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Mar 16, 2009

SA, Australian consultancies merge to form ‘top 60’ global engineering force

Aurecon CEO Paul Hardy explains the rationale for the three-way merger that created the company in a conversation with Engineering News Editor Terence Creamer. Cameraperson: Lizelle Cronje. Editing: Darlene Creamer. (16/3/2009)
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Two leading South African consulting engineering companies officially merged with one of Australasia’s largest infrastructure advisory companies on Monday to form a new global ‘top 60’ professional technical services group, with a combined revenue of $650-million.

The new company, called Aurecon, emerged as a result of a three-way merger of the capital and skills bases of Connell Wagner of Australia, with those of Africon and Ninham Shand, of South Africa, to form a new 6 700-employee entity, with 87 offices in 27 countries.

Aurecon would be headquartered in Singapore, and would seek to position itself as a large-project specialist across the infrastructure milieu, from transport to energy.

It saw particular opportunity in Africa’s power market and hoped to emerge as an “A-list” adviser to South Africa’s power utility, Eskom, which was pursuing a R385-billion, five-year expansion programme.

While the current global economic crisis had reduced market visibility in certain sectors, particularly in building and resources, the new company also saw potential upside as a result of the unprecedented response from governments, given that many of them had placed infrastructure at the centre of their economic stimulus proposals.

Aurecon would remain privately owned by its 600 invested partners and there was no intention to take the company public. But South Africa’s black economic-empowerment imperatives had reportedly been recognised and incorporated into the final ownership model.

On a pro forma basis, Connell Wagner contributed some 70% of the combined revenue to the merger entity, with the South African partners offering the balance, positioning the new entity in the top 60 of the yearly Engineering News-Record league table of international consulting engineering and architectural groups by turnover.

Its chairperson would be South Africa’s Prof Jakes Gerwel, who played  the role of DG in former President Nelson Mandela’s government and who currently occupies several high-profile nonexecutive board positions, including the chairpersonship of South African Airways.

Paul Hardy, previously the CEO of Connell Wagner, would be the company’s inaugural global CEO, while Africon’s former CEO, Dr Gustav Rohde, had been appointed CEO responsible for Europe, the Middle East and Africa (AME). The previous MD of Ninham Shand, Arnie Möhr, would assume the role of deputy chairperson for the so-called AME zone.

The new entity would seek to participate in large-scale integrated infrastructure projects across the AME region, as well as the Asia Pacific.

Speaking at a launch function in Johannesburg, Hardy stressed that the consolidation, which had taken some 11-months to consummate, was a “merger of equals” and that it would enable the group to offer a broader range of expertise across continents.

Currently, the transport, building, mining and industry, and environmental market segments contributed about 20% each to the combined entity’s fee income, with the balance arising primarily from the power and water segments.

Hardy said that the global company still had a solid order backlog, while Rohde indicated that the order book for the AME region gave it comfort for the next 9-month to 12-month period.

Rohde indicated that Aurecon would be four times larger than its nearest South African rivals, which included firms such as Stewart Scott, BKS and Kwezi-V3.

Meanwhile, Hardy argued that the group’s newfound critical mass would position it to bid for far larger projects, including the power-related work in Africa that in recent times had gone to European and American consultancies.

Approval for the formation of Aurecon had been provided and is unopposed by the South African Competition Commission.

Hardy also stressed that no jobs would be shed as a direct result of the merger, stressing that there had been very few points of overlap between the three merging partners.

“This was a merger made in heaven,” Hardy quipped, arguing that no thought had been given to calling it off as a result of the global economic meltdown.




Edited by: Terence Creamer
Creamer Media Editor
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