UK: mtm's Mr Lines finds a formula.

UK: mtm's Mr Lines finds a formula. - There seems to be a strange lacuna in Richard Lines' understanding of the modern English vocabulary. Lolling easily behind his desk at MTM's head office, Rudby Hall in rural North Yorkshire, the company's still youth

by Geoffrey Foster.
Last Updated: 31 Aug 2010

There seems to be a strange lacuna in Richard Lines' understanding of the modern English vocabulary. Lolling easily behind his desk at MTM's head office, Rudby Hall in rural North Yorkshire, the company's still youthful 55-year old chairman can be heard saying, quite distinctly, "I am not an entrepreneur". He becomes almost vociferous on the point. "I am a very boring person," he insists. "We have 18 manufacturing locations. You could not manage that number entrepreneurially."

Now this is a man who, less than 14 years ago, left a safe senior middle management job at ICI in order to go into business on his own account; who teamed up with a fellow refugee from the industry to build a branch new million pound chemical works on a greenfield site - and sold it after two years; who then, with is partner, built a second factory with £2 million of borrowed money; and, two years on again, bought a large existing (and loss-making) chemical works for a further £2 million-plus. Both these businesses were later sold as well. Yet the net result of forming or acquiring rather more than 30 companies during the 1980s and early '90s has been to make Lines chief executive (with around 7% of the equity) of an international chemical group turning over well in excess of £100k million and valued in the market at over £200 million. If he's not one, then what is an entrepreneur?

Lines' aversion to the entrepreneurial tag is not simply a question of semantics, however. There is also the matter of perception - his own and other people's - which is to say the matter of image. MTM has certainly changed over the years. It is no longer a random collection of small chemical companies - if it ever was, and Lines would argue about that, too. What he would not dispute is that the group is much more soundly constructed than it ever was in the past: no less vigorous or acquisitive but more professional; with a clearer idea of where it's going; in two words, better managed. So, while other business leaders like to cast themselves in the role of chief entrepreneur, Lines prefers to play "a very boring person", a manager.

He can claim fair success in this character part among the audiences that matter most. "Credibility", he remarks, "is something you get through sustained performance. I suspect we are very close to being totally accepted as a material entity in the industry." The City, too, is "beginning to understand us". The City seldom had much of a problem in adjusting to MTM's performance. Earnings have improved year by year ever since a few shares were placed with institutions back in 1984. But analysts worried about the ceaseless activity on the acquisitions front, and about the group's shifting composition. The industrial logic behind it was not clear.

Lines argues that the group was never without a unifying design; "We have deviated (from the initial conception) hardly at all." It's just that, from time to time, "the wind and tide" appeared to push the ship in other directions. Indeed, the essential specification was written into the original MTM business plan, which Lines and his partner Brian Wiggins drafted back in 1979: "To construct a high quality, safe, flexible, manufacturing plant on an environmentally friendly site. Such a plant should be specifically capable of handling the difficult and hazardous chemicals which are necessary precursor to the fine chemical and pharmaceutical intermediate business. Such chemicals are generally expensive and/or very difficult to handle ... This situation provides the opportunity for above average profited to be achieved in an area usually unaffected by economic cycles.

"The commercial policy (the document goes on) must match the production facilities in its flexibility and speedy response to the rapidly changing demands of the industry. A 'custom' manufacturing service should be available to the industry for these difficult intermediates, together with pilot plant scale of manufacture ..."

However a premium-priced service to the chemical industry - supplying small quantities of difficult substances was not quite what Lines had in mind in the early months of 1978. He had then been with ICI for a dozen years, following an earlier career in the Navy which he had joined as an ordinary seaman. Commissioned as an engineering officer, he became a naval flier, then spent several years in naval intelligence - so much for his being "a boring person". When he left the Navy, aged 29, he joined ICI as a marketing man.

Lines progressed rapidly at ICI, in spite of a lack of respect for big company procedures. But by the later 1970s he was frustrated, and for the second time in his life he opted for a change of career. He intended to build a sports centre at Stockton-on-Tees. In order to have an income in the meantime, however, he set himself up as a consultant. His clients were, inevitably, chemical companies.

At this point Brian Wiggins, who Lines had first known as a competitor, reappeared. Wiggins had done the rounds of the chemical industry (excluding ICI), as works manager here and managing director there. He had also founded (and later sold out) his own company - which made custom chemicals for the majors. Wiggins, too, was filling in time as a self-employed consultant, and, at Lines' suggestion, he moved into the latter's office in Stockton. The scheme for the flexible, rapid response, user friendly and environmentally sound manufacturer of tricky chemicals was hatched very soon afterwards.

To provide a foundation for the enterprise Wiggins and Lines joined forces, calling their company Marlborough Teesside Management (MTM), after their address Marlborough House. They proceeded to raise £1 million by way of private subscriptions and loans. And within 15 months the factory, at Seal Sands on Teesside, had been designed, built and commissioned.

The business was evidently successful. But being fast growing in a capital intensive industry, it was also intensly capital hungry. Thus when a US corporation arrived on the scene in 1981, offering what looked like a good price, Wiggins persuaded Lines of the wisdom of selling out and starting all over again - from a rather higher base.

The second venture, called Wendstone, cost twice as much as the first and entailed a further round of the banks. It also took longer to bring to completion. As they strove to hurry their project along, Wiggins and Lines were personally affected by some extraordinarily fluky winds and tidal eddies, and seemed to veer wildly from the course they had laid down. For MTM became involved in a number of businesses far removed from the chemical sector: in a scaffolding equipment firm, for example, and in several property schemes. None of them prospered.

Rather less bizarre was a joint venture with ICI, to manufacture a new type of bag for ICI fertilisers. Yet this didn't really fit with MTM's plan for selling "difficult" chemicals to a variety of customers in the industry. The towering event of 1983 at least brought a massive enlargement of the customer base. Albright and Wilson's delapidated industrial chemicals plant at Widnes, on Merseyside, became available at a knock-down price for a quick sale. And acting with great speed, through the joint venture, Wiggins and Lines bought it.

The acquisition, incorporated as Marchem, was many times the size of MTM. It promoted the Lines-Wiggins partnership into a wholly different league, giving it a potential turnover measured in many millions rather than a few hundred thousand - with the possibility of profits to match. Sure enough, Marchem soon responded to the partners' tireless treatment. But the cost, in terms of money and management time, was by the same token very considerable. The partners had no sooner accepted an offer for Wendstone, their custom chemicals company than they were off to the City to raise further sums, by way of the placing, to fund expansion at Marchem. And while all efforts were concentrated on Widnes, there was a tendency for problems to break out elsewhere.

For, among other things, Marchem provided an excellent basis for buying companies. The steady sequence of acquisitions which concerned certain City people was well under way before MTM (by then renamed Marlborough Technical Management) floated in 1986. Most of the acquired businesses were quite small and specialised, and many were no more than a few years old. There were company formations as well. The newcomers made chemicals used in oil drilling, surface coatings, acetates for printing inks, and hundreds more. But Lines is adamant that "We were not rushing round buying everything." The choice was determined by customers and capabilities.

Marchem also helped MTM to get going overseas. A US sales subsidiary was set up within a few weeks of the deal, expressly to create a big outlet for the Widnes plant. This led directly to a US maker of pharmaceutical intermediates, acquired in 1988. Several more North American buys followed later, culminating in the purchase of Hardwicke Chemical, a significant agrochemical and pharmaceutical intermediates producer, 16 months ago. Costing $112 million, and needing a £62 million rights issue to secure it, the acquisition is MTM's biggest to date, by far.

Yet, in spite of all the doors it opened, Lines never cared much for the Widnes operation. It was altogether too much like other large-scale inflexible, producers of commodities. Lines' vision, he says, was always to identify a demand and then to set out to meet it.

Lines "wanted out". But even after Marchem had been turned round there was no way that it could immediately be sold: it represented far too big a chunk of MTM. However in 1987 - the year Wiggins retired on doctor's orders - a solution was found. Marchem was lumped in with a similar factory near Lille, belonging to CF Chimie (later Orkem), to create a 50:50 Anglo-French joint venture under the name Norsochem. The French had the right to buy out the British partner in due course - which rang alarm bells in the City. In fact MTM sold its 50% to Orkem after only 18 months. By that year-end it had already found sufficient extra turnover and profit to plug any gap caused by losing Norsochem. By that time, too, it had had a major rethink about which way it was going.

It is not difficult to discern a pattern in the relentless acquisitions policy pursued by Wiggins and Lines together, or to understand why Lines was so eager to be rid of Marchem. But not since that early document of 1979 had the criteria been written down, and many of the newly acquired businesses conformed only loosely to specification. What was needed was a conceptual framework that could instantly be understood by all.

Thus it was that top management sat down with consultants from the US-owned firm Kepner Tregoe. "They merely told us how to examine our navels." Management listed the alternatives. MTM was not just a buyer of profit potential in the style of Hanson. It was not a "products offered" company, like some manufacturer of branded goods. Its strength lay in responding to needs within the chemical industry by supplying products at short notice if necessary. MTM was a "production capability" company.

So beginning in 1989, unit companies were shared out between different business areas. Incorporated as MTM Agrochemicals, MTM Pharmachemicals, MTM Speciality Chemicals, etc, the business areas themselves became responsible for sales and distribution, and for deciding which plant should actually fill the order. Also, the production flexibility which already existed at certain plants was adopted as the norm. Thus MTM Performance Chemicals' new factory at Teesport (the first unit in a £50 million development) has duplicated pipework which allows work-in-progress to be siphoned off into holding tanks while the reactors are set up to make something else.

When divesting its 50% holding in Norsochem in 1989, MTM simultaneously announced a major acquisition - a smallish British company called Lancaster Synthesis. Lancaster's speciality was supplying tiny quantities of unusual chemicals (as little as one gramme) to research chemists. In this business price is clearly no object and the added value is enormous. Reinforced by further acquisition, and by the addition of a "semi-bulk" service, Lancaster is now MTM Research Chemicals. Listing 12,000 different molecules, the Lancaster catalogue, mailed direct to chemists around the world has only one serious rival. And it is the final confirmation that MTM knows its chemistry. It enables Lines to claim that, within its chosen fields, MTM can meet any need and in any quantity. Have you synthesised a molecule? MTM will let you have a few grammes, or a few kilos or many tonnes; and help you take the product from the lab, through the pilot plant and into full-scale manufacture. The company calls it "production partnership".

It's an elegant conception. How many customers have so far been persuaded by it can't be told, since their identities (particularly at the research end) are governed by the rules of confidentiality. IBM aside, few companies have ever been very successful at selling complete business systems. But whether or not the whole machine ever operates as suggested, the parts unquestionably work. And the reasons for that could be largely cultural.

MTM has been called a hire-and fire organisation. "Nah," snorts Lines, but it's true that he has parted ways with quite a lot of senior men. It's also true that the majority of his senior colleagues today are almost veterans, given the group's brief history. Jim Friederichsen, who heads MTM in America, opened the original, US office in 1983, then left the company and came back again. Neville Newson, his counterpart in charge of european operations, was a partner in a joint venture startup dating from 1985. On the other hand Tom Baxter, the finance man, is one of the newer faces among the executive directors. Like many MTM people he came from ICI.

The fact is that MTM is exceedingly results-oriented, a trait which the top team is seeking to institutionalise by setting individual targets at all levels of management. "If you don't do what you've been recruited to do, you'll probably be fired," applicants are told. "If you don't like that culture, don't join us. If you do it brilliantly you'll probably be paid a lot more." It's a "can do" philosophy, according to Lines. That's probably the only philosophy for a young, energetic enterprise with a long way to go. "We (meaning MTM) are a spotty teenager at the moment," says Lines.

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