Should You Merge Your Business? Probably!

In Australia there are approximately 10,800 architecture, engineering, planning and related consultant and design businesses*. Of these:

■ 60% of practices have less than 5 people

■ 80% of practices have less than 10 people

■ 90% of practices have less than 20 people

This is just under 10,000 businesses who have a heavy reliance on the principals to bring in the clients, recruit and manage the people, design and deliver projects and control the finances. Ultimately, it doesn’t leave a lot of headspace, time or capacity to build and grow the practice. It also doesn’t allow much time to deal with success and the increasing risks that result from demanding contract conditions, finding and retaining the right people, lower fees, investment needs, and the changes in an increasingly global economy.

*Australian Bureau of Statistics Professional Service Businesses 2016.

The benefits of merging

Merging—the coming together of two businesses and becoming a new business—is an increasing trend worldwide, an approach that Australia is slow to embrace. In our region, we are a long way behind what’s happening in other parts of the world—in particular, Asia and the US. In the past six years alone, approximately 600 architecture and engineering firms have been either sold or merged in the US.

It is clear that the total number of architects, engineers and designers in Australia far exceeds the commercial demand for services. There are too many businesses competing for a diminishing service in an increasingly competitive market place. The number one concern for AEC leaders is the diminution of fees and services — the consequence of high and increasing competition for clients and projects from a myriad of sources. This includes other professions, the construction sector, the impact of technology and the forces of globalisation.

The advantages of merging /combining your business in today’s increasingly competitive and oversupplied market place include:

■ Increasing the client base

■ Stronger and more talented leadership

■ Increasing your skill base

■ Increasing productivity

■ Economies of scale

■ Increasing the capacity to invest in technology, innovation and systems

■ Building scale to engage experts in business

■ Improving the firm’s competitive position

■ Expansion into other geographic regions

■ Adding new practice areas

■ Greater capacity to devolve and spread the client relationships

■ Diversification of work to mitigate the risk

■ Sharing the workload and improving work / life balance

■ Increasing your influence in the marketplace

■ Succession and exit strategy.

The downsides

AEC businesses, in particular, are different to most in that each has a clear identity, a distinctive design proposition and unique culture. Merging with another company and maintaining that uniqueness is ultimately seen to be especially difficult to overcome for many AEC business leaders.

Below are a few of the primary reasons that Management for Design regularly confronts with businesses who are hesitant to merge:

1. Leaders not wanting to lose control of design and clients

2. Lack of outside trusted advisors — “who do I go to?”

3. Answering and being accountable to others

4. Inability to step away from the day to day

5. Not knowing where to start and how to go about it

6. Not knowing potential partners / targets

7. Culture of independence and freedom.

Learn more

To find out more about he pros and cons of merging—and how you can make it work for your business—make sure you read our recent two part Business Journal series in full.

Management for Design has developed a unique approach to executing an approach to developing and executing a merger strategy that, if implemented, effectively ensures alignment of strategy, brand, aspiration and results. At the core is a methodology and system to ensure successful execution that involves the key people in the business.

For more information, contact Rob Peake on rpeake@m4d.com.au.