Anatomy of a merger

Tetra Tech’s president Jan Auman prefers the term “merger” to “acquisition.” He has just returned to the United States after months in Europe, Australia and Southeast Asia, tracing the margins of Tetra Tech’s new markets. After acquiring Coffey International Ltd. last fall, the contracting giant picked up business in Australia, Vietnam, the Philippines, Papua New Guinea, East Africa and the United States, via Coffey’s U.S. subsidiary, Management Systems International. “It was such a large and complex operation that I felt the only way to really understand it was basically to embed,” he told Devex. The strategic significance of “welcoming Coffey to the family,” as he put it, is all about that geographic breadth, as well as the companies’ compatibility at the sector level. Tetra Tech has a long history of working with the U.S. Agency for International Development on consulting and engineering projects in areas such as water, infrastructure, governance, energy and climate and others. Like many other American organizations, however, it struggled to win contracts with other big donors, including the United Kingdom’s Department for International Development, Australia’s Department for Foreign Affairs and Trade, and EuropeAid. Coffey brings those new players into Tetra Tech’s portfolio, where its organizations can now “share those platforms,” Auman told Devex. Leveraging an acquisition to enter a new market has proven successful for other development players in the past. When Development Alternatives Inc., a U.S.-based firm acquired British consultancy HTSPE in 2013, it grew its DfID, EuropeAid and World Bank business by leaps and bounds. For example, at the point of acquisition, HTSPE had won $33 million in contracts with DfID between 2011-2013 alone. Tetra Tech hopes to replicate that success. The company currently operates in more than 150 countries, with 400 offices and 13,000 employees worldwide. Coffey, which was originally founded in Australia as the country’s first geotechnical firm, brings 3,300 staff working across five continents. Known well in the USAID and DfID communities for its excellence in monitoring and evaluation, Coffey has already “deepened [Tetra Tech’s] monitoring and evaluation knowledge base,” Auman said. Buy quality Auman spoke to Devex on Tuesday from San Antonio, Texas, where Auman was en route to D.C. for the first gathering of all of Tetra Tech’s international development units after the merger. They hope “to really get to know each other, to share knowledge, to share best practices, to really get to know the depth and breadth of our technical capacities,” he said. No stranger to mergers and acquisitions, Auman was the chief of partnerships at another firm acquired by Tetra Tech eight years ago, ARD, formerly known as Associates in Rural Development. Since then, Tetra Tech has acquired or “merged” with four other entities. “The fundamental lesson we’ve learned is to buy good, passionate companies and just encourage them to do their thing,” he said. Auman saw that approach first hand coming from ARD. “We still have our offices in Vermont. We still have a very unique culture and legacy,” he said. Tetra Tech intends to preserve Coffey’s legacy as well, he said. “Our approach to acquisitions is to respect each community, and I assure you Coffey will remain Coffey, Coffey will maintain its personality and the quality that has established its relationships and trust with its partners,” he said. “We can’t tell them how to work within their client space, within their markets, but what we can do is provide a platform for shared knowledge management.” Maintaining Coffey’s unique identity also makes business sense, if previous mergers are an example. “I think the advantage in merging with a company that’s already here, and you’ll see the big American companies that have come in, have acquired quite sensibly, and then used those vehicles as a way of delivering,” Kit Black, general manager for international development at Coffey told Devex. “I think what they’ve all learned, is that you can’t bring a different cultural approach and impose it. If you look at companies like DAI, even though it’s a big American company, it’s definitely got a British flavour to it when you look at the personality and approach,” he said. A win-win The Tetra Tech merger enables Coffey to expand its reach, too. “I think because Tetra Tech take the view that if a business is working reasonably well, then there’s no need to to impose much shift,” Black said. “The view of staff has been generally very positive because it brings an expanded capability for our market. We operate in these types of areas, and now we can potentially operate in the global environment,” he said. Black pointed to Tetra Tech’s expertise in climate change as a particularly exciting opportunity for Coffey to grow its knowledge base. Likewise, Auman said Coffey brings its strategic advantages in the education and health sectors, market areas that “were not strong suits” for Tetra Tech. Both Black and John Nittler, director of Tetra Tech ARD’s Environment and Natural Resource Sector acknowledged one area of potential overlap — particularly for the environment sector — will be Tetra Tech and subsidiary MSI’s work in monitoring and evaluation. Both said the conflict of interest is a minor one, and is to be expected. “We have initiated and look forward to strengthening our relationship with them, while still trying to balance the organizational conflict of interest,” Nittler told an audience of development professionals gathered at Coffey’s new offices in Russell Square in London last month. Auman likewise prefers to approach the overlap as “complimentarity,” he said, for the companies’ monitoring and evaluation operations — unlikely to cause few, if any hiccups beyond those expected in a merger of this size and complexity. 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