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Tuesday, Oct 4, 2022

New AECOM CEO Unveils Restructuring Plan

Just two months into his tenure as chief executive of Century City-based engineering and infrastructure giant AECOM, Troy Rudd’s first bold move has been a company restructuring that has claimed the position of one high-level executive and consolidated power into the hands of company President Lara Poloni.

Rudd, who took over as chief executive on Aug. 15, announced an operational restructuring on Oct. 5. The plan places Poloni in charge of the company’s entire design and consulting services business, which makes up the bulk of the company’s $13.6 billion in revenue.

“This initiative further simplifies the operating structure of the company and will enable greater connectivity and collaboration across the enterprise,” AECOM said in its announcement.

As part of this simplification, the position of group president for design and consulting services Americas was eliminated. Steve Morriss, the executive who held that post, “has stepped down effective immediately,” the announcement said. 

Morriss will continue to consult for the company during a transition period of unspecified length. His responsibilities are to be handled by Poloni, who assumed the role of president in June.

A company spokesman declined to comment when asked whether Morriss stepped down of his own volition. 

“Our greatest opportunity is to fully capitalize on the expertise that is inherent across our organization by thinking and acting as one global company — and in order to do that, we need to be structured as one,” Rudd said in a statement. 

“Today’s announcement is a critical step in the advancement of our strategy to best position the business for success, to ensure that we continue building on our momentum toward our vision of establishing a new standard of excellence in the industry and to, in turn, create exceptional value for our stakeholders,” he added.

Simultaneous with the restructuring news was the revelation that Chief Operating Officer Randy Wotring — a 40-year veteran of AECOM and its predecessor companies — was retiring effective immediately. He will continue to serve as a senior adviser to the company through the end of the year. 

Wotring came to the company from URS Corp., which AECOM purchased in 2014. He had been president of URS’ federal services group for a decade prior to the purchase.

“He provided continuity until the CEO change occurred, so I’m not surprised by the timing of his retirement announcement,” said Mike Dudas, partner for engineering and infrastructure at Vertical Research Partners, an independent equity research firm based in Stamford, Conn.

The restructuring, which was announced after market close on Oct. 5, had little apparent immediate impact on investors. AECOM’s share price edged down on Oct. 6 less than 1% to $44.11.

What carried more impact for investors was a move by AECOM just one business day earlier. On Oct. 2, the company announced prior to market open the completion of a $155 million share repurchase program that began in September.

AECOM also announced a plan to repurchase up to $300 million worth of additional shares through the end of this year. That’s about half of the company’s total outstanding share repurchase authorization of $605 million.

That news sent AECOM’s share price up 4.3% on Oct. 2 to close at $44.05.

Accelerated transition 

The restructuring and share buyback are the latest in a string of measures AECOM has taken to boost shareholder value in recent years.

Exactly one year ago — as the company was being pressured by activist New York hedge fund investor Starboard Value, which had purchased a 4% stake in the company — AECOM agreed to sell its management services business for $2.4 billion to affiliates of New York-based private equity firms American Securities and Lindsay Goldberg. That deal closed in January. 

The management services unit had roughly $6 billion in revenue and about 25,000 employees worldwide. The sale made AECOM a significantly smaller company in both revenue and employees.

In November, then-Chief Executive Michael Burke announced his retirement from the post, effective in March.

But as the coronavirus was halting business around the globe in March, AECOM’s board postponed Burke’s exit.

Rudd, who was then chief financial officer, was named chief executive in June, with the transition date set for Oct. 1.

Just two months later, the company announced the transition date had been moved up. 

“Given the tremendous progress we are making with substantially improved financial performance and the smooth leadership transition, I plan to accelerate my departure from AECOM and transition my responsibilities to Troy Rudd on August 15,” Burke said in a conference call with analysts in early August. 

“While we’re only six weeks into our transition, Troy and Lara (Poloni) have already proven they are ready to lead this company immediately. I see no reason to further delay this transition,” he added.

The Oct. 5 announcement was Rudd’s first major operational move as chief executive.

“Moving the design business to one global platform makes sense for efficiencies and a better ability to drive improved margins in U.S. and elsewhere,” analyst Dudas said. “These moves seemed natural and affirm Rudd’s intention to hit the ground running.”

Howard Fine
Howard Fine
Howard Fine is a 23-year veteran of the Los Angeles Business Journal. He covers stories pertaining to healthcare, biomedicine, energy, engineering, construction, and infrastructure. He has won several awards, including Best Body of Work for a single reporter from the Alliance of Area Business Publishers and Distinguished Journalist of the Year from the Society of Professional Journalists.

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