Chris Balch, DTZ’s new UK and Ireland MD, has to bring together 2,000 people from DTZ and Donaldsons. Some have walked away. By Lucy Barnard.
“I must admit there’ve been days when I’ve gone home to my wife and said, ‘what did I take this job on for?’” admits Chris Balch, DTZ UK and Ireland managing director.
He is the man charged with bringing together more than 2,000 UK staff in the merger of DTZ and Donaldsons – one of the biggest takeovers the agency world has seen. Yet until 1 May this year, Balch had the much lower profile role of managing director of DTZ’s consulting and research department.
Balch certainly has his work cut out. Last week, EG reported that up to 55 current and former employees had filed claims with the Employment Tribunal, alleging that their rights under Transfer of Undertakings (TUPE) regulations had been infringed (p37, 10 November). And a substantial number of staff have left since the merger, mostly from the regions.
But Balch is optimistic about the £48.6m takeover, which was formally announced in July after at least six months of “serious” talks.
The merger has made DTZ the second largest commercial agent in the country. The combined UK commercial turnover of the two firms last year would have been £218m, ahead of Savills and Jones Lang LaSalle, and closing the gap on CB Richard Ellis, which last year had a commercial turnover of £239m.
Motives for the merger
It was a move emblematic of the new ethos pervading the biggest property advisers – swallow up smaller competitors and grow as quickly as possible – and an answer to critics who said that the 223-year-old DTZ was being left behind by the top global players. DTZ made another retort this month, buying JJ Barnicke, Canada’s largest independent property agent, for £13.9m.
For Donaldsons too, a medium-sized firm running the risk of being squeezed out of the picture between the big four at one end and niche agencies at the other, joining up with a bigger player also made sense.
But, as Balch admits, the devil is in the detail. He now has the unenviable task of trying to make a marriage of convenience work between DTZ, a quoted company with 1,500 UK employees, and Donaldsons, a partnership with 650 staff.
“There are challenges because there’s a new national business unit, retail, to fit into our structure – and we have to fit that team from Donaldsons into a mostly geographical management structure,” he says.
“We look at people coming in and see how they work – how the line management system is operating – so that we have clarity as to who provides leadership.” However, this has been hard to stomach for Donaldsons’ salaried partners – at least 20 of whom had to re-pitch for their jobs in the merged firm.
Re-pitching for jobs
The Donaldsons staff who are taking the equity partners and DTZ to the Employment Tribunal allege that both firms failed to consult them on issues such as changes in their reporting lines, job titles and office locations. An employment tribunal could award up to 13 weeks’ pay per employee. Balch says that only 20 cases are now outstanding and that most have been settled amicably.
Since the merger was signed over three months ago, more than 40 Donaldsons staff have quit – and the number is rising. This week, it emerged that four former London partners have left to join rival firms (see News). The firm’s retail agency team in Manchester, led by Matthew Illingworth, is also departing, and is expected to join Cushman & Wakefield. In Leeds, director Jonathan Hyland has left to go to Knight Frank, and senior surveyor Ellie McMillan has quit.
In September, a team of six quit Donaldsons’ Leeds office to go to Atisreal. They included Francis Brown, head of valuations, Miles Youdan, head of investment, Martin Foster, director of valuations, and Lloyd Nicholson, senior surveyor, valuations.
But Balch is adamant that staff retention has not been an issue during the merger. “Inevitably, there have been grumbles about the merger process but all in all it has been a positive thing,” he says.
Prior to the acquisition, he points out, DTZ had a 15% attrition rate and Donaldsons 20%. “We’re not ahead of that attrition rate. In the three months to October, it has been around 35 people.”
But Balch seems to take a few of the more high profile departures to heart.
“In a handful of cases I wish they hadn’t left,” he says. “It’s disappointing that they didn’t give the merger a chance. But, for the most part, I’m quite sanguine about it.”
Balch speaks as a DTZ man through and through who has been at the firm for 10 years, after DTZ bought Pieda in 1997. “DTZ is a good place to work. It has a teamwork environment and supports individuals, and is one of the major global commercial real estate advisers. We can offer people so much opportunity,” he says.
Balch is now almost through his programme of physically integrating the two businesses by moving staff from the two firms into shared offices. Last week, DTZ announced that it was leaving its main London HQ in Curzon Street, Mayfair, and moving most of its London staff to 100,000 sq ft at the former Stock Exchange tower in the City.
In London, DTZ’s West End teams, planning and development, corporate real estate, consulting and international inward investment (most of whom are original DTZ staff) are now located in the former Donaldsons offices in Warwick Street, while the Donaldsons retail team is now based in DTZ’s Curzon Street headquarters and is set to move to the firm’s new Old Broad Street offices.
In the regions, a similar pattern is emerging, with staff in Edinburgh, Glasgow and Leeds “co-mingling” (as Balch puts it) across offices with the intention that the teams in all the cities across the UK, with the exception of London, will eventually be based under one roof as lease commitments expire.
“A move like this sheds light on the culture of the organisation,” he admits. “It will be a challenge for people from Donaldsons who have ownership and management in the firm as a partnership to move to a plc structure, which is flatter and less hierarchical.
“Leadership in DTZ doesn’t mean an equity stake it means a role in the relationship with clients. Leadership in DTZ is a world of difference from traditional firms, where if you’re not an equity partner then you don’t have much leadership.”
Balch says the culture at the new DTZ will evolve into one that encompasses those of both agents, although he does not expect the two businesses to be properly integrated until DTZ’s new financial year next May – and even then he says it will be 18 months until “the whole thing is bedded down”.
“Donaldsons has a strong esprit de corps and we’ve got to ensure this is infused into the culture of the new organisation,” he adds. “I’ve been talking to colleagues about what we want in the culture of the organisation we are trying to create. The new culture will not be an imposition of one on the other.”
And Balch says that the merger is already bearing fruit in terms of its main objective – winning business. In August, the Donaldsons team won the prestigious three-year Manchester Airport management contract, worth £1.6m, from Lambert Smith Hampton.
This month, Donaldsons was re-instructed by the Home Office on a £12m three-year contract. “Overwhelmingly, clients think that the merger was a good move. It has really strengthened our relationships,” he says.
