This architect has been through many changes of name and ownership in its 14-year history, but who could have predicted that it would eventually go Canadian?
Joey Gardiner finds out how the events came about
When Chris Littlemore, chief executive of Archial, told Building in March he intended to grow the architect by merger or acquisition, being rescued from administration by a Canadian consultant was not what he had in mind. Nevertheless, the 14-year story of the practice concluded last week with its sale to 600-strong architect and engineer Ingenium, after six days in the hands of administrators.
With any other firm, this might have seemed an extraordinary chain of events. But for Archial, formerly SMC Group, this kind of drama is almost to be expected. The story of the practice’s rise is well-known, from its birth in 1997, through its quick-fire acquisition of a string of medium-sized practices, its flotation in 2005 and purchase of Will Alsop’s practice in 2006, to its rebranding and restructuring as Archial following founder Stuart McColl’s sensational departure. Despite Littlemore’s best efforts since then, the tale ends sadly, with an outstanding tax bill and administration.
With such a dizzying rise and sudden fall the story could be seen as an Icarus-like morality tale of the perils of overweening ambition. Except that, with its purchase by Ingenium, it might just have avoided plunging into the sea. As of today it is still one of the country’s 10 biggest architects, and has received a big financial injection to put it back on a stable course. The question is: how did this fall from such a lofty position happen and where does Archial go from here?
I meet Littlemore, who picked up the pieces after McColl’s departure in 2007, with his new boss, Ingenium chief executive Victor Smith, the morning after the deal has been concluded. Smith studies Littlemore briefly. “You certainly seem a little more relaxed than you did yesterday,” he smiles. “I’m just delighted that it was a very short period of time that the administrators were in control,” responds an obviously relieved Littlemore.
He may be. But the first thing I want to know is how it came to this. Surely you have to take your eye some way off the ball to allow a £34m-turnover business to fail - and all due to an unpaid tax bill? Not so, says Littlemore. The collapse, he explains, was due to the drip-drip effect of lots of contracts being pulled or deferred. “A number of schools, academy projects, a number of police and custodial projects were affected,” he says. “Each individual project doesn’t have a particularly material effect, but during the course of a few weeks you realise the effect this is having on your revenue. So you have to react to it, and that’s what we did.”
While he won’t name individual projects, it’s clear that government spending cuts, and the BSF programme in particular, had a big impact. “I fully understand the government’s reasoning behind it, and why they’ve got to do that - everyone understands that,” he says. “Altogether they’ve certainly had an impact.”
Littlemore looks offended when I ask if the departure of Stirling Prize-winning architect Will Alsop, in August 2009, may have contributed to the firm’s woes. No, he says - the Alsop Sparch practice, part of the Archial Group, is going from strength to strength. Okay, so was it an error, in retrospect, to become publicly listed? It was a decision which has added to Archial’s nagging unpopularity with fellow architects, who have been suspicious of its corporate approach. Littlemore is evasive, but Smith says: “There are obvious complications when one attempts to convert professional services businesses into corporate structures. There’s a layer of expense and governance required as a public company that restricts your agility and flexibility to operate as a professional practice.”
Indeed, Smith reveals it was Archial’s status as a listed company that prevented a merger when they first started talking 18 months ago. Smith spent three days in June 2009 in the UK discussing a deal. “We felt very good about the proposition but I think the debt structure at the time just didn’t make it feasible,” he says. The collapse changed that. “Chris contacted me early last week and said: ’Would you be interested in putting in an offer?’ I said: ’Absolutely.’”
After that the deal was done “very very fast”, says Smith, who travelled over from Toronto and stayed until the deal was done. He says Ingenium has long harboured a desire to set up a regional office serving Europe in the UK, and from their previous conversations he knew he liked Archial’s approach to design, its diversity of clients, and its international exposure.
“We’re culturally very similar, we’ve got a similar design philosophy, certainly a dedication to serving our clients in a professional way. There was a lot of attraction there.”
Most importantly for Archial’s staff, Ingenium has agreed to pay everyone up in full, and keep everyone on. The speed of the deal means it was, according to Littlemore, possible to keep all but a handful of staff (“Less than the fingers of one hand”) from leaving, although defections do include some directors (“It would be completely inappropriate to say who.”).
Meanwhile, Archial’s debt will be left with the administrators. Littlemore says its clients have been “extremely patient” and “very loyal” although he doesn’t directly answer whether any have walked away.
Possibly the best news is that it appears Littlemore will get a free hand to run the business, albeit with Toronto signing off strategy. While Smith talks about “developing synergies”, it’s clear Ingenium is not about to sweep in and turn the business upside down. “I’ve got a lot of confidence in Chris and the current administration,” Smith says. “We certainly see them running the business autonomously, but according to plans and strategies and a reporting process so that we’re actively engaged in the business.”
Perversely, then, Littlemore may have got what he said he wanted back in March - to be in a bigger practice, with more global reach - despite his firm’s collapse.
The first of many?
Littlemore’s practice is clearly not the only one that has been feeling the pinch in recent months. With Make reporting large losses last week, Arup putting staff on notice and Carey Jones announcing a restructure, there is plenty of bad news going around. Indeed, the RIBA’s latest survey of architects’ confidence found a significant number expecting further cuts
The most obvious reason is the sudden halt in government spending, particularly the BSF programme, and the continued uncertainty ahead of this month’s spending review.
But there is also the realisation that recovery will take a lot longer than anyone thought. Gordon Carey, chair of Carey Jones, which cut five of its 11 directors in September, says: “There are actually some signs of recovery - we haven’t cut because things are getting worse, but because it has become clear it isn’t suddenly going to lift and get better.
“The recession has lasted a lot longer and been deeper than people anticipated.”
Who is Ingenium?
Consultancy makes up about 90% of the turnover, thought to be more than £100m, of the privately-held multi-disciplinary practice based in Toronto. Its mainstay architecture and engineering brand, Norr, was founded in 1938. Two-thirds of its consultants are architects, the rest engineers, with the group also offering construction services in its native Canada. It is employee-owned, and with offices in the US, Middle East and India, about 40% of its revenue comes from overseas.