Watch the Downside!

“Mouchel is just the latest in a long line of businesses who take on too much risk in order to grow.”

Mouchel has come an awfully long way since 1877 when it was founded, in Briton Ferry, by Louis Gustave Mouchel. He arrived in the UK from France with a license to use the new technology of reinforcing concrete with iron bars that revolutionised the use of concrete in construction. Since then it has worked, as consulting engineers, on some landmark buildings including: The Royal Liver Building in Liverpool; London’s Earls Court and the Royal Victoria Dock; both the Liverpool and Manchester City football stadiums; and it even designed the cooling towers for Battersea Power Station.

Since the 1980’s Mouchel has taken a different tack and increasingly focused on government work that currently accounts for something like 90% of what it does and outsourced contracts in particular. It also jumped on the acquisition bandwagon and ended up over committing itself financially at a time when government outsourcing wasn’t quite such a soft target any more. Mouchel now has a lot of competitors and government is increasingly careful about the money it is spending, not necessarily out of a sense of due diligence, but simply because it doesn’t have any.

Mouchel is now struggling to recover, not only from a fairly basic strategic mistake of over extending itself and taking on far too much debt, but also from a quite surprising series of operational management blunders which have included: accounting errors, contract mistakes; management resignations and more than one failed takeover attempt. Methinks it was trying to run before it really learned how to walk. Not that it is an easy task to manage a growing business but it is particularly difficult when you buy several other businesses and try and make sense of what you then find yourself with. It isn’t easy. That is why you should try not to do too much too soon because, as Mouchel has found out, there is a big downside to getting it wrong.

It is no wonder then that the new folk trying to restructure the business are slimming it down and introducing a little more focus. In the past Mouchel appear to have been involved in a dizzying range of activities: business process outsourcing; education; highways; housing; international; land & environment; management consulting; property; regeneration; waste; and water.  Well, when you consider that it has grown from a turnover of £223m in 2003, to a peak of £632m in 2010, you begin to get an idea of the challenges that management faced.

I am sure that growth could have been managed better but to my mind that wasn’t where it went most wrong. Its big mistake was not that it was ambitious and wanted to grow, no, its big mistake was to focus on one customer and then offer them anything that they seemed to want. Being a jack of all trades is not a sensible business strategy unless you are a monopolist and sadly this is a very competitive game these days and Mouchel has competitors with much bigger scale benefits than it does.

Why is it so hard for companies to watch the downside? Because they get carried away with the excitement and the kudos of it all and don’t even think about the downsides, they just go for it and assume everything will be OK. Sadly, that is a common and often very costly mistake.




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