Back in 2004 it looked as though social housing firm Mears had picked a dream team. Bob Holt and Stuart Black, the bruiser and the wunderkind, were together at the helm of a City darling. So why did Black walk?
Stuart Black has proved remarkably prescient. Shortly after he was appointed Mears’ chief operating officer in November 2004, he commented on the fact that his new employer had grown 42% a year since 1996. “Sometimes,” he said, “I wonder why they needed me.”
It seems that Mears didn’t. Less than two months ago, Black, who had since been promoted to chief executive, shocked the City by resigning. His reason was frustration with what he saw as the unnecessary interference of Bob Holt, his predecessor and chairman. Black is now soothing his gall by sailing around Antigua and Grenada while trying to buy tickets for the cricket World Cup.
It was the break-up of an impressive partnership: at 42, Black is young, and regarded by his peers as fiercely intelligent. Holt is a tougher figure, a bulldozer who likes to point out that his company, which specialised in repairing and maintaining social housing, “has never let the City down” since he bought and listed it in 1996.
Like many a relationship, the break-up was the result of a dalliance with a third party: in this case, a domiciliary care business called Careforce. Although the deal was announced last week, it had been under discussion since November.
At £22m, Careforce is not a big acquisition for a company that had a turnover of £241m in 2006. The significance is not the size of the purchase but the change in strategic direction it represents. Domiciliary care is about providing services to elderly and disabled people at home, which has some crossover with Mears’ housing maintenance work. “The idea was that we could build a business off the back of it,” says a source in the company.
Black had ordered a strategic review of Mears last autumn. That suggested that the board should look at the domiciliary care market in general and Careforce in particular.
There was no dispute between Holt and Black over whether they should go for the business. The problem was that they had different ideas of how Careforce would fit into Mears’ structure. It emerged in a series of conversations with Black before Christmas that Holt was “keen to get his hands on” Careforce, according to a source close to the disagreement. Another source says Holt did not see that his direct involvement in the business would be a problem with Black.
Well it was. Black suspected that Holt wanted to take charge of the business himself, although sources close to Holt insist that what he really wanted was to ensure that Careforce was represented on the main executive board. Black wanted the person who headed Careforce to sit on the lower operational board and report to him.
“Holt believes human resources, IT and marketing directors on the executive board should know that they are there to support the operational part of the business. He doesn’t want the executive board without a strong operational presence,” says a Mears source.
To Holt, this would ensure that his ambition to take Careforce from the fifth biggest to the biggest firm in its market could be achieved within two years.
Black felt his authority was being challenged. Even if Holt was not looking to head Careforce, by making those kinds of decisions he was usurping the role of the chief executive. Black felt he was losing his grip on the strategic direction of Mears.
A source says: “You cannot have two chief executives. Holt wanted his baby back.”
The chairman was coming into the office more often than he had since 2005, when he relinquished the chief executive’s role. It was not that he was worried about Black’s performance: the firms results for 2006, reported last week, showed an 11th consecutive year of record profit. But he was worried that the board had become too collegiate.
However, Holt did not want Black to go. A City analyst says: “Apparently, Mears tried really hard to keep hold of Black, and Holt was a bit miffed when he said he was going, which is why Black is on gardening leave.” Some in the company wondered if Holt would hold Black to his one-year notice period, but they are understood to have recently settled on six months.
Neither man is keen to comment on the situation, but both have insisted that they still get on well and that the break-up was amicable. Holt goes a bit further: “Stuart and I disagreed on one thing in two-and-a-half years of working together. We disagreed over the operational structure of the business. I had and still have the highest regard for him.”
Holt is now chairman and chief executive again. City analysts believe he is hungry for acquisitions and fear he might be too gung-ho in chasing down targets. They wonder if Holt will take more risks than he did during his previous tenure because he now has less to lose. He used to be the firm’s largest shareholder, but he sold 2.7 million shares at £3 each in December 2005, leaving him with a stake of 0.85%.
Holt would point to yet another set of record results and repeat that Mears has never let the City down. That said, when the results and the Careforce acquisition were announced last Monday, the City did not seem too impressed. Shares fell 5p, although this was partly caused by the issuing of 7.5 million shares to finance the deal.
This time next year it might be easier to say whether Mears needs Black after all.
Mears at a glance
Enter “Mr Holt & Mr Black” into Building’s website archive to read the 2004 interview.