Diversification increases Smithers' global focus

AKRON—As a young boy, Michael Hochschwender remembers his father teaching him how to tie his shoes while he sat on a step in his dad's office.

Nearly 50 years later, Hochschwender continues to tackle new challenges as well as look for other opportunities from an office within that same company.

As president and CEO of the Smithers Group Inc., where his father, Herman, once served in a similar position, Hochschwender has overseen a flurry of diversification over the last 13 years. The company, celebrating its 90th year in business this year, has transformed into a global entity with a highly educated work force that caters more to the tire industry than ever before. Through several acquisitions, Smithers has six business groups and facilities in England, Japan and China.

“The global tire companies were always our clients,” Hochschwender said of the company, founded in 1925 as Smithers Laboratories. It eventually merged with Hochschwender & Associates Inc. in 1972 to create Smithers Scientific Services.

“(Before the diversification), we did not have facilities in Europe. We didn't have a facility in China. So we served our global client base strictly from America. Today we clearly serve our clients from facilities on three continents: From Europe, from North America and from China.”

The Smithers Group remains a global testing, consulting and information service company that is committed to its customers, Hochschwender said.

“We believe it's our job to support our clients in their success, not so much to brandish our success,” he said. “We truly value the success of our clients. It's what we're all about. We don't want to take the focus off of that. It's not what we're going to do.”

While the company established Smithers Quality Assessments in 1993 to address the fast-growing business of management system certification, Smithers' first major move came in 2002 when it acquired Springborn Laboratories Inc., a contract research and regulatory compliance firm for the pharmaceutical, agrochemical and chemical industries.

“That took us into the world that is called environmental risk or environmental toxicology,” Hochschwender said. Today, Smithers Viscient, formerly Smithers Springborn, works with the chemical companies and pharmaceutical industries to assess the environmental risks of a drug, household product or pesticide.

He called that acquisition “a big diversification” for three reasons.

“We believe we are in the business of science, and that there is an environment in which scientists can and will be very successful at business,” he said. “Our belief is that approach is somewhat unique. At Smithers, the environment is more about the technology being an enabler for the scientist to do good business. That was philosophically why we felt the move into a new technology was an appropriate change in direction.”

Secondly, the acquisition allowed Smithers to ride out the cyclical nature of the automotive industry. Hochschwender said it paid off during the recession in the early 2000s.

“Diversification when done well provides stability. Through diversification, we wanted to be able to stay the course, even during challenging times,” he said. “We had other parts of the business that actually were doing very well. What that enabled us to do is, during that recession, is we did not exit one market. We did not exit one capability. We were able to stay the course as result of that diversity.”

And thirdly, Hochschwender identified “critical mass” as a reason behind the move.

“We felt that was important for our clients to expect us to be able to do things and make investments and take the initiative in critical mass and mobility,” he said. “One of the things we were very cautious of was the loss of focus.”

In 2006, Smithers secured a foothold in the United Kingdom and Europe with its acquisition of Rapra Technology Ltd., which, like Smithers, provided analytical, research, testing and information services to both the rubber and plastics industries.

“That was a significant acquisition for us,” Hochschwender said. “They were a very capable organization ... with a wonderful staff.”

Then, four years later, Smithers purchased England-based Pira International, a provider of knowledge-based information and testing services to firms in the packaging, paper and print industries, and their supply chains. The acquisition broadened Smithers' reach in the U.S., as it included facilities on the West Coast and Michigan.

“That brought with it packaging testing,” Hochschwender said. “The packaging space uses a lot of polymer materials, which was a natural tie to our Rapra business. If you are going to ship computers to the other side of the world, you want to make sure they get there in one piece.”

Smithers followed that with two acquisitions in 2012. First, it purchased Environmental Sciences Group from Covance Laboratories, an England-based risk assessment firm that services the agrochemical, pharmaceutical, industrial chemical and animal health industries. ESG became part of Smithers Viscient.

Later that year, Smithers Group bought Avanza Laboratories and combined it with Smithers Pharma Services, creating Smithers Avanza to provide a broad range of pharmaceutical testing services.

And in the last few years, Smithers Quality Assessments opened an office in Suzhou, China, and the company expanded its winter test center near Sault Ste. Marie, Mich.

In mid-December, Smithers announced it was relocating its North American Information business unit from Portland, Maine, to Akron as part of its strategic initiative. A dozen positions will move to Akron, and 10 jobs will be created over the following year. The Information business unit produces market reports, conferences and publications to clients in traditional markets as well as to companies and industries with emerging technologies.

“Having this team co-located with our technical experts and scientists in Northeast Ohio allows the team to work closely on new product and service offerings,” Hochschwender said.

So what attracted Smithers to these acquisitions?

“We looked for companies that have a good solid science, good technical capabilities, a reputation for quality, but they may have something that is holding them back,” he said. “That can be anything. It can be their size, limited resources to pursue new opportunities, or access to clients. It can be any number of things. What we like to do is we go in and liberate them from whatever constraints they have.”

Hochschwender said no other acquisitions are imminent.

“We digested a lot in the last five or six years,” he said. “We're very happy with what we've done, and we want to make sure everything we've done is on real solid footing before we would venture into anything else. We're a conservative company by nature. ... We're very careful about what we do. We don't want to put anything we do or any of our clients at risk at any time.”

That isn't to say the company will stand pat.

“We always have our eyes open,” he said. “We follow our clients. If our clients feel there's a need for us somewhere, hopefully they give us a call, and we'll look there. We know our role. Our role is to support our clients, and ... we go where support is needed.”

Hochschwender learned many life lessons—in addition to tying his shoes—from his father. Chief among them is the importance of recognition.

“You can look at a financial statement, you can look at a balance sheet, you can look at all of those things, and many people use that as a measurement of success,” he said. “We measure those things too. But I don't think that's our measure of success.

“Our measure of success is how we're viewed by clients. If we're viewed well by them, and our reputation is as good as it can be, we can manage the rest of it.”