother...
Integration always hardest part of a merger or acquisition; but if you get the fundamentals right, everything else will follow. By Julie Kyle Editor T hrough strategic mergers and ac- quisitions, A/E/P and environ- mental firms can acquire specialized skill sets and a wider geographic base for operations that can enhance reve- nue through gain in market share. It’s not an easy undertaking; integration is the true task of any deal. But as Brad Mallory, president and CEO of Michael Baker Corporation (Pittsburgh, PA), a 3,250-person en- gineering, design, planning and con- struction services firm, explains, if you match the culture and strategies of both firms, the rest will fall into place. In terms of specific skill sets Baker now holds, among the more modest is high-level stream restoration through the acquisition of Buck Engineering , P.C. , of Cary, North Carolina. The acquisition of Buck has strength- ened and greatly expanded Baker’s presence in North Carolina, and en- abled the company to leverage a high- value stream and wetlands restoration service that is of growing importance to many of its customers across the United States. Baker acquired The LPA Group , a 475-person transportation consulting firm based in Columbia, S.C., last year. Out of the LPA acquisition came en- hanced program management capabili- ties, Mallory said. “LPA was a $100 million firm with un- usually significant program manage- ment capabilities for a firm that size,” he says. “They were one of the first firms in the country involved in large- scale transportation program manage- ment contracts. “Obviously, with our strong trans-
portation background, that work was a natural fit, which we are now attempt- ing to spread across our broader plat- form,” Mallory says. Strategic move. Baker made a de- cision several years ago to focus heavily on more design/build work in the fed- eral and transportation segments of the business. Proving to be a better de- cision than firm’s leaders knew at the time, by adding LPA, Baker effectively multiplied its design/build capabilities at least a couple times or better, Mal- lory says. Through the acquisition, Baker has added the talent it takes to perform small to midsize airport terminal work. “Baker had long been a strong run- way firm,” Mallory says. “However, we did not have a broad or deep résumé in those small to midsize terminals, which is really a very good market. LPA did. So effectively, by acquiring LPA, we ended up with a strong small and mid- size terminal résumé and added that to our runway design and limited large- scale airport work. It made a much more robust airport business.” geographic spread. This spring, Baker acquired JMA Architecture Studios , a rela- tively small architectural firm out of Las Vegas. This acquisition expands Baker’s capabilities to reach out into the healthcare and education markets where JMA’s footprint is solid, and also will allow Baker to achieve a vision of having a studio in the Southwest, one in the Mid-Atlantic, and one in the Southeast. Market and With the just-announced acquisition of RBF Consulting (Irvine, CA), Baker can now pursue things it has previously either only dabbled in or traditionally not seen as strong suits, Mallory says. “Our water business is almost entirely related to flood plain management,” he says. “RBF’s single largest book of busi- ness probably relates to water treat- ment. That’s been a goal of ours for long time and we’re very happy to have
acquired those particular talents.” Baker is well regarded for its trans- portation capabilities, but much of that work has been for state DOTs and tra- ditional turnpike authorities. Mallo- ry says RBF and LPA have positioned themselves on the cutting edge, work- ing for county and regional transporta- tion authorities. “We are seeing a not-so-subtle shift in the transportation market away from the federally assisted, big, state-funded programs, to more locally controlled, voter initiative-driven transporta- tion programs administered by coun- ties or regional authorities,” he says. “We think that trend will continue, and are positioning to deploy more broadly across the country in that area.” The right fit. Before the acquisi- tion with Baker, RBF already had some of its senior, most capable people till- ing the soil in the United Arab Emirates pursuing project possibilities. When Baker acquired RBF, they were essen- tially able to hit the ground running. “It helps if you’re not coming cold into a jurisdiction or country – you have to pay your dues for several years,” Mallo- ry says. The same could be said for en- tering a U.S. region or state not familiar with the firm. “Frankly, mergers and acquisitions can be a good way to get there from here,” Mallory says. But the cultural and strategic parts must fit together; all parties involved in a deal must have similar philosophies. “If you get the cultural and strategic stuff right, the fi- nances follow, and integration is rela- tively straightforward.” The targets of Baker’s deals have en- joyed mutually beneficial arrange- ments, Mallory says. “The way an LPA or an RBF looks at it – from their per- spective, they attract business, cli- ents love them, but they may have had trouble reaching them; maybe the cli- ents saw how much work they had, and didn’t think they were quite big enough. Well, they’ve got a big broth- er now, and now they are,” he says.
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