When Alastair Storey and William Baxter combined their catering companies industry insiders predicted an uneasy ride, but now, after two years, they are enjoying phenomenal growth. Ben Walker reports
It is now more than two years since the merger of two very different contract catering companies. The men who were at the helm of those companies, Alastair Storey and William Baxter, freely admit to being quite different characters. Baxter has an entrepreneurial, make-it-up-as-you-go-along outlook and a degree of candour rare among executives. His down-to-earth charisma means that even when he refers to himself in the third person it doesn't sound pretentious.
Storey is a process-orientated, tenacious individual with a strong commercial record in creating growth through acquisition. When I ask if the merger was made on the basis of personal friendship, he insists that you don't need to get on with people in business to do well - but it's a nice plus if you do.
Storey had spent nearly 25 years in the corporate environment of Sutcliffe and Compass/Granada Food Services before he formed Wilson Storey in 2000. He quickly grew the company by acquiring Halliday Catering Services and then Cater Link to become Wilson Storey Halliday (WSH).
In the meantime, Baxter put his name to the successful organic growth of two niche boutique caterers, Baxter & Platts in 1987 and then BaxterSmith in 2000, which set the benchmark for aspiring food service entrepreneurs.
Two years on from the merger of WSH and BaxterSmith to form BaxterStorey, it seemed like a good time not only to assess the development of the new company but also to see how much the two principals share the same vision. What has been the result of combining the efforts and talents of these two very different men?
The first 12 months were not easy, Baxter remembers. With six directors at the top of the business, the press and competition were predicting a falling-out. From the first day it wasn't clear what everybody's role was. "Everybody's influence is slightly diluted because you've got a bigger board. You have to suss out exactly what it is you're doing and make sure everybody has sufficient space to do their own thing without losing sight of the common goal," he says.
Storey recalls that attention to the cultural fit and creating the right branding for the business took up the most time at the planning stage. An enlarged business meant there were new cultural issues to come to terms with.
"If you take some of the process required in a larger business, it wouldn't always sit comfortably with the guy who makes it up as he goes along," says Baxter. "If I came back and was close to doing a deal, would I take kindly to filling in a form? No. Here we are 28 months later - I'll fill in a form, because it helps the machine work."
The success of the merger also hinged on how close the office was to Baxter's home. He was not prepared to commute, having stopped in 1987, and wanted to keep his offices within three miles of home. At the start, the new company existed with two head offices, one in Amersham, Buckinghamshire, and one in Wokingham, Berkshire. It quickly became clear that you couldn't create the necessary focused culture and camaraderie in two locations.
The solution was a new head office, rented from client Oracle, on a business park in Reading, which is, luckily, only a 40-minute drive for Baxter. Despite being the company's base for 15 months the offices still have a brand-new unlived-in feel with plenty of empty desk space, a clear sign of an expanding company. Baxter and Storey's offices are spartan, with just a few papers in the in-tray. "I have more time to be with the customer than I did when I ran a smaller company, because I don't have to deal with IT or health and safety," says Baxter.
Areas of expertise
Given its rate of growth, the initially criticised top-heavy structure of BaxterStorey now makes perfect sense. Each of the eight directors has his or her own area of expertise. Keith Wilson looks after finances, Linda Halliday is head of human resources and Simon Esner is sales director. There are three managing directors, Noel Mahony, Mike Smith and the recently appointed John Bennett, who each look after their own portfolio of clients, rather like partners in a law firm. As well as looking after their own clients, Baxter and Storey sit above the MDs making sure they all speak the same language and preventing separate empires being built within the company.
As the business grows, a fourth MD might be appointed. "We want to give the client the service of a small business: high-level people available at short notice to the customer. That way you can ensure that the clients are getting what they bought," explains Baxter.
The intention is to keep the ratio of sites to management personnel reasonably slim. At present, with 310 sites, this works out at 39 sites per director. Operations managers are responsible for a limit of 12 sites. BaxterStorey also has one regional development chef for every 31 sites.
The attraction of merging WSH and BaxterSmith was to take on the marketplace and create something new. Baxter was keen to work with a board, with more ideas and more resources. Storey says: "WSH was good with IT systems, and from a flair and creativity point of view BaxterSmith was ahead of us. So if you put the two together, you've got more than the sum of its parts."
With a turnover of £145m in 2006, up from £102m in 2005, BaxterStorey is in a unique position. The fifth-largest UK caterer is rapidly catching up with Elior UK (£177m turnover in 2004) and leaving the other independents far behind.
In Baxter's words, it has all gone "boringly well". "The two fears you have is that you'll lose part of your existing client base, which we have not done and it's difficult to sell the new entity to the marketplace - we've added 120 locations in the two years, while hanging on to the existing business."
Storey concurs: "After the merger we thought we'd probably struggle with growth, because the market won't like it. Bollocks - we've grown more than 20% organically year-on-year."
The main challenge
For Baxter, the main challenge over the next three years is to continue to recruit and retain good-quality people. At its current rate of growth, the company will take on another 2,000 staff by 2010. The turnover of skilled chefs has been reduced by 5% over the past 12 months, and measures have been put in place to reduce it further. "In the past we haven't shown enough attention to the chefs. There's been too much emphasis on catering, area and ops managers as the ones that make all the effort," admits Baxter.
Ten development chefs are now in place to fire up the workforce with trips abroad and to markets. The introduction of the Chefs' Academy now provides in-house training from NVQ level 2 up to a BSc in international culinary arts.
For Storey, improving relations with facilities management companies will be an issue. "Where we've had a relationship-based business with the client, which is then taken on by an FM company, this tends to dilute the relationship with the client," he says. "We just need to try to understand how to work well with the FM companies."
With a lot of big personalities in the company there is the odd spat. "We don't get on every day of the week," admits Storey. Still, as far as the fundamentals go, the two chief executives obviously share the same vision for the business. In fact, they use the same phrases in our separate conversations: "Never underestimate the competition." "There's still 96% of the market to go for, and we're going for it." "It's not a complicated business."
Neither is remotely interested in relinquishing control of BaxterStorey or opening the door to external investment vehicles. Consultants are saying that over the next 18 months there will be a whole new wave of significant contracts going out to tender, and BaxterStorey is going to be in great demand. The enviable challenge for both men will be to ensure that their structure and processes enable them to grow without overstretching themselves.
The full story behind the merger
Alastair Storey: "I can't say that it came to us as a blinding flash overnight, because we'd been thinking about it for a long time. Both companies were independently successful, but they'd grown in different ways. WSH was good with IT systems, and from a flair and creativity point of view BaxterSmith were ahead of us, so if you put the two together you'd get more than the sum of the parts and a cracking board. If you had to go out and find those people, you might get half of them - but not all of them."
William Baxter: "I sold Baxter & Platts to Granada, and for two-and-a-half years I reported to Alastair when I stayed on as chairman. After two years I'd set up a pretty firm idea about BaxterSmith, so I had the team in place and all the ideas to start again. Then Alastair phoned up and said, ‘Can I see you at home?'
"We had a walk around the garden, which was all very convivial, and after an hour or so I said, ‘Alastair, what do you want?' in the nicest possible way. He said he'd spent 25-odd years with Sutcliffe and Granada/Compass. He felt he wanted to concentrate on food and service and that the financial pressures got in the way of doing a good job. Would I consider going into business with him?
"I got my fellow directors at BaxterSmith to agree that we would go in with Keith Wilson and Alastair Storey, but on holiday I got thinking, ‘There'll be six of us in a new business with no business coming in, all having reasonably high salary expectations and so on.' So I phoned up Alastair and said I wasn't so sure it was a great idea after all, but I'd be more than happy to talk about how we might get together in the future.
"We decided that we would go our own ways, but bear in mind we'd been friends for 25 years. We agreed to keep in touch every three to six months. If, after a period of four years, we felt that the fit was still good, it might be appropriate to combine the businesses when we had some business to combine. And that's exactly what happened."
- Head office: Reading
- Offices: London, Manchester, Edinburgh, Dublin
- Turnover: 2005 £102m
- Turnover: 2006 £145m
- Net profit margin: 3-4%
- Staff: 4,500
- Business and industry market share: 4%
- Number of sites: 310
- Clients include: Barclays, Oracle, GlaxoSmithKline, UBS Warburg, Royal Sun Alliance, Slaughter & May, Herbert Smith
- Percentage of business taken from Compass, Sodexho, Aramark and Elior: 70%
Geographical spread of contracts
- South of Birmingham 80%
- Manchester-Leeds corridor 15%
- Scotland 4%
- Ireland 1%