SBHD: For those who are firmly of the opinion that big is beautiful, a merger could be one solution to the dilemma of business expansion. Bhavna Mistry reports on one success story
As the industry shows signs of picking up again, one of the more tangible business trends has been consultancies looking for means to restructure and expand. But the lessons of the recession haven’t been forgotten; acquisitions by public groups with huge bank balances are not as rife as they were in the Eighties. Mergers seem to be a more appropriate route to growth.
At the beginning of this year, Nick Holland Design Group and Queensberry Hunt “combined” operations in what was, effectively, a merger of rivals. The Cardiff-based product design consultancy shut up shop and came to Queensberry Hunt’s offices in London.
Coincidentally, the news of the merger came with the announcement that the ceramics group had changed its name to Queensberry Hunt Levien.
The Nick Holland Design Group, although by no means operating unviably, experienced a “difficult year” in 1994, according to Nick Holland. And, he adds, “I had been thinking of forming some sort of alliance or merger for about two years, and I wanted to be part of something bigger.”
Another reason for the merger, says Holland, was that he felt his business was being “stifled in Cardiff. Clients are far more amenable to a meeting in London,” he says.
QHL wanted to broaden its design base, and with experience of similar clients and a similar design ethos, Holland decided that his group’s success in industrial design was the additional strand which could benefit QHL’s ceramics’ strength.
Holland actually initiated talks by approaching Queensberry Hunt. “We met Nick for a drink on the day we decided to change the group name, but the two events are unrelated,” says QHL partner Robin Levien. “We wanted to broaden out beyond ceramics and were victims of our own success, really, because we had a credibility problem in the areas we wanted to develop into. The experience of Nick’s group gives us that credibility.”
Ultimately, the new QHL wants to increase turnover to “about Ãº1m”. When the merger took place, Holland’s group was turning over “about Ãº500 000”, while Levien estimates QHL’s turnover as Ãº6-700 000.
As far as mergers go, the QHL/Nick Holland partnership is unusual. Both parties have known each other for years and have sometimes been on the same pitch lists. But where there has been a potential conflict of clients’ interests, QHL has also referred work to Holland’s group.
As a result of this long and personal relationship, the merger was finalised extremely quickly. Talks started at the end of October 1994 and Holland and his team were in place at QHL’s offices in London by the end of the year.
“There was no problem with trust or anything like that,” says Holland. However, both Holland and QHL used accountants to forecast business plans and look at each other’s current financial situation. “From our point of view, we were interested in terms of Nick’s capabilities in getting work in, as well as his design capabilites. We couldn’t afford to take on people without being able to generate work to cover them,” adds Levien.
In the new company, Holland operates at a partnership level of the business, although he doesn’t hold shares. “To create new partners, existing partners have to give up shares, so it’s a fairly fixed situation,” says Levien. He also states that the merger isn’t etched in stone. “We haven’t tied ourselves up so that we can’t get out painlessly if we don’t get on.”
Levien cites time as a possible drawback of the merger. “The whole process ate into our normal time considerably, so in that way it was time-consuming.
“While we don’t have over-inflated ideas and are not expecting immediate results, this is a very exciting time. We are making use of the collaboration when once we were competing,” adds Levien.
SBHD: If you are considering a merger or alliance with another business, without the advantage of the strong
personal relationships between the partners at Queensbury Hunt Levien and Nick Holland, some areas to examine in the proposed
partner’s operation are:
* Good management structure
* Strong creativity
* Prestige product
* Long-term client relationships
* Specialisation within a specific sector
* International projects
* Lack of long-term obligations (such as property)
Holland also advises: `Do a lot of research; look at business forecasts both for your business and the one you’re considering forming an alliance with. You have to be hard-nosed in business terms, but you have to trust gut instinct too.’ The acid test, he adds, is whether you’d ask those people home for dinner.