Bucknall Austin is about to join the list of consultants that have set sail on global ventures with foreign partners. But some of these have sunk amid accusations of rule breaking, client nabbing or just plain boredom. Josh Brooks asks whether the game is worth the candle.

Bucknall Austin is about to set off on a long journey. The consultant is, insiders say, on the verge of expanding its coverage beyond its traditional UK market by signing a global alliance agreement with Australasian and North American practice Rider Hunt, and Chinese player Levett & Bailey.

A global alliance means companies from different territories share their clients. So, if Bucknall Austin is hired to cost a project in China, it could hand the client over to Levett & Bailey and vice versa. In most cases, there is limited financial co-operation although a holding company is usually established.

When the deal goes through, it will signal Bucknall Austin's belief that it can succeed where a much bigger rival slipped up last year. If the agreement is finalised this month, it will be almost a year to the day since Gardiner & Theobald's eight-year relationship with the same two firms ended after a bitter territorial feud.

G&T has refused to talk about the alliance's collapse, a policy still in force during the writing of this article. This silence is a far cry from the fanfares and speeches when the partnership was formed in 1997. At the time, G&T hoped its tie-up would make it part of the second-biggest QS group in the world, behind the UK-Far East empire of Davis Langdon & Everest (as it was then called). The demise of G&T's tie-up is a warning to other QSs with global ambitions: alliances are not necessarily the best way to achieve their dreams.

Why G&T's alliance foundered

G&T's aim was that the three firms would share clients who wanted to do work in each other's markets, with conference calls every week and management board meetings three times a year.

A closer partnership, perhaps even a formal merger, was mooted when the alliance was announced.

But the reality was, according to industry sources, very different. Although the details of the breakdown remain vague, it has become clear that individual ambitions got the better of the partners. Levett & Bailey and Rider Hunt seem to have felt that G&T was breaking the rules. G&T developed plans to open an office of its own in China, a key market for Levett & Bailey, which is based in Hong Kong. It is also thought to have wanted to expand in the USA, where Rider Hunt is strong. One senior QS says problems were inevitable, as the US and Chinese firms were not going to allow G&T to be partner and rival: "Levett & Bailey was never going to give up Hong Kong. They'd been there for 50 years."

Perhaps the breakdown is understandable, because senior managers are understood to have barely known each other. Some industry sources say key G&T directors would not have recognised their Australasian or Asian partners if they walked past them in a street. One source adds: "Nobody really worked at it. Without that the relationship was bound to wither - until eventually up came the opportunity in China."

A risky endeavour: the case against making alliances

Your partner might be sharing your name but it doesn鈥檛 necessarily mean they are sharing your working practices

Tim Wray, Turner & Townsend

For many in the industry, G&T's problems exemplify why QSs should avoid alliances with foreign partners when looking to expand overseas. Most of all, concern is rife that alliances can lead to abuse of trust, particularly if a firm gets too close to the clients that its partner has introduced to them. This is why many practices prefer to acquire firms in the markets in which they want to operate. Richard Steer, senior partner at Gleeds, considers acquisitions money well spent and has a strict policy of avoiding alliances - particularly after a joint venture in Ireland in the early 1990s went wrong. "Acquisitions are expensive, but at least we keep it in our own organisation."

Buying a firm means a QS can ensure that it has quality control over its subsidiaries, by setting targets and establishing work practices. Tim Wray, chairman of Turner & Townsend, argues that a major risk of alliances is that the partners do not share the same standards, with the consequent risk of damage to a firm's reputation if it doesn't do the job well enough. "Your partner might be sharing your name but it doesn't necessarily mean they are sharing your working practices."

Clear, well-directed management is also at risk if the partners in an alliance do not have enough incentive to make it work. In the case of G&T's alliances, less than 20% of each company's profits were injected into the partnership's holding company, and the arrangement could be broken off every five years - perhaps short enough for the company directors to be relaxed about the alliance failing. Many argue that this means that the partners were not willing "to live and die" by the alliance, ensuring that it did not succeed.

A lucrative venture: The case for overseas partners

Others believe alliances can be made to work, but it is important that standards of processes and client relations are shared. Francis Ives, chairman of Cyril Sweett, which has an alliance with German cost consultant Drees + Sommer and an equity-share arrangement with Middle Eastern firm DG Jones, argues that aligning IT systems is hugely important, because this ensures "standardisation of product". This means each partner can be more certain of the quality of service the other provides and feel safe leaving their clients in the other's hands. Staff exchanges can also be beneficial, as this helps the firms to a better understand the other's working practices.

Consultants agree that the crucial thing when setting up an alliance is to lay down rules, particularly over where the partners operate geographically. Andrew Dewick is joint managing director of London cost management at Northcroft, a practice that has a series of associations throughout Europe. When choosing a new overseas partner, he makes sure the local firm has no ambitions to expand into a market where Northcroft is working. Cyril Sweett's Ives echoes this view, even though his firm looks for partners with a larger geographical reach, such as those that can provide his clients with services across a whole continent, rather than the more localised practices that Northcroft pursues. Ives, who is in talks over a new alliance in India, adds: "You need very strong territorial rules and you've got to stick with them."

Then there are the benefits, cost being a major one. Practices often shy away from setting up offices in overseas countries because of the financial risks involved. An alliance, however, allows a firm to buy into the reputation of an overseas company without the expense and responsibility of an acquisition.

Alliances can also help boost a partner firm's expertise in a burgeoning market. Drees + Sommer wanted to tie up with Cyril Sweett because of the latter's experience in the PFI, a market that is in its infancy in Germany. Sweett has been involved with the Ministry of Defence's 拢12bn Allenby and Connaught barracks contract and more than 50 PFI schemes with a total value of more than 拢6bn. Its expertise can give Drees + Sommer a competitive advantage when it pitches for Germany's upcoming PFI work.

Yet the shared advantages and incentives to maintain an alliance do not always guarantee success. The profit-sharing mechanism built into G&T's alliance was seen as a safeguard against economic slumps in local markets, thereby protecting the finances of the firms at virtually all times. But this was not enough to keep the alliance intact. The retirement two weeks ago of the firm's managing partner, Peter Sanders, will leave a headache for his successor Simon Jones as to how to handle the firm's overseas business in China, Australasia and parts of America. For Bucknall Austin, though, the big trip is only just beginning.

Decentralisation: Davis Langdon鈥檚 approach

Davis Langdon & Seah International (DLSI) was formed in 1990 following the merger of Langdon Every & Seah, which operated in the Far East, and Davis Langdon & Everest, which had formed in 1988 and covered the UK, the Middle East and Asia Pacific.

Unusually for a QS group, the firm and its equity swaps are run through a Swiss structure known as a 鈥渧erein鈥. Under the verein, each of DLSI鈥檚 five regional businesses is run independently, with limited liability to each other. Because the firm is decentralised, each part of the business is bound only by regulations in its own region.

Rob Smith, senior partner at Davis Langdon and chairman of DLSI, says the verein gives each part of the business a strong bond to the others, even though clients never deal with the verein. Business is always conducted, he says, through the regional offices. 鈥淏ut the verein sets down the rules and under it we wouldn鈥檛 dream of trying to set up an office in China to compete with our own operation there.鈥

For Smith, the key to a successful global firm is the strength of personal relationships between the partners. But that doesn鈥檛 stop at the verein鈥檚 three annual global board meetings. 鈥淲e make the effort to drop in on each other even when we鈥檙e on holiday,鈥 he says.

Smith is aiming to take advantage of the international business to plug skills gaps in regions where it is hard to find staff. DLSI鈥檚 latest venture is to set up an academy for engineers in Manila in the Philippines, that will feed staff into the firm鈥檚 offices. Smith says staff have already started transferring out of the Manila office to locations around the globe.

SWOT analysis: Are global alliances worthwhile?

Strengths

  • Alliances allow firms to expand their geographical coverage into new markets with a ready made client base
  • Partners can share core expertise, such as experience in PFI, with overseas partners
  • Set-up costs are low compared with opening a new office or making overseas acquisitions

Weaknesses

  • Partners can break off an alliance relatively easily and the structure鈥檚 success is based on strong relationships between managers in different regions
  • Clients could feel they are being passed on to a consultant they don鈥檛 know or have a relationship with
  • The ground rules on geographical coverage of each partner could be breached

Opportunities

  • Partners have exposure to new clients and markets and can offer overseas services to their own clients
  • Staff can move across borders, offering attractive careers for them and potentially improving staff retention
  • Skills shortages in some markets can be plugged where there is over-supply in other regions

Threats

  • Partners could try to steal each other鈥檚 clients if they become too close
  • Management can lack the incentive to help their partners鈥 business if the financial stakes are too low
  • Quality can be a problem without careful planning and alignment of the different partners鈥 products and services

Globe-trotting: Favourite destinations for consultants

Alliance lovers

Davis Langdon part of Davis Langdon Seah International, a sort of global alliance of five divisions under a Swiss verein (see 鈥淒ecentralisation鈥)

Cyril Sweett European alliance with Drees + Sommer, equity swap with DG Jones (Middle East). Also owns offices in France and Spain

Bucknall Austin set to sign into a global alliance with Rider Hunt and Levett & Bailey

Office owners

Gleeds owns offices in China, Australia, the USA, the Middle East and across Europe

EC Harris has 25 wholly-owned offices in Europe, Asia, Africa and the Middle East

Franklin + Andrews owns offices in Nigeria, China, Hong Kong, Singapore, Ireland and Norway

Gardiner & Theobald owns offices across Europe, in the Middle East and New York; also has alliances with several European QSs

Mix of both

Northcroft has associations in Europe and the USA, but also owns or part-owns offices in Asia

Turner & Townsend owns or has a majority stake in offices in Australasia, Africa, Ireland, Asia and the USA, but has associated offices in China and Singapore and across Europe

Faithful + Gould owns offices in four European countries, the USA, Asia and the Middle East, but has an affiliate network of companies across the rest of Europe