Burton have announced the 40-year-old has been appointed as the replacement for the sacked Lee Clark
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Birmingham have parted company with manager Lee Clark following a poor start to the Sky Bet Championship season.
Blues are one place outside the relegation zone having won just two of their 12 league games so far, and only retained their second-tier status in the final seconds of the last campaign.
A statement on the club's official website read: "Birmingham City Football Club has parted company with Lee Clark and Steve Watson with immediate effect.
"The search for a successor has already begun and the board will look to make an appointment in the very near future."
Wigan wiped the floor with beleaguered Birmingham in a horribly one-sided Sky Bet Championship encounter at the DW Stadium.
Callum McManaman was again the pick of the Latics players with two first-half goals as the home side led 3-0 at the break.
Andrew Taylor and substitute Martyn Waghorn grabbed the others for Wigan, who could have won even more comprehensively than 4-0 such was their total superiority.
Birmingham have confirmed that they are in 'advanced discussions' with a British consortium over the sale of the club.
Birmingham International Holdings Limited, the holding company of the football club, made an announcement to the Hong Kong Stock Exchange (HKSE) over the course of the weekend.
Callum McManaman's quick-fire strike booked Wigan their place in the Sky Bet Championship play-offs by securing a 1-0 win that has left Birmingham City on the brink of relegation to League One.
McManaman struck with his fourth goal of the season - and his second in the last four games - after he caught Birmingham napping in only the third minute at St Andrew's.
But for Birmingham, only three years after winning the league cup when they beat Arsenal at Wembley, they are now staring into the relegation abyss following an 18th successive Championship home game without a win stretching back to October.