A change in the wind

At a time when other design groups have been merging with, or acquiring, their contemporaries in a bid to achieve the growth they crave, Rodney Fitch & Co and Wickens Tutt Southgate are ploughing individual furrows.

In parallel transactions completed in the early hours of last Friday morning, WTS founders Mark Wickens and Paul Southgate bought back the majority stake Rodney Fitch & Co has held in their company since 1996. Meanwhile, Virgin Group sold the 50 per cent joint venture stake it held in Rodney Fitch & Co to founder Rodney Fitch.

“Virgin has been a generous partner in establishing our business and we have been able to work for it on some very successful projects. However, I have taken this opportunity to buy out Virgin and simultaneously sell our interest in WTS back to Mark and Paul,” says Rodney Fitch.

Last month Virgin also quietly sold the 20 per cent stake it had held in design group Clinic. “It was purely a commercial decision. We are still doing masses of work with Virgin,” says a Clinic spokesman. But the deal means that the varied Virgin conglomerate has now divested itself of all its design consultancy operations.

Those consultancies will now have to operate without a generous parent company. But the news that Rodney Fitch & Co and WTS have decided to part company will come as no surprise in the design community, which has been buzzing with gossip about the two groups splitting for some time.

“We never tried to integrate the businesses,” says Rodney Fitch & Co managing director Christopher Jenkins. Instead, the pair aimed to find joint projects which best used their respective talents.

“We’ve enjoyed a fruitful relationship with Rodney, and done some great work together for clients such as The Seattle Coffee Company. But the opportunities for synergy have not been as strong as we had both hoped, so we are pleased to take this opportunity to go our separate ways, though we will continue to work together as and when opportunities arise,” says WTS chairman Wickens.

Jenkins agrees that “the relationship has not brought as much joint work as it might have done”.

But all parties are maintaining a dignified silence when it comes to the precise reasons behind the split. “Owning design companies is not really part of the core Virgin strategy,” says Virgin Group director of communications Will Whitehorn of Virgin’s decision to sell its design interests.

Wickens says just: “We are the sort of people who have to work for ourselves.”

But he and Southgate say they are even unable to name the venture capital company which backed their buyout. All the companies involved are maintaining strict confidentiality when it comes to the financial side of the parallel deals.

In particular, they all decline to comment on what one well-placed industry source claims was a prime motivation for Rodney Fitch & Co’s sale of its WTS stake.

The source claims that the dire economic situation in Asia, where Rodney Fitch & Co carries out much of its work, had led to the group needing extra backing from Virgin over recent years. When Virgin’s patience faltered, the sale of WTS was allegedly needed to repay some of the debt, a large proportion of which has now been written off, claims the source.

Whitehorn declines to comment on the claims, saying only that Rodney Fitch & Co “paid a fairly substantial sum to buy back the business… whether or not that matched the original investment sum is a moot point”. Whitehorn describes Virgin Group’s backing of the deal as “a very personal investment. Rodney [Fitch] had approached Richard [Branson], who he knew”.

The two design groups have different future plans. WTS will be introducing a shift in strategy, to concentrate on identity work. “I would imagine there will be some people joining us in the not too distant future,” says Wickens.

Rodney Fitch & Co is taking a more cautious view. “There will be no immediate changes,” says Jenkins. “Acquiring 100 per cent of Rodney Fitch & Co gives us the opportunity to develop the business. Whether that will be by acquisition or growth has not been decided,” he adds.

Potted Histories

Wickens Tutt Southgate

formed in 1987 as a packaging and branding consultancy, it now has 36 staff

Rodney Fitch acquired a majority stake in WTS in November 1996

has worked with Trebor Basset, Unilever, Bisto Foods, Royal Mail, Rizla, and SmithKline Beecham, as well as drinks clients such as Tango, Morgans Spiced Rum and Seagrams

Rodney Fitch & Co

formed in 1993 as a joint venture between Rodney Fitch and Virgin

the group employs around 30 full-time staff in the UK, and has a presence in Hong Kong

specialises in interiors for the retail and leisure sectors, and has a client list including Dixons Group, Littlewoods, Hamleys, and Railtrack in the UK. In Asia, clients include Swire Properties, Jardine and Hutchison

Clinic

formed in 1983 as Design Clinic, it became a part of the Fether Miles Group – formerly the design arm of Virgin Communications in 1987, with a combined staff of 50. It was renamed Clinic in 1998 and now employs 55

it has worked with a number of broadcasters such as British Satellite Broadcasting (in which Virgin had an interest), Disney Channel, Granada Home Technology and Manchester United TV

it has helped roll out the numerous Virgin brand extensions such as retail outlets Virgin Bride, Virgin Vie and the health club chain Virgin Active.