Backing for the Future

24 June 2008

Behind the acquisition of United Utilities FM by Europa Support Services earlier this year is a strategic investment by ex- Stiell and ex- Alfred McAlpine, Billy Allan. Jane Fenwick speaks exclusively to him about his return to the FM sector as a private investor

MERGERS AND ACQUISITIONS have been a feature of the FM sector in the past few years. A few big players have consistently swallowed up smaller companies to create organisations that offer a wide range of support services to corporate national and international clients in the private and public sectors. It was, therefore, an interesting development to see that one of the most recent and among the biggest deals, involved a smaller company aspiring to be a big one. The market was rather taken by surprise in February when Europa Support Services, a respected family-run soft services provider to the managing agent and retail sector trumped the opposition to successfully bid for United Utilities FM (UUFM) when it was put up for sale earlier this year. This move has transformed Europa into the top rank of the FM sector.

Behind the transformation of the aspirations of Europa Support Services there has been the support, expertise and finance from one of the most successful and committed FM personalities who now invests in FM businesses. Billy Allan, led the MBO at Stiell Facilities in 1996 and took the company into Alfred McAlpine in 2002. Since 2005 he has been investing in businesses and aiming to regain a foothold in the FM sector.

Speaking exclusively to PFM, Allan explained his reasoning behind investing in Europa Support Services, a company of which he is now chairman. “It was not about recreating Stiell, but more about getting back into a market that I have been in throughout my career and that I love. The fact that Europa is akin to Stiell is partly by design and partly by default. Europa was the closest we could get to Stiell although it had a strong bias towards the soft services. The core of the business and its culture were very similar to Stiell’s. Martin Jones and his family who owned the business, ran it very professionally and were very focused on their customers. Those are the parallels that you could draw between Europa and Stiell.”

Allan has never been far from the world of FM support services. Apprenticed at the Scottish FM and engineering company Stiell Facilities in 1976 at the age of 16, Allan worked his way through the company to become the managing director that lead the MBO of Stiell Facilities in 1998. “When I started at 16 I decided to be the best apprentice in the company. By the time I was 21, I was sponsored for an HND. For next 5 years I focused on being the best young engineer in the company. When I was made a contract engineer, I then decided I wanted to be a contracts manager. All I did was aim for the next level. It must be in my DNA – I always thought ‘how good can I be?’, and when I arrived at the next level, I wondered how far I could push myself. Then I got to be a director, I decided I wanted to run the company. Then I had the chance to buy it out, and I felt we could be a large independent, national company.“

He recalls that in the 1990’s Stiell Facilities was “One of the few FM companies trying to do things differently”, a fact that was recognised by the PFM Awards in 2000 when Stiell’s partnership with Abbey National won the Partners in Facilities Management category and the Overall Winner Award.

Although Europa Support Services was not on the market, research by James Stander of Ronin, suggested that it was the right company for Allan to invest in. As a result, an approach was made. Allan explains, “Although Martin Jones was intrigued by the interest in his company, it was clear that the business was not for sale. After a second or third meeting, Martin was obviously excited about the opportunity, and his sister [who shared the ownership of the company] saw this as a chance to retire from active involvement in the business.”

Ronin led the MBI consortium in 2006 to acquire a 49 per cent stake in Europa Support Services to transform it into a leading FM company. At that time it had a turnover of £13m and it provided cleaning, front of house, security and maintenance services predominently to shopping centres, including the Bullring. The strategy to reshape the business has progressed and involved expanding the service offering, accessing new client sectors, expanding geographically and strengthening senior and middle management. To this end, David Pollock (also ex-Stiell and Alfred McAlpine) was appointed to the board.

During the first 15 months, Europa’s turnover had achieved £28m by December 2007. Allan continued: “My job is to make things happen, support them, drive the strategy, help build the management team and capability and put in an organization shape and structure that allows us to address market opportunities. It is a very different role for me and I enjoy it. In the days of Stiell Facilities, we had to roll up our sleeves and get on with the business. I grew up in that business and I didn’t want to give control to anyone. This is different – this is not my business - it is Martin’s business.

In February 2008, Europa acquired UUFM, a business that had grown from an internal operation to a successful externally focused company with several blue chip clients. The transaction transformed Europa into a company with a turnover of over £60m employing 2,000 staff and offering a full range of services nationally to a wide range of client sectors. Allan explained that “The intention was always to bring in other services through acquisition, hard services in particular. We were looking at 10-15 regional players when the UUFM business was put up for sale. If I was to describe the ideal acquisition, it would be UUFM.”

He continued: “We were up against some very big players. They were surprised when we were selected as preferred bidder. I don’t think the competition saw Europa coming. This was a small independent soft service biased FM company whom the big players did not consider to be serious competition. But we blew them out of the water and offered the right price too!

“This was a perfect acquisition for us. Acquiring UUFM doubled the business in size and employees overnight, moved us into the utility sector where we had not been before. The integration is going well. John Entwhistle, who heads up the UUFM division of the business has stayed on as divisional MD: David Pollock is divisional MD of the Europa division of the business with Martin Jones as group managing director.

The process of integrating the two business is ongoing with Europa aiming to supply soft services to UUFM clients, while Europa clients can benefit from hard services from UUFM. Both organisations are starting to work as one with cross selling across both businesses. Allan is particularly pleased about the close working relationship Europa has developed with a number of managing agents and UUFM’s involvement in the utilities and public sector as both are growing markets. In both instances Allan remarks that there are only a few FM service providers in these markets. “We find ourselves in two sectors – the managing agent side and the public sector – both of which are growing fast,” he said.

The acquisition of UUFM by Europa was financed with some capital from private equity firm, HIG Europe, and some bank debt. Allan commented that “Typically these deals are highly leveraged, but this is not the case at Europa. We have the capacity to take on more debt and the ability to take on a second acquisition partly because we have low levels of debt and partly because we have a partner that wants to put more capital in the business.”

He revealed that no one person has a majority share in the Europa business. He explained, “There is one institutional shareholder, Martin and his family, and me and my colleagues including Bill Loch and James Stander of Ronin. Paul Canning of HIG has a minority stake.

Clearly, Allan wants Europa to grow but not to become like other large companies in the sector of whom he is critical for no longer being innovative, and for largely offering ‘a one-size fits all’ solutions to all clients. “There is still too much focus on cost per square foot rather than understanding the value in the built environment. The cost of facilities management is insignificant compared to the rental costs of the building the salaries of the people employed in it, “ he said. “The advanced FM buyer is looking at the total cost of the space including staff, rent, occupancy and FM costs. We have to understand how that building functions and how people occupy that space. Space can be occupied more efficiently, but the FM costs may go up; conversely, the rental costs could go down. That is the kind of solution that is needed and what intelligent clients are demanding. The best customer is the one that understands FM.”

Allan understands more than most the challenges facing a growing company in the FM sector, and the importance of allowing its management to manage. Asked if he regretted taking Stiell Facilities into Alfred McAlpine considering he left the company three years later, Allan said, “It was the right thing to do to sell Stiell into McAlpine. Alfred McAlpine had the coverage, brand and balance sheet strength that we required. We had grown well as an independent but we grew much faster as part of this larger organization. Alfred McAlpine was the right company for Stiell, and in the three years that I was there I was left alone to get on with building the company. However, inevitably, as Stiell Facilities became Alfred McAlpine Business Services and became a the fastest growing and the largest part or the organisation, McAlpine started to take more interest in and control of the business.”

Allan likes to have his ‘hands on’ in any business he is involved in, so once the deal was done to invest in Europa, he took to opportunity to join Asco, a leading logistics company in the oil and gas business when it was acquired by the Phoenix private equity house. Asco provides non-core services to oil and gas companies, and as Allan explained, “It is a service company with complex contracts, and it is an international business which appealed to me as I had spent my working life in the UK.”

Whilst Asco has the advantage of being based close to home in Aberdeen, his business now takes him around the world to places as diverse as Azerbaijan, Trinidad, Canada and Norway. Asco is the largest company in oil and gas logistics, and the most diverse in terms of the number of countries and companies it supports. It services clients in more locations in the world than anyone else. The Asco business is five or six times the size of Europa’s but it employs fewer people because it is a managed services model rather than service delivery model.

As Allan explained, he faces a completely different set of challenges. “I don’t want to leave FM and never will, but this is for me an interesting business. The different cultures and huge distance are challenging. We have to mobilize businesses to look and feel like an Asco business, with all the systems, processes and people behaviours in totally different time zones and cultures, and without losing quality of service. These skills can apply to FM. If we can do that in Azabaijan we can do it in Newcastle.”

He has taken from his FM experience a whole range of new initiatives on employee development, selection and recruitment, appraisals etc. He explained that the emphasis on people had lapsed in Asco. He said, “Now that has changed and people think it is a good company to work for.”

He added that he has also brought to Asco from his FM background a greater attention to customer service. “It was always good but it wasn’t great. We needed to take it to a new level. Key account management was new to Asco and now we have account managers for key clients such as BP and Talisman, to develop the business. We were perhaps guilty of looking like the big FM players in the UK. We did what we did because we were good at it, and did not feel the need to be creative. But, we always have to be more creative.”

It is hard not to be infected with his energy and enthusiasm for the FM business which has been his life from apprentice to private investor. Asked which role has given him most satisfaction from his career in Stiell Facilities and as part of a large corporate in Alfred MacAlpine, he clearly preferred to be part of the MBO management team at Stiell Facilities.

He said, “Europa is close to that but I am a ‘non-exec’ so a little bit of the fun is missing. Asco is close too but is a private company. I like to be hands on. I have never woken up and thought ‘I wonder how much money I will make today?’ and I never will. For me it is about having the control and responsibility for your own business and the decisions you make. This is also the case in Europa. Everything we do in Europa is our business. You live or die by the decisions you make in your own business. It is not about money; it is about pride in a job well done and having control over your own destiny.”