An acquired firm can double your size, elevate your design reputation, and give you a foothold in a new market – if the cultures fit.
Editor’s note: Design Organization was acquired by Shive-Hattery in 2012. The firm’s rebranding under the Shive-Hattery umbrella was completed in 2016.
As a 26-person architecture and interior design firm, established in 1971 with two locations in Chicago and Indiana, Design Organization was widely held with five major, and three minor, shareholders. The firm’s finances were in excellent condition. With a steady business and staff growth philosophy, our ongoing ownership/leadership transition plan was in effect. We had a regional healthcare, higher education, and workplace practice with a very high percentage of repeat clients. It seemed that all was perfect. Not quite.
At our 2011 strategic planning retreat, we were faced with a rapidly increasing competitive marketplace. Our slow organic growth was an issue for internal staff growth and opportunity, as well as a competitive disadvantage in the marketplace. We were fully engaged in all northwest Indiana markets, but under the radar in Chicagoland. As a small firm with limited resources, we felt a merger or acquisition was an option we needed to consider for sustainable growth.
Our M&A consultant walked us through the process. He spent time working with us on our priorities, strategy, and goals while understanding our organization and culture. He developed our valuation and financial metrics so we would understand how we compared to peers and our value in the marketplace – an important reality check. We resolved that the most important criteria would be cultural compatibility.
This is when the courting process began. We reviewed a list of firms from our consultant, but really only talked with a few. We met with one firm well-known for their excellent design, but leaving the meeting we felt it would have been culturally incompatible. Discussing this aspect at length internally, we agreed that culture would be, far and away, the number one criteria for us and for our staff.
Our consultant came to us with another option: Shive-Hattery. Honestly, I looked at their web page and said we’re an “A/I” and they are an “E/A,” but we decided to meet with their president at the time, Tom Hayden. We talked by phone and then spent an afternoon together. It was clear our cultures and values were in alignment regarding some very important aspects: staff engagement and development, unparalleled client service, and financial performance.
In addition to growth, a strong focus on elevating their design profile was another reason they were interested in us. To validate discussions and expand our team’s buy-in if we moved forward, several of us did a road trip to Shive-Hattery offices and met with leadership and key staff. Everyone we met was open and engaging. We all got a sense of really good people with a great culture.
“When we met Spero Valavanis and his firm’s key leaders, we quickly realized they were ‘just like us,’ which was imperative for a successful integration,” says Jim Lee, president of Shive-Hattery. “With our Corporate Shared Services groups relieving Design Organization’s team from accounting, IT, and human resources, they now had the ability to focus on the ‘fun stuff’ in our business and grow their practice.”
Valuation, cash-out, and purchase of Shive-Hattery stock, employment agreement and non-competes were discussed. You might think this was the hard part, but not so. Shive-Hattery had made previous acquisitions and we had done our homework. The financial part of the process went smoothly.
If you are familiar with workplace design, you know it’s all about change management. M&A is, too. We developed a communication plan for our staff that was integrated with messaging from the experienced Shive-Hattery team.
No matter how well choreographed, and it was, the process is disruptive. Shive-Hattery human resources, finance, and IT departments were fully engaged and supportive, without being obtrusive. Some things needed to change immediately, but others transitioned over time with the intent not to overwhelm staff.
We had seen disaster acquisitions before and were very concerned about our clients’ perception of this change. With support from Shive-Hattery, we assured our clients and communities that our staff and values had not changed. Our brand was maintained for the first three years. When we did change our name two years ago, it was a non-event.
Has it been a success? The Chicago-Valparaiso team has doubled in size, more than doubled revenue, and significantly increased brand recognition in the Chicagoland marketplace. The “One Firm” philosophy is elevating design and leveraging multi-disciplinary expertise and resources from within our company’s offices, ultimately delivering the best value to our clients, both regionally and nationally.
Finally, it always comes down to people. For the last five years I continue to look forward to meetings with our Operations Team, which consists of corporate officers and office directors, who are people I like and respect. Each office has the autonomy to run their businesses with support from Corporate Shared Services. This is an ideal corporate structure which sets us up for continued growth and future acquisitions.
Spero Valavanis is the director of the Chicago and Valparaiso offices for Shive-Hattery. He can be reached at email@example.com or 312-882-0013.