A wide range of factors have combined to drive this world-class operation, from a steely customer focus to regular reinvestment, says Attractions Management editor, Liz Terry

1. Leadership
Talk to Merlin CEO Nick Varney’s team and they’re rightly proud of him and also respectful – of how hard he works, how he manages to get straight to the heart of things and of how well he knows the business. Importantly though, he also seems to hire great people and empower them to get on with it.

2. Staying grounded
In an often ‘political’ market which is sometimes characterised by showmanship, Merlin is a resolutely sensible company. However, its endearing lack of pretension shouldn’t deceive – the Merlin team are driven and competitive, but it seems they believe that actions speak louder than words.

3. Surgical investment
Varney is very clear on what it takes to create profits and avoids investment fads, keeping a clear eye on the returns.

This is especially important as the company ventures into emerging markets, where investments can be perilous. Many factors – including the underlying demographics – have to be right for Merlin to launch or acquire.

4. Lean head office
Many people do a double take when you tell them the second biggest attractions operator in the world after Disney is based in a (nice but) fairly modest, shared office in Poole in Dorset, UK. They expect something more high profile.

But the decision to keep nimble and lean at the centre has served the company well and enabled it to focus on operations, investor relations and growth.

5. Harnessing brands
When Varney arrived in the industry, his mantra was brand, brand and more brand and he’s been unwavering in his faith in their power to build businesses ever since.

It’s an approach which has seen the company develop a portfolio of national and global properties, both by organic growth and by acquisition.

In all, Merlin has 12 brands and 100 plus attractions in Europe, the US and Asia and a recently announced deal with DreamWorks to build Shrek’s Far Far Away Adventure – themed midway attractions – shows that this philosophy continues to underpin strategy.

Being brand-focused has ensured Merlin has remained customer- and consumer-focused and has given the company huge PR and marketing clout.

Buying into the LEGOLAND brand was the cherry on the cake, as it’s regularly listed as one of the top 10 in the world.

6. Global perspective
Varney has led his team fearlessly and without hesitation into global ventures and seeks opportunities wherever they make sense according to the business model.

He throws himself wholeheartedly into these ventures – learning languages to get closer to partners and stakeholders – and the company has succeeded in transplanting its culture wherever it goes, which is no mean feat given the geographical diversity of its growing portfolio.

7. Scaleability
Having a strong suite of brands at its fingertips has enabled the Merlin team to grow the businesses steadily, to take advantage of development opportunities in a wide range of markets and world regions and to develop attractions of varying sizes and types.

Merlin attractions are divided into three groups: resort theme parks – the larger businesses; midway attractions – the mid-scale operations, such as SEA LIFE and Shrek; and LEGOLAND.

When it comes to global roll-outs, having such a diverse, well-balanced portfolio of properties enables Merlin to respond to a wide range of opportunities.

With everything from LEGOLAND Discovery Centres, which work well in urban locations, to major standalone theme park brands, the company has a great menu to choose from.

8. Spreading the risk
When it comes to risk and stability, Merlin has built a diversified portfolio.

From a location point of view, the company has invested in a range of businesses which span northern and southern hemispheres and indoor and outdoor locations, as well as year-round and seasonal businesses: it’s involved with everything from ski resorts to pop-up operations and waterparks to hotels.

Having such range ensures that if any one market, season, location or attraction type falters for any reason, or is affected by external influences, the overall businesses is buffered from the negative trading impact that ensues.

9. High point of entry
One of the reasons Merlin has been so attractive to investors is the high level of investment needed by operators to be able to compete in much of this market – especially the larger theme parks and resorts.

In some leisure markets – bars, and health clubs, for example – the amount of capital needed to set up a new business is extremely small, making them far more vulnerable to competitive attack.

Merlin, with its substantial investment needs, has placed itself in a position where competition is less likely to emerge.

10. Sound investor relations
Growth has been funded by a series of private equity deals and a sale and leaseback on part of its property portfolio.

Those involved have done well and the company’s stock market floatation in November 2013 was the final seal of approval from the investment community.

The first results following the float were strong, with an EBITDA of £390m.

The team has worked hard with investors, personally briefing them and choosing backers to ensure a good fit. “We couldn’t have done it without Joe Barratta and Blackstone,” says Varney.

11. Hard work
Varney and his team are still driving their operation as though it’s a start-up – even after all these years. This intensity has created and sustains great momentum.

12. Hard noses
The team don’t back away from tough decisions. Redundancies happen when they’re needed to maintain profitability and sites are disposed of if they don’t perform. Being able to deliver on tough decisions keeps the company on track.

13. Teamwork
Varney says Merlin’s success is in part a result of great work by the top team: Andrew Carr, Mark Fisher, Glenn Earlam, Nick Mackenzie and John Jakobsen.

14. Continuity
Having the founder of a business at the helm as it grows can be a hindrance unless their vision grows with it.

Merlin’s investors are fortunate Varney (and his team) have stayed the course, providing continuity to enable the growth which took the company through its floatation to the $6bn+ valuation. Nice work.