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鈥業t鈥檚 a bit like Star Wars really,鈥� jokes Keith Howells, chairman of global engineer Mott MacDonald. 鈥淭he rebels ganging together against the evil Empire.鈥�

He鈥檚 talking about the 鈥渘uclear arms race鈥� happening in the consultancy sector - the trend towards consolidation among firms and the growth of the supersized consultant.

The 鈥渞ebels鈥� in Howells鈥� analogy are independent, employee-owned consultants such as his own. The 鈥渆vil Empire鈥� consists of the large listed corporates that Howells claims are close to crowding out the market.

The 58-year-old clearly does not want for fighting spirit - Mott MacDonald was embroiled in the UK construction industry鈥檚 biggest ever law suit over its work on Multiplex鈥檚 Wembley stadium before settling out of court (see box, overleaf). But behind his 鈥渆vil Empire鈥� joke is a serious dilemma - should the second biggest consultant in the UK merge to compete with the listed giants? Or is it happy to stay independent?

Howells admits the firm will 鈥減robably鈥� explore merger options within the next 10 years. Before that, however, it is returning to a strategy that has served it well over the past decade: expansion. 鈥淚t鈥檚 always been business folklore that you don鈥檛 want to be in the middle,鈥� says Howells, sitting in his ninth-floor office in Croydon. 鈥淭he issue is whether we end up in the middle as others stretch away.鈥�

Keeping up with the Harrises

It may seem surprising that Howells is mulling over the need to significantly gear up 拢1bn-turnover Mott MacDonald again, so soon after a five-year period in which it doubled turnover through major expansion. Between 2004 and 2009 - when Howells, who has spent his entire 36-year career at the company, was managing director - it grew from 拢485m to just over 拢1bn. There were no fewer than 20 acquisitions - eight of which were in the US, including Hatch Atlantic Infrastructure, Higgins Associates and Rail Technologies. The company鈥檚 rate of growth has slowed since then - to 3% in 2010 and 2011 - but Howells is proud the firm is 鈥渟till growing 鈥� there are many who are not鈥�.

鈥淚f you鈥檙e not growing, you鈥檙e either standing still or shrinking, and neither is very comfortable,鈥� he says. 鈥淚f you鈥檙e growing, you鈥檙e creating opportunities for people, and in theory you should be improving the business and making it more profitable.鈥�

The strategy now is to expand by a further 3-5% over the next two years and faster thereafter, by increasing its presence, including acquisitions, in 鈥渞esource-driven鈥� economies, such as Australia, Canada and Brazil, where oil and gas and mining add another dimension to the sorts of opportunities available.

鈥淚n the UK we鈥檙e big - fine, we鈥檙e up there,鈥� Howells says. 鈥淏ut in the globe we鈥檙e 15th. That鈥檚 fine, but if we were to drop down to 30th or 40th because we were overtaken by lots of other people - that would probably be uncomfortable.鈥�

You can understand why Howells is wary. The last couple of years have seen some mega mergers in the consultants sector, with Scott Wilson, EC Harris and Davis Langdon all getting snapped up by overseas-based listed consultants - URS, Arcadis and Aecom respectively. Halcrow was also bought last September, but by a fellow employee-owned engineer, US-based CH2M Hill.

Howells doesn鈥檛 see any reason for this trend to end. 鈥淚 ask myself the question, why would it stop? And there isn鈥檛 a good answer to that. Because the big companies are sitting on cash and they鈥檝e got nothing else to do with it and they seem prepared to pay over the odds for small companies. Small companies are feeling a bit fragile so they鈥檙e worried about scale and opportunities so it鈥檚 quite easy for a big guy to come along and say, 鈥楥ome and join me, you鈥檒l be secure鈥�. The only way it鈥檚 going to stop is if there鈥檚 a strong economic recovery and those small guys start feeling comfortable again and ask, 鈥榃hy should I sell my business?鈥欌��

It is these market dynamics that have led Howells to consider a merger within the next decade. 鈥淭he most likely thing for us would be to find an employee-owned company of similar size or smaller and merge with them,鈥� he explains. 鈥淸But] you鈥檝e got to find a willing partner and that鈥檚 not always easy.鈥�

Merging may be on the cards but Howells draws a distinction between Mott MacDonald and its listed rivals. He has clear disdain for the notion of listing - the firm has 鈥渘o intention鈥� of doing so, he says. 鈥淲e don鈥檛 have any external shareholders poking their noses in the business - who know nothing,鈥� he says. 鈥淚t gives us a lot of freedom to manage our own destiny.鈥�

The big hole

Mergers aren鈥檛 the only issue on Howells鈥� agenda. He鈥檚 conscious that there鈥檚 a sizeable gap in Mott MacDonald鈥檚 global network of 186 locations. 鈥淭he big hole for us is South America,鈥� he says. He explains it has always been on his list, but now, having set up bases in South Africa, Australia and Russia over the last five
years, the region is firmly in his sights. He visited Brazil on a reconnaissance trip last autumn and says the firm is considering setting up a permanent base there for the rest of South America.

The only hitch could be the potentially high cost of entry. 鈥淵ou can鈥檛 do an organic start-up in Brazil - it鈥檚 almost impossible. If you want to get anywhere in a reasonable timeframe you need to buy something, and right now companies are realising that the world fancies a bit of Brazil and they鈥檙e asking a lot of money. It would be an expensive buy if we wanted to do it.鈥�

Howells expects the resource-driven economies to provide the best growth opportunities over the next few years, and says the firm is targeting infrastructure work linked to the global mining boom. 鈥淢ining companies are having to do more of the infrastructure themselves as mines become more remote. We鈥檙e very interested in doing more in the mining infrastructure sector.鈥�

He also sees potential for the firm in Iraq. Mott MacDonald was 鈥減retty much there when the war ended [in 2003], getting water and power up and running鈥�, and has been in the country ever since - latterly working on projects for oil companies including Shell, BP and Exxon. He believes Iraq could be 鈥渢he biggest construction project in the world at some point in the next 10 years, providing it can get over its political issues鈥�.

The company is also 鈥渨atching鈥� Libya, after attending a trade mission to the country in January. Howells admits the firm was 鈥渓ucky鈥� its staff avoided serious harm in the country last year, after it pulled 10 workers out just a day before the violent uprising began.

There鈥檚 a limit to how long you can do that job and remain sane. I don鈥檛 think I could have done it for much longer

Despite Howells鈥� bullish projections for some of its developing markets, he says North America is still the firm鈥檚 鈥渂est market鈥�, with Canada providing the strongest profit margins in the group. 鈥淐anada is stronger than the US and it has been for five years,鈥� he says. 鈥淚t鈥檚 ridden the recession well and there鈥檚 a lot going on, but it could be that we鈥檙e close to maxing out there.鈥�

Closer to home

The UK, on the other hand, is the firm鈥檚 鈥渟oftest market鈥�. Howells criticises the coalition government for its lack of clarity on energy policies, and claims the industry has 鈥渓ost trust鈥� in the coalition after its decision to slash solar feed-in tariffs. 鈥淚n principle it was right to peg back [the feed-in tariff], but they shouldn鈥檛 have done it in one foul swoop [sic] - we should have pegged it back more slowly over 10 years. There were smarter ways of doing it.鈥�

But Howells backs the government鈥檚 mandatory BIM roll-out and believes the collaborative system is a 鈥済ame changer鈥� for construction. 鈥淚f you鈥檙e not doing BIM in five years鈥� time, you won鈥檛 be in business,鈥� he says. The firm is already starting to see 鈥渜uite substantial savings鈥� on BIM projects around the world, he adds.

Five years is a long time in business, of course, and nobody knows that better than Howells. He became managing director in 2004 and the next five years was a frenetic period. He says he doesn鈥檛 miss his former role. 鈥淭here鈥檚 a limit to how long you can do it and remain sane. I don鈥檛 think I could have done it for much longer. When you come into a job like that, you feel you can make a difference, but after about five years you鈥檝e run out of ideas and it鈥檚 time to let someone else have a go.鈥�

Of course, Howells鈥� period as managing director has left a strong legacy - it wasn鈥檛 just turnover that doubled, but also staff. 鈥淩ecruitment became a key activity. We had a dozen recruiters in the business doing nothing else but recruitment.鈥� Mott MacDonald now employs 14,000 people - a far cry from the company of 80 he joined from university. And that sounds like a sizeable rebel force with which to battle it out against the evil Empire 鈥�