21 | businessnews.com.au February 29, 2016

With many professional services firms chasing diversification

opportunities, Business News profiles four businesses pursuing very

different strategies.

HOW does a tech

start-up in North-

bridge backed

by a mining con-

sultancy in West

Perth manage to secure work

on the world’s largest privately

funded infrastructure project, in

Nicaragua?

The answer lies in the diversi-

fication strategy pursued by CSA

Global, which has found novel

ways of employing its expertise

during the mining downturn.

CSA has secured clients in vit-

iculture, broadacre farming and

most notably on the $US50 bil-

lion Nicaragua Grand Canal and

Development Project.

5-PAGE FEATURE

Mark Beyermark.beyer@businessnews.com.au

@AMarkBeyer

Novel strategies for growthWELL STOCKED: Jeff Elliott says CSA Global has no need to go into ‘hibernation’. Photo: Attila Csaszar

“The minerals industry is doing

it tough but business goes on,”

managing director Jeff Elliott told

Business News.

“We’ve got good people and we’ve

got the financial resources, we

don’t need to go into hibernation.”

Its recent initiatives have

included applying the mineral

industry’s approach to prospectiv-

ity mapping for the wine industry.

At Swinney Vineyards in Vic-

toria, CSA built a 3D soil model

showing all of the main soil types,

overlayed with the viticulturist’s

fruit quality maps to find which

soil types coincided with the best

fruit.

The results can be used to help

identify the best areas for new

vines.

The company took a similarly

lateral approach to the farm sector.

Just as miners blend ore from

multiple pits to get the best mix

for clients, the same approach is

being applied to hay.

“We took a mining optimisa-

tion solution and applied that

to hay blending,” Mr Elliott said.

He said the work in Nicaragua

came from a discussion about

aerial photography.

“We told them about the tech-

nology that’s available and the

benefits of that, and how it

could help them locate the build-

ing materials they need for the

canal, the sand, gravel, stone,

cement, etc,” Mr Elliott said.

“If you know where the indus-

trial minerals are, you could

start optimising your canal

route economically based on

load and haul distances.”

To Mr Elliott’s surprise, CSA was

FEATURE

F E AT U R E

• Diversification

a key goal for

many businesses

• New revenue

helps offset

mining

slowdown

• Acquisitions

can speed up

diversification

• Integration a

major challenge

Key takeaways

That was

something we

developed for the

minerals industry

but we’ve been

able to apply it

to agriculture

and we’re now

applying it to

infrastructure

- Jeff Elliott

employed former Leighton boss

Bill Wild as chief project adviser.

“We thought we didn’t stand a

chance because they were going

global,” he said.

Despite these doubts, CSA was

contracted last year to conduct an

aerial geological survey of the pro-

posed 276-kilometre canal route

and the Lake Nicaragua shoreline.

“They were pleased to have

exposure to international experi-

ence and diverse experience, and

bringing in technology and ideas

from other industries,” Mr Elliott

said.

CSA recently won its second

contract on the canal pro-

ject, to supply an information

management system for the

archaeological, environmental,

Continued on page 22

Professional services

invited to pitch for the work by

Hong Kong-based project devel-

oper HKND Group, which has

FEATURE PROFESSIONAL SERVICES

22 businessnews.com.au | February 29, 2016

geological and engineering data

being collected.

It’s using a cloud-based solution

that was developed in-house and is

now housed in Northbridge-based

technology startup Spring Tech.

“That was something we devel-

oped for the minerals industry but

we’ve been able to apply it to agri-

culture and we’re now applying it

AMBITION: Otoc wants to secure around 5 per cent of the national survey market,

according to Simon Thomas.

Firms’ novel business strategiesFrom page 21 to infrastructure,” Mr Elliott said.

Innovation history

Mr Elliott said CSA had been

pursuing innovative solutions

since Irish geologist Rupert Crowe

founded the business in 1984.

“He was one of the first people

in the industry to use the original

Apple Macs, to bring the power of

computing to the geoscience field,”

he said.

That led to CSA developing

more capability in geographic

information systems.

“He started up a GIS company

that is well-known to this day,

NGIS,” Mr Elliott told Business News.

“It started up inside CSA, the

same way modern startups

happen, it was incubated then

stood on its own two feet.”

CSA originally specialised in

base metals, but under Mr Elliott

broadened its coverage to other

commodities.

It has also diversified beyond its

geologist roots, to offer services

such as ore body evaluation, mine

planning and mine operations,

and has opened international

offices.

“By adding capability and open-

ing up market opportunities, that

led to clients saying ‘why don’t you

have an office here’?”

We’re

looking for

principals who

are attracted to

the concept that

we’re building a

large, national

surveying-

related services

business

- Simon Thomas

Mr Elliott said CSA tended to be

countercyclical.

“Listed companies tend to

follow market trends, they tend

to be a bit late adjusting,” he said.

“Private companies can hide

under a cloak and be far more

nimble and dynamic.

“That means when others react

to the market, we react to the

opportunity that presents.”

Mr Elliott said the group also

had a conservative financial

model, to help it deal with the

impact of commodity cycles.

“We put away hay in the good

times; that gives us a reserve if

opportunities come up.”

Diversification was an ongoing

journey, he said.

“You should stick to your

knitting unless you’ve got the

expertise to move into a new

area, and if you move, make sure

it’s a natural extension, not a com-

plete right turn or a big jump into

another industry,” Mr Elliott said.

“It’s not like we were geos who

suddenly said we’re environ-

mental experts or construction

engineers.

“We’re a mining consultancy

with a range of services, and a very

strong foundation geologically

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PROFESSIONAL SERVICES FEATURE

23 | businessnews.com.au February 29, 2016

BASE: Lycopodium remains a resources-focused business, Peter De Leo says. Photo: Attila Csaszar

There is no

plan to reinvent

the company;

we believe at

our size and

scale, that there

is a sufficient

market across

our existing

sectors

- Peter De Leo

because that’s the heart of our

service.”

Mr Elliott said a recurring

theme during CSA’s growth was

collaboration, which was contin-

uing but in a different way.

“Typically in the past we pooled

resources with others in the

mining industry,” he said.

“The future is collaboration with

people outside mining, you get

greater leverage opportunities.”

Tech opportunities

In recent years, CSA has turned

more attention to investing in

innovation.

“What drove us to invest in

innovation was the GFC,” Mr Elli-

ott said.

“Suddenly we had spare capac-

ity and people with good ideas.

“One of the lessons we’ve learned

is that you can identify the inno-

vation within, but don’t try to

commercialise it from within.

“In a professional services firm,

the mantra is staff utilisation,

gross profit, hourly charge-out

rates and all that.

“In a startup, if you bash them

with that, they switch off.

“Those natural defence systems

will attack it.

In support of this goal, CSA

recently participated in a $900,000

capital raising for local big data

company Inhouse Group.

The fundraising was led Mr

Rossdeutscher, who also joined

Inhouse as board chairman.

Mr Elliott said that, like all of

its peers, CSA had been heavily

affected by the mining slowdown.

Its turnover had fallen, while its

head count had dropped to about

80 people.

However, he believes its diversi-

fication has helped.

“We’ve stood against the

weather much better than most

others,” Mr Elliott said.

OTOC’s new focus

Contractor OTOC is taking the

concept of diversification further

than most companies.

It is effectively creating a

second, professional services

business stream through the

acquisition of surveying firms

across Australia, to operate

alongside its contracting arm.

It is hoping those businesses

will deliver steady, reliable earn-

ings, in contrast to the lumpy

income from contracting.

Otoc has owned Perth-based

Whelans since 2010 and has

bought three east coast surveying

firms during the past two years.

Chief executive Simon Thomas

said the group held about 1.5 per

cent of the national market, and

wanted to get bigger.

“We have an ambition to have

around 5 per cent of the national

“The best thing to do, if you

think you’ve got something good,

is push it aside, free it up, give it

space.”

CSA’s journey of innovation

took another step in 2014 when

technology entrepreneur Peter

Rossdeutscher joined as chairman.

He also chairs a board

sub-committee looking at growth

opportunities outside CSA’s core

consulting activity. Continued on page 24

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ACCOUNTANT ACQUISITIONS IN WA*

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EY: C3 Business Solutions, ISD Analytics, Oyster Consulting

KPMG: Markets IT, Momentum Partners, SGA Property Consultancy

PwC: Appian Group, Hands-on Systems, GEM Consulting

* This is a sample of acquisitions in recent years, not a full listing.

For more see businessnews.com.au

OTOC

survey market,” Mr Thomas told

Business News.

That presents two major chal-

lenges: the group will need to

complete a further 10 to 15 acqui-

sitions over the next five years to

achieve its goal; and it will need

to effectively integrate those

businesses so it doesn’t repeat

the mistakes of companies like

VDM Group.

Mr Thomas said Otoc was pre-

pared to bide its time to find the

right opportunities.

“We’re not seeking out dis-

tressed businesses that we can

improve through cost efficien-

cies and cost-cutting,” he said.

“We try to identify businesses

that are sound in their own right.

“We’re looking for principals

who are attracted to the con-

cept that we’re building a large,

national surveying-related ser-

vices business.”

Mr Thomas said integration

was a gradual process than

cannot be rushed.

“We allow them to operate

stand-alone for a two year period

and that allows us to work hand-

in-hand with the principals on

how the integration process will

take place,” he said.

Mr Thomas said the inte-

gration of core areas such as

11KPMG AUSTRALIA ACQUISITIONS IN PAST TWO YEARS

Many strategies, one goalfor businesses – diversifyFrom page 23

It’s not a

simple property

sale, nor is it a

complex M&A

deal, it’s in a

sweet spot right

in the middle

that suits our

service - Justin Carroll

treasury and finance had deliv-

ered savings, such as through

consolidation of insurances.

There was also a concerted

effort to improve and standard-

ise business processes to create

not just cost savings, but more

importantly, consistent quality

and service delivery.

Lycopodium on track

Mining-focused engineering

firm Lycopodium has broadened

its activities over the past decade

but has no plans to shift its core

focus, despite the downturn in

that sector.

“Overwhelmingly we are still

resources focused and we’ve been

careful not to lose that,” managing

director Peter De Leo said.

“It’s what we’re very good at

and have a very good name for

internationally.

“Our story has been more about

broadening than diversification.”

Lycopodium has completed sev-

eral small acquisitions since 1999,

including its Melbourne-based

process design business and its

Perth-based asset management

business, which have given it

exposure to industries outside

mining.

“They are small but they are

doing some great work,” Mr De

Leo said.

“They’ve made the landing a

little softer.”

Lycopodium has also created

new business streams, including

its infrastructure arm, which has

won numerous small contracts

on projects ranging from the

Yanchep Surf Lifesaving Club to

suburban land subdivisions.

“That was really just an

extension of what we did for

mining-related projects, building

camps, non-process infrastruc-

ture and civil engineering,” Mr De

Leo said.

He said the company’s core

minerals business was already

diversified across commodities

and geographies.

“There is no plan to reinvent the

company or anything like that.

“We believe at our size and scale,

that there is a sufficient market

across our existing sectors.”

Accountants

The ‘big 4’ accounting firms

have made more than 20 local

acquisitions over the past two

years, mostly of specialist consult-

ing groups in the technology field.

PwC Perth office managing

partner Justin Carroll said the

group diversified into new areas

when it recognised synergies with

the needs of its clients.

“If we get a lot requests, we will

look at buying or building up the

capability internally,” Mr Carroll

said.

PwC’s latest acquisition was

national infrastructure advisory

firm Appian Group, which has

worked on projects including

Perth Stadium, Fiona Stanley

Hospital, Elizabeth Quay and Mid-

land Health Campus.

“They have deep project skills

that have been fully integrated

into the PwC network,” Mr Car-

roll said.

He said acquired firms could

have a lasting impact, even if the

principals moved on after a few

years.

In Perth, for instance, PwC

acquired GEM Consulting in 2007

and Mainsheet Corporate in 2009.

GEM’s Robert Radley is now

at Azure Consulting, his former

colleague Brian Beresford was

recently appointed head of

corporate finance at Euroz Secu-

rities, while Mainsheet’s Maurice

Argento now runs a management

consulting practice at BDO.

“Those people have left but the

capability and type of business

they built, the methodologies,

mindset and thought processes,

that all stays,” Mr Carroll said.

“The acquisitions also estab-

lished a critical mass that has

allowed us to continue.

“Would we do those deals again?

Every day of the week.”

Mr Carroll said PwC’s consult-

ing practice, headed in Perth by

Andrew Friars, was one of its fast-

est growing divisions.

A notable growth area for PwC

is real estate advisory, a service

it has offered for three years in

Perth and six years nationally.

Mr Carroll said PwC focused on

providing strategic analysis and

advisory services rather than just

being transactional.

He believes PwC’s rounded

capability was a major factor in

the firm being appointed last

year to manage the sale of the

Insurance Commission of WA’s

commercial property portfolio.

“It’s not a simple property sale,

nor is it a complex M&A deal, it’s

in a sweet spot right in the middle

that suits our service.”

Mr Carroll said while most of

the graduate recruits joining PwC

were from a traditional commerce

background, the lateral hires were

often from different areas.

This includes psychologists,

doctors and clinical nurses

working in the firm’s health con-

sulting practice.

“That’s become a huge part of

our business, maybe the best in

Australia,” he said.

Mr Carroll said PwC was also

building a substantial legal prac-

tice, which currently employs 120

people in Australia.

He said the firm’s strategy was

to be a one-stop shop for clients,

but it would only offer legal ser-

vices that were relevant to its core

business.

STRATEGY: Justin Carroll says acquisitions created a critical mass that allowed PwC to

continue. Photo: Attila Csaszar