SMC saga highlights risks of acquisition strategies

The latest twist in the SMC Group saga strikes a cautionary note for design groups bent on extending their reach through acquisition. Expansion can put as big a strain on your business as a diminishing client base. Both need nimble management.

Media reports are of ‘a management shake-up’ at SMC following a profit warning last month for the architecture and interiors group – owner of high profile architectural practice SMC Alsop, among others – when the group’s share price dropped by almost a third in one day.

Under the shake-up, Sir Rodney Walker becomes executive chairman and erstwhile chief executive Stewart McColl becomes deputy chairman. Walker has curbed McColl’s ambitions to buy in Scandinavia, the Netherlands, Australia and Eastern Europe, aiming instead to achieve greater cost-efficiencies and organic growth in the short term.

You may wonder what relevance the SMC case has to design. Its interests are largely architectural, with bigger projects than is usual in design operating over far greater timescales. There’s less scope for flexibility there than we are used to in an industry where a handful of smaller job wins can turn a business around in weeks – though not guarantee long-term stability.

But those who go back a bit will know that McColl came from design. He was one of its more colourful characters in the 1980s, ranking alongside Rodney Fitch and David Davies on the interiors front. He distinguished himself in 1988 by selling his then group McColl to WPP for £32.5m, making Martin Sorrell’s marketing services empire the biggest player in UK design.

That deal was quick, reportedly taking five weeks, and buying Alsop showed McColl has not lost the knack of taking fast action. But he has been unable to fire on as many fronts as he hoped.

The lessons are there. Stay ambitious, but don’t overstretch. And remember acquisition can be costly and is always harder to bed in than organic growth.

LYNDA RELPH-KNIGHT, EDITOR