Wood Group firmly believes the energy services industry is predominantly a people business. That is, people are the principal asset of any company and represent a competitive advantage.
Over the last few years, major acquisitions have become a common occurrence in the energy industry. While it's understandable that employees worry about the personal impact of such events, an issue of equal concern to the companies involved is the very real possibility that clients may delay orders while deliberating potential changes. In a situation of even moderate confusion, competitors will circle like sharks.
A major component of what changes hands in an acquisition is management and employees' knowledge of business activities and key relationships with clients, vendors, and company personnel. These relationships are critical to the continued success of the company. This is why when Wood Group considers acquisition candidates, the company looks for businesses where it can retain the existing management team following the acquisition and provide an environment that will allow the team to generate organic growth.
This strategy of retaining the existing management team is often met with initial scepticism; however, management team members who have been involved with a Wood Group acquisition soon learn how true this is. These managers discover Wood Group's underlying culture of decentralized entrepreneurial management. Wood Group has built a track record of successful acquisitions that translates into a selling point when the company negotiates an acquisition. This post-acquisition philosophy can be a deciding factor for members of the management team in the company being acquired.
A recent example that illustrates the success of the approach is Wood Group's relationship with Mustang Engineering. Mustang had historically experienced strong growth based upon the superb focus of the company's employees, combined with great client relationships. Mustang launched what it called an "adopt-a-parent program." The idea was to find a parent company that would act as a partner, maintaining Mustang's hard-won culture and relationships, while assisting in the growth of the business and its movement to the next level. Mustang joined the Wood Group family in 2000, and since then has doubled in size.
For a more recent example of Wood Group's acquisition style, consider Thomason Mechanical. This heavy industrial turbine field service company is based on the west coast of the United States. Thomason joined Wood Group in 2002, providing the smaller company with greater opportunities, including access to new engineering resources and sophisticated repair technologies. Thomason's clients were delighted after the acquisition when there were no changes in management, philosophies, or relationships.
It is important to note that while Wood Group is careful not to disrupt the management teams of acquired companies, it does take an active interest in these companies. Existing management is empowered to work with the group's wider network of companies and resources to grow the acquired business in its particular market. Wood Group also works with the acquired business to develop and guide the overall success of the business. This is done through a series of regular strategy and performance reviews.
This philosophy has proven its success. Wood Group is widely known as an acquisitive company, which could lead to the assumption that its growth has been largely bought-in. Acquisitions are, however, only a small part of the story. Although Wood Group has a track record of making and successfully integrating a significant number of acquisitions each year, the majority of the growth comes from further developing these businesses post-acquisition. Looking back over the last 10 years, it is telling that 30% of Wood Group's growth comes from acquisitions and 70% from organic growth.
Wood Group's continuing goal is to find good businesses with good people, bring them into the group, and then together really begin the expansion process.
Deputy Chief Executive
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