Don't they just love being in controls?

It works out of an anonymous office in Windsor and its business, control systems, is equally low profile. But Siebe has grown at an explosive pace to become a world beater in electronics, writes Roger Trapp

Siebe is on the point of making its 40th acquisition in three decades. It is one of the UK's largest engineering groups, it has a market capitalisation of pounds 4.6bn and it employs more than 40,000 people in 150 companies. Not bad for a group that few people have heard of - and that got into its present business by mistake.

Most impressive of all, Siebe has transformed itself from a typical 1980s takeover merchant into a focused world-beater in electronics without changing its management. Ten years ago Barrie Stephens rode the merger wave with the likes of Lord Hanson, John Ashcroft of Coloroll and Nigel Rudd of Williams. Now he is more likely to be compared with those US chiefs revered for their management and strategic skills.

The deal now under way - the pounds 20m purchase of the compressed air division of Germany's Mannesmann Demag - is small by Siebe's standards; earlier this year, for instance, it paid nearly pounds 500m for the UK-based power-controls company Unitech. But it clearly fits the company strategy of focusing on a few key areas and going all out to dominate them.

Few people outside Siebe claim much understanding of a business centred on making control systems for everything from whole factories to domestic refrigerators. But they understand the figures well enough.

In recent presentations to City analysts, the management pointed to sales growing at a compound annual rate of more than 16 per cent over the past decade, with operating profit increasing at more than 20 per cent a year. It reckoned its overall performance in sales, profits, margins, earnings per share and dividend growth put it ahead of peers including Emerson Electric and Honeywell in the US, ABB and TI in Europe and Omron in the Far East.

In the latest financial year turnover passed pounds 2.5bn and pre-tax profits were up a fifth at pounds 331m. And Mr Stephens, the chairman, is confident that Siebe can carry on the good work: "If you are as good as we say we are, you've got to keep improving."

However, Siebe's progress has not always been so smooth. Even by the standards of the 1980s it was an aggressive buyer, launching rights issues and piling up debts that often took gearing well over 100 per cent to fund large, chiefly US acquisitions.

Mr Stephens, who is now 67, was brought up in Wales but headed for the US when he was 21. He worked his way up through General Dynamics and the Barden Corporation before being headhunted to take over Siebe in 1964. It was a small company specialising in diving equipment, turning over pounds 1.4m and making pounds 100,000 profits.

He and his finance director, Roger Mann, diversified through acquisition and turned Siebe into a modestly successful conglomerate. Then in 1984 they bought a garage equipment maker called Tecalemit. This included two small controls businesses, which the managers tried to sell because they knew nothing about them. They failed, and decided instead to get to grips with controls systems. At this point, says Mr Stephens, he fell in love with the technology.

The purchase of UK industrial compressor group Compair a year later brought three more controls companies into Siebe, and then acquisition followed acquisition. However, the love affair turned sour in 1990 after the purchase of Foxboro, a US process auto-mation com-pany. Although Mr Stephens was convinced about Foxboro, the City seemed to think it was a deal too far. "It was our nadir. Over a period of about seven weeks our share price halved and I was in the doghouse."

Time, and his zest for "sorting out" companies, seems to have proved him right. But Mr Stephens insists "there's nothing magical about Siebe." Instead, "everything we do is purposeful and has a jolly good reason. There aren't many thrills."

Modern managers love systems, and Mr Stephens is no exception. His pet system is the weekly production and perusal of the "magic six" - the vital statistics of each operating company. Although the group stands apart from much of British industry in the amounts it invests, staff are left in no doubt that this is no free and easy organisation. Siebe, like such US giants as Hewlett-Packard, strives to strike a balance between substantial investment - about 5 per cent of revenues - and controlling costs.

The magic six is a key means of achieving that. The benefits are not just that top managers gain information on orders received, sales shipped, purchase orders placed, supplier invoices received, and cash in and cash out. Having to compile the material also concentrates the minds of the line managers.

Mr Stephens sets such store by the practice that failure in any one of these areas is liable to land a manager in trouble. But though he has said that the organisation moves swiftly to replace people who do not do what is required, he also places great emphasis on continuity. "It's not a good environment if you chop and change. It tends to give the whole corporation a sense of churning," he says, adding that it also leads to confusion among customers.

Accordingly, Siebe has a well-developed training programme designed to produce future executives from within. As well as funding a chair in engineering at Plymouth University, it is currently paying for 549 young people to study for undergraduate and post-graduate degrees. Although there is no requirement that they work at Siebe afterwards, Mr Stephens says the vast majority are sufficiently inspired by the challenges and potential rewards to sign up.

Unsurprisingly for a group that claims the egalitarian credo of "one rule for everybody", there is a strong US feel to Siebe - even though its modest headquarters is tucked away in a side street in old Windsor. Several senior managers - including Allen Yurko, who became chief executive after Mr Stephens relinquished the role last year - are either American or have spent substantial parts of their careers in the US.

While the company claims to have invented some of its management techniques, it admits to adopting many of the best practices from the US. In particular, it regularly surveys customers to find out what they think of its performance and to see how it can improve. Equally, it is convinced it cannot stand still if it is to remain a market leader.

"A company has to look at itself with the eyes of outsiders, adjust itself and constantly renew itself," says Mr Stephens. "Once you get smug and self-satisfied and stop looking over your shoulder, you'll be in the cemetery."