SigmaRoc – Spreading the Load

We take a look at SigmaRoc’s unique approach to dealing in heavy construction materials, combining the efficiencies of a large company with the speed and flexibility of many smaller local firms.

In 2016 SigmaRoc started out as a building materials group dealing in heavy materials, but from the very beginning, the firm was looking to take a different approach to many of the larger companies looking to dominate this market. While other large companies in the construction materials sector looked to have an empire of outlets controlled from a single head office, SigmaRoc saw things differently.

“We want to be decentralised because our products are heavy and don’t travel far,” explains Max Vermorken. “That means we’re always dealing with local markets. There is no international market for asphalt or concrete. So, to be most effective you need a structure with as much autonomy and decision power in each region, rather than at the centre.”

The argument is simple. If you are a house builder in Somerset and you order a load of concrete, but it starts to rain heavily, you want to be able to call the concrete plant down the road and ask them to hold it until the weather changes. What you absolutely don’t want to do is ring a call centre in Leicester and spend ages trying to get your instructions directed to the right person, by which time the concrete might already be pulling up outside the building site.

“It’s important to have that because we sell a commodity product, where stone or cement from one supplier or another is roughly the same,” Vermorken says. “You can only distinguish yourself through service.”

Vermorken had observed that the small independent suppliers were able to outcompete very large and well-run companies.

“We thought why is that? And that is why we concluded the answer was the local connection and local understanding,” Vermorken says. “So, then we thought how can we apply Large Cap management efficiency principles to local businesses? Companies that do not necessarily have good stock management principles, good investment where required, basic management principles that you might find in larger companies. Companies that didn’t necessarily have an organisational structure geared to efficiency, rather than processes that existed because ‘they’ve always been like this’. We realised we could elevate these businesses.”

Keeping the Baby from the Bathwater

When SigmaRoc began their first task was consolidation through the acquisition of smaller companies. This was a delicate task that involved ensuring new acquisitions were operating as efficiently as possible, but without losing any of the qualities and culture that made these smaller companies such appealing acquisitions in the first place. From the beginning, Vermorken was adamant that each company should be left with as much autonomy as possible.

“A key challenge that’s standard for acquisitions is when you buy a local business with a long history with the owner or founder in the business or close to it and you have to preserve the good bits while getting the efficiencies out of it,” Vermorken explains. “You need to understand what you’ve got. But you still want to have the changes come through.”

SigmaRoc has been through this process many, many times, with their own team dedicated to the process, but that doesn’t mean it ever becomes routine.

“We’ve got a team at the centre of the business that does nothing but this, they’ve been doing it with us for the last three years,” Vermorken says. “It’s never routine and it can’t be routine because you’d apply the same logic to every business which would be wrong. But there are three things you need to do every time. If you have got something good do not break it. Understand what makes it good. Once you’ve got that written up you can change and improve.”

SigmaRoc has a culture of its own, of course, but it is one they make sure not to impose on acquisitions.

“It’s less a way of living and working than it is an entrepreneurial attitude,” Vermorken points out. “We move forward and anyone who wants to join the merry band is able to do so, and if people don’t because they have their own ways of doing things locally that’s not a problem so long as they come with the increased efficiency.”

Learning Curves

While their autonomy is protected, many acquired businesses find they learn a lot from the process.

“Very often it’s something local businesses actually find quite enlightening. You talk to them and say ‘have you ever looked at it this way?’” Vermorken says. “Health and safety is a key example. Owner-operated business often doesn’t have the kind of health and safety practices that the group would have because they’ve not been trained and made aware of these other ways of doing things.”

At the same time, other aspects of acquired businesses, such as their recruitment practices, remain almost entirely in their own hands.

“The business is run by platform, and a platform is two or three businesses in the same area or with products that nicely fit together. It’s just about the size one MD can run,” Vermorken explains. “HR and everything related to that is run locally out of that business. They recruit locally and have their own people. I tend to not interfere in that whole approach unless it’s a fairly senior person in that business, the head of several operations or something like this because potentially they might take a bigger role later and we want to ensure the ethos of the individual is something we want, someone happy to roll their sleeves up and get stuck in.”

By now it is a tried a tested way of working, and results speak for themselves.

“We’ve done that for three years and we’re close to 1000 people across the group with £100 million turnover,” Vermorken tells us.

Going forward, Vermorken believes SigmaRoc still had a great deal of potential for growth.

“I think the business model itself is sufficiently appealing. At the beginning it was an unknown, people saw another consolidator in the industry making one uniform sausage, but there was a bit of noise about the marketplace that we are quite the opposite of that,” he says. “We’ve been good at acquiring businesses in short order without destroying what we’ve got. So, we can keep deploying this model.”

More like this