ENR.com Senior Business Editor Richard Korman recently spoke to Robert Van Cleave, CEO of Balfour Beatty Construction plc, formerly Centex Construction and recently acquired by England’s Balfour Beatty. The conversation focused on the acquisition and its significance, the company culture and competitors.
Why did so many people, including ENR, mistakenly believe Centex Construction was being shopped to several potential buyers?
Homebuilding skyrocketed and we became a smaller and smaller part of the aggregate Centex Corp. That’s why we were sensitive to the perception that we were on the shopping block. If customers think it’s true it could be detrimental to business. But very few people pick up a $2-billion construction company. We’ve told our employees for four years Centex is not trying to sell.
So what actually happened?
Four years ago Balfour Beatty asked, “Would you be interested?” and we said, “Not at this time.” They re-approached in July last year, and this time we took it to the board, which said, “Robert, what are your thoughts?” It was a one-horse discussion.
What will be the difference between being in Centex and Balfour Beatty. Listening to English accents?
This is a laugh, but not for the reason you say. One reason Centex was a good parent is it has allowed us tremendous amount of autonomy and left us alone. Homebuilding has a billion in earnings. So we’ve not been core and have not been significant from an earnings perspective. With Balfour Beatty we are both strategic and significant and they have a willingness to invest. More involvement from our new parent than our old one has a lot of positives. We will have the opportunity to develop some joint strategic directions. It’s an owner interested in our business and we’re already feeling the love.
Where could your new relationship with Balfour Beatty take you, geographically? They have Heery and it has operations in California…
California is one area we’ve paid attention to. California is four different markets, and we would be specific about it, insuring it. Balfour Beatty will offer additional intelligence about which of those areas make most sense. Just because Heery has offices there may not make it the best. Industry size, fee levels, level of competition all matter; we will be able to validate what’s best.
In contrast to other companies in search of growth and profit, such as Skanska, Centex hasn’t bought many companies recently. Why?
Centex started by acquiring in commercial construction. Culture is key. Acquisition creates opportunity for culture conflict, so we haven’t made any major acquisitions, none in the last 15 years. The way we’ve grown business, from a billion to 2.2 billion, is by saying let’s be big, deep and significant [in selected good markets]. Different people have different strategies.
You spent 15 years at Clark Construction and the last 11 at Centex. How do you view Clark? Is Centex similar?
Clark is a very healthy competitor, in Florida and in D.C. Similarities? I take that as a compliment. They go after relationships alot and they capitalize on them. If they see a project they take it and perform.
You have had a cash bonus system for project managers at Centex. Will that stay?
Our project managers are offered incentives on how their project performs and they are in control of customer satisfaction and earnings and schedule. We think we’ve tied them to responsibility, and that’s what we’ve had for six years at Centex. Don’t know if it’s special compared to others in the industry. It’s an opportunity to pay above market for performance, tied to what they control. And it’s not done strictly by numbers; it has a financial tie, but there is a huge customer satisfaction and safety piece.