When bigger is not better

Virginia landscape architecture firm was acquired by a much larger engineering outfit from North Carolina, and big and small didn’t mesh.

By Richard Massey
Managing Editor

The owners of what was then called H&G Landscape Architects in Richmond, Virginia, were searching for a succession plan, or some form of ownership transition, when North Carolina-based engineering firm Stewart, looking to expand its footprint in the Commonwealth, came calling.

After a period of “dating,” in which the firms sized up the proposition of a merger, they hashed out an agreement, and beginning in January 2015, the merger moved forward in Richmond with the marketing moniker Stewart/HG. The firm combined the bread-and-butter landscape
architecture of H&G with the design and engineering focus of Stewart. All signs pointed to a happy union: H&G achieved its ownership transition, and Stewart gained a foothold in Richmond, a market it had coveted for several years.

But the merger didn’t last long. This June, the firms parted ways.

H&G has since rebranded itself as HG, and Stewart, still keen on the Richmond market, in September is opening an office in the Edgeworth Building in the city’s trendy Shockoe Bottom district.

The big question is, what went wrong? Why did the merger go sideways in less than two years?

Meril Gerstenmaier, who with her husband, Dave, owns HG, says the merger took her firm way out of its comfort zone.

“It became evident early on – in the first six months – that we could better serve our clients going back to being a small operation,” Gerstenmaier says. “Our clients liked us the way we were.”

George Stanziale, Stewart’s president and director of design, agrees.

“They had a difficult time becoming part of a big firm,” Stanziale says. “It was their discomfort with the structure of a larger firm.”

For context, at the time of the merger, HG had less than a dozen employees, whereas Stewart had in excess of 100. Two different firms, two different cultures. And as they say, the devil is in the details. In terms of process, hiring, compliance, training, integration, and decision-making, the two firms just had too much ground to cover if they were to meet in the right place.

“Culture is No. 1,” Stanziale says. “We may have misinterpreted the culture.”

The Gerstenmaiers, longtime owners of their firm, after the merger were share-holding employees of a much larger organization based about 160 miles south in Raleigh-Durham. Meril’s title in the Richmond office was director of operations, and Dave’s title was VP and director of design. At the outset, Gerstenmaier said she and her husband were fine with that. But, Gerstenmaier says, things didn’t pan out.

“We thought we’d run Virginia and get back-office support,” she says. “That didn’t materialize the way we expected.”

Though the Richmond office was winning new work in the Richmond market, Gerstenmaier says client satisfaction suffered because Stewart/HG, burdened by an unwieldy administration down in Raleigh-Durham, could not handle demand.

“We could not demonstrate that we were able to offer better service,” she says, referring to conversations she was having with clients.

While the unwinding of the merger was deemed amicable by both sides – the case never went to court – it was still a separation, and there are reasons why things turned out the way they did. While Gerstenmaier says the Richmond office never really got the support it needed, Stanziale has a different take on the issue. He says that HG never wanted to give up the
flexibility and freedom that a small firm enjoys. In the process, the merger soured.

“There was nothing ugly about it, but it was unfortunate,” Stanziale says. “We looked at it as a learning experience.”

Meanwhile, both firms seem to be doing fine. HG is up to 16 people, recently made civil engineer Charlene Harper a partner, has plenty of backlog, and is back to doing business like it was done in the old days.

“We couldn’t be happier,” Gerstenmaier says. “Just because you are a big company doesn’t mean you have it all figured out, and just because you are a small company doesn’t mean you don’t have it figured out.”

Under the leadership of Stanziale and chief marketing officer Patrick Pettit, Stewart has plans to open its new Richmond office in September and staff it with as many as 30 people with a focus on landscape architecture, civil and structural engineering. Built on a foundation of government, higher education, and healthcare, the Richmond market is reliable if not explosive. Perfect, Stanziale says, for a firm like Stewart.

“We think it’s a good place to expand north,” he says. “It doesn’t have wild economic swings. It’s stable.”

Posted in Archives | September 9th, 2016 by