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BDP’s purchase by Japan’s Nippon Koei caught everyone by surprise

BDP's Manchester office
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But this coupling of multidisciplinary giants from east and west makes real business sense, says Denise Chevin

Well no one saw that one coming did they? BDP’s purchase by the Japanese civil engineering practice Nippon Koei for £102 million caught everyone by surprise. Even in an age where globalisation rules, it has still left a fair few scratching their puzzled heads. Why would a firm like BDP – back from a rough few years, and building on its reputation as a solid go-to practice for large projects with something of a more fashionable edge – swap mastery of its own destiny for subsidiary status within a culturally very different company based 6,000 miles away?

The fact that it’s a Japanese firm rather than a North American one flashing the cash only adds to the intrigue. While the deal won’t affect 99.9 per cent of UK architects, BDP is to the architectural profession what M&S is to retail, a British institution that has launched a few careers since it was founded as the first multidisciplinary practice in 1961. So there is a fair degree of sentiment attached to the UK’s second-biggest practice – and, therefore, a degree of concern about what might happen next.

This is certainly not a forced sale driven by financial circumstances. BDP offloaded its crippling pension scheme to the Pension Protection Fund in 2013, and now has an enviable balance sheet and order book.

In a profession where owners are often short of exit routes, the cash will be a very nice windfall for BDP shareholders. The majority of the firm is owned by 26 current directors and 14 former ones, with the rest of the 7 million shares split among BDP Employee Benefit Trustees (Ltd), the pension fund, and several hundred employees and former employees. Dividing the £102 million capture price, minus liabilities, among these owners means there’ll be a fair few of their peers turning a shade green, that’s for sure. Employees, however, might be feeling a little nervous and might be wondering what will happen to the profit share and the business they are part of.

But BDP is about a third the size of its new owner and has about a fifth of the turnover, so it’s not the same as being swallowed by a mighty conglomerate, and, moreover, Nippon Koei says it will run BDP as an autonomous subsidiary. Of course, many companies have been promised that, only to find the ink is barely dry on the deal before the logo has been ripped up and half the senior management are off. But there really is more chance of arm’s length management with this deal. One of the reasons Nippon Koei didn’t match the Arcadis offer for British engineering firm Hyder in a bidding war two years ago was that it wanted to run it as a standalone subsidiary and didn’t feel it could add any fresh value at the £296 million price tag it eventually went for.

The east-west marriage is bound to have its challenges. Both firms may point to shared values – long-term views, both rather patrician in outlook. But it’s hard enough for architects and engineers to ‘speak the same language’ when they actually speak the same language. You only have to look at pictures of the Nippon Koei board – all wearing identical dark suits and ties and not a single female among them – to imagine a few cultural differences that might arise.

But Nippon Koei has only a very small footprint outside Japan. If it has bought BDP as an entry route into India, Asia and China, it makes sense to keep the English identity. On the other hand the takeover gives BDP the chance to expand abroad without the commercial risk weighing so heavily on its shoulders. And the merger allows both firms a chance to pitch for the commercial work around the 2020 Tokyo Olympics. It certainly has its risks but, in terms of dovetailing, the coupling makes real business sense.

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