PODCAST: It’s little more than a month since Bilfinger tied the knot with GVA. But this was no shotgun wedding. The two chief executives began flirting two and a half years ago and, they insist, their relationship will be long and fruitful.
Rob Bould, who has led GVA through the past five tumultuous years as chief executive, is frank about the background to his first meeting with Bilfinger head of real estate Aydin Karaduman in early 2012: “Aydin wanted to buy GVA.”
Karaduman makes no bones about it either. “We decided to internationalise our business,” he says of the German engineering and services giant’s real estate division. “We started operations in Turkey and in Poland. We acquired companies in Switzerland and Holland and in the Dutch market. And, of course, we were very aware that a key market for us was the UK and that we would have to be here with a strong presence.
“We wanted to play an international role and that was the reason we started looking around in the UK. We have spoken to a lot of companies – smaller ones, bigger ones. And when I first met Rob and I came here, I said ‘that is the right target’.”
But there was a snag, says Bould: “It just wasn’t the right timing for us.” The regional markets in which GVA’s strength still lies remained, by and large, mired in recession. GVA itself was busily negotiating a £60m debt-for-equity swap with major backer Lloyds Development Capital. Meanwhile, with the ink barely dry on DTZ’s pre-packed administration into the arms of UGL – and Colliers weeks away from going down the same path – dark clouds hung heavily over the mid-tier agency world.
In short, there was no chance of GVA realising the sort of value it believed existed in the business, had it sold then. Its £150m purchase by Bilfinger, which completed on 1 July, justified the decision to hold out. Valuing the business at 10 times earnings would have been unthinkable two years earlier.
It could have turned out so differently. Bilfinger may have been seduced by GVA at that first meeting, but it kept its options open, talking to other firms with strong footholds in the UK. Karaduman won’t name names, but admits that conversations elsewhere did advance.
“We did some due diligence on other targets,” he says. “But we realised that GVA was the best one. When we really stepped into close negotiations with GVA, we left all the other ones by the side.”
Bould, who inevitably acquired the nickname Bouldfinger during the talks, now finds himself chief operating officer of Bilfinger Real Estate, with Karaduman executive president.
After weeks of the senior teams getting to know each other, both men insist the cultural fit is a good one. “The people just get on very well together,” says Bould. “They’re competitive, but there’s competition in a positive way in terms of actually just trying to do more business.”
A perfect fit
Karaduman describes how complementary the two firms are. “We had our focus more on the management side, GVA more on the consultancy side,” he says. “We think that is a perfect fit.”
Previous partnerships between engineers and property advisers have proved short-lived. Atkins’ acquisition of Lambert Smith Hampton in 1999 unwound with an MBO eight years later. UGL’s 2011 purchase of DTZ will come to an end once the sale to a consortium led by private equity house TPG Capital completes next month.
But Karaduman insists that Bilfinger will not make the same mistakes as other corporates that have acquired businesses and failed to integrate them properly. It is, he argues, something Bilfinger is good at. “The secret is, what we haven’t done in the past is really big acquisitions,” he says. “Bilfinger is a billion-euro-turnover business with 75,000 people, but no acquisition was bigger than €200m turnover. The secret is to do it together with the management and not against the management.
“Also, we are buying healthy businesses. We are not buying restructuring businesses, we are buying very strong companies in their specific markets where we know that the people like our vision and our strategy and that they join the strategy, join the vision. We don’t have a concept when we acquire a company and come over and say ‘OK, that is the concept and now we have to sit down to apply to that concept’.
“We have bought a very professional company here. ?We have very professional people here and the idea is to develop the future, the new business model, together. So for us, we try to handle that as a merger of equals. Everyone has influence.”
That said, Karaduman is clear about his ambitions for the new business. “We want to become a really international global real estate consultancy and management business,” he says. “We want to become a market leader in the European markets where we are and we want to play.”
This begs the question: why acquire a predominantly UK business? “The UK is a key market for continental Europe,” says Karaduman. “It’s the entry gate for continental Europe for many overseas investors. It brings us into a position also to go into other European markets where we are not at the moment. That’s one part. The second part is we have the GVA Worldwide network. And the third thing is to do one step after another.”
Karaduman will be tapping up that network – conversations with US member Cassidy Turley are slated – as he looks to bolt on other firms around the world, although he cautions against “doing everything at the same time”, instead taking on “digestible pieces”.
Bould and Karaduman are halfway through conceiving their 100-day plan.
Boston Consulting Group has been engaged to review structures and the operating model. Given the partners’ limited geographical overlap, “there will be no radical strip-out”.
Too many opportunities
Bould says: “The challenge we face is that we’ve got too many opportunities because people are looking at these Anglo-German businesses that are so keen to really start exploring those opportunities. We don’t want to go off with a big bang and then go flat; we want to deliver the service to our clients. The first part is really getting to know each other.”
And what will that business be called in two years’ time when the two companies are one? “GVA has its culture in the UK, which will be maintained,” says Bould. “Bilfinger Real Estate has its culture. We are looking for the best common brand and Bilfinger is a single brand. Will we be Bilfinger, and when? We have to work that through over a period of time.
“But we are not going to do anything with the brand that’s going to cost us money in client recognition.”
A combination of the two brand names is a possibility. Bilfinger has deployed hybrids among the 300 or so other businesses it has integrated.
Short-term opportunities have been targeted: building on the two companies’ shared industrial strength, capitalising on Bilfinger’s forte in shopping centre management, and working jointly in the healthcare, data centre and energy sectors.
In pitching to BASF for a disposal contract in Paisley, Scotland in May, the GVA James Barr team mentioned the likely Bilfinger deal. That may well have helped persuade the German chemical giant to appoint the firm.
“What we are doing with the operating model is seeing which parts of the business are really scalable,” says Bould. “We are in learn-stage at the moment.”
Meanwhile, there are office relocations. GVA is moving to Gresham Street, EC1, while Bilfinger Real Estate itself is on the move in Frankfurt. And yes, the business is looking to hire, bolstering its teams in the City, the West End and in Germany.
As you would expect, both men are optimistic about prospects, although they won’t commit to targets. “We are not setting a figure, but what this is about is being very good and growing the margins and growing what Bilfinger wants in terms of corporate structure,” says Bould.
“And with the depth of resources we now have, we are actually quite well off. We don’t have to go to the banks, we don’t have to borrow any money, I don’t have to go to a private equity firm.”
Karaduman won’t sign up to any commitment to challenge the likes of CBRE or JLL within a set period. “The big advantage is that we are not so strongly deal-driven, like some others,” he says. “I think the issue is profit and having a well-balanced risk profile. That means that when we have growth ambitions, those growth ambitions have to follow that profile. Of course, that doesn’t mean we have to compete with a company that has £5bn turnover. That would be crazy for the time being.”
damian.wild@estatesgazette.com
