25 corporate collapses – and the lessons learnt

Artcore

Source: Smartcompany.com.au

http://www.smartcompany.com.au/P ... lessons-learnt.html

ABC Learning Centres
Date: November 2008
Sector: Childcare
Lesson: ABC Learning founder Eddy Groves had a pretty good little business going in Australia – profitable, fast growing and underpinned by government childcare subsidies. But his forays into the US and British markets distracted Groves from the day-to-day running of the Australian business, and without his scrutiny the low-margin operations started losing money. Eddy’s ambition of creating a global childcare giant was his undoing – had he stayed focused, ABC’s fate could have been very different.

Allco Finance Group
Date: November 2008
Sector: Financial services
Lesson: Like fellow fallen finance groups such as MFS, Allco’s problem was simple – too much debt. Add this to a business model that was insanely complex and you have a recipe for disaster.

Apollo Life Sciences
Date: October 2008
Sector: Biotechnology
Lesson: You have to feel sorry for companies in the biotechnology sector. It takes years of research, product development and trials for these companies to turn a profit, which means they must continuously raise cash to stay alive. The funding freeze has hit the sector particularly hard – no-one wants to be involved in companies with long-term risks. As always, cash is king.

Asset Loan Group
Date: September 2008
Sector: Financial services, property
Lesson: Another company that seemed to believe the good times would last forever. When the credit crisis hit, this small Queensland financier-turned-property-developer began frantically trying to sell assets to repay debt. But as the property market went into freefall, getting a sale across the line took too long, and Asset Loan Group went under. As administrator John Greig said, timing was the company’s biggest problem in the end.

Australian Discount Retail (Crazy Clark’s, Go-Lo, Sam’s Warehouse)
Date: January 2009
Sector: Retail
Lesson: The collapse of Australian Discount Retail’s three cheap-and-cheerful chains was a shock – discount stores generally do well in a recession. But the company’s private equity owners had loaded the company with $201 million of debt, giving ADR little room to move when retail spending slowed. As always, debt kills.


Bill Express
Date: July 2008
Sector: Financial services
Lesson: The collapse of electronics payment provider Bill Express hit the company’s customers – mainly newsagents and small telecommunications providers – very hard. In hindsight, the company’s financials were clearly a mess – despite reporting a profit in every year it was listed (since 2004) the company managed to rack up debts of $180 million by the time it collapsed.


Beechwood
Date: May 2008
Sector: Construction
Lesson: The collapse of New South Wales’s largest homebuilder sent shockwaves through the property sector. The company was squeezed from three angles; demand dried up as the economy tanked, the cost of contractors and tradesman continued to escalate, and the credit markets froze. But Beechwood and the other collapsed home builders were guilty of undercutting each other and destroying margins in the process.


CFK Childcare
Date: November 2008
Sector: Childcare
Lesson: The collapse of ABC Learning sealed CFK’s fate – its attempts to sell its assets became impossible when ABC went under. The lesson from the childcare sector collapses is that apparently cottage industries such as childcare (which had, until 10 years ago, been largely dominated by community groups and single operators) are not always as easy to corporatise as it may appear.


Commander Communications
Date: August 2008
Sector: Telecommunications
Lesson: Technology experts say Commander Communications treated its customers poorly, overcharging them for relatively old technology solutions. That was OK when the company had a strong position in the SME market, but as competition increased, customers turned away and revenue fell.


Destra
Date: November 2008
Sector: Digital media
Lesson: Digital media company Destra was always difficult to describe, mainly because it had so many different elements, from digital music businesses through to publishing through to marketing. The speed at which these diverse businesses were cobbled together proved to be the company’s undoing – Destra bought separate companies in the three years before its collapse, with most of the acquisitions funded by debt. In the end it was a case of too much, too fast.


EBS International
Date: July 2008
Sector: Online retail
Lesson: EBS International was better known as EBusiness Supplies and became one of the biggest traders on eBay until its collapse last year. The company’s grow-at-all-costs mentality seemed to have been its undoing – it kept selling more and more goods even as its problems with suppliers and delivery mounted, further compounding its problems and eventually leading to its demise.


Elderslie Finance
Date: July 2008
Sector: Financial services
Lesson: Former Liberal leader John Hewson resigned as chairman of Elderslie just weeks before the company was placed in receivership. The company’s problem was simple – it ran out of cash as investment markets tumbled and fee revenue shrunk. Another example of a business model built for good times but unable to weather the downturn.


Environinvest
Date: September 2008
Sector: Agribusiness
Lesson: Environinvest, which was founded by former Victorian state government minister Roger Prescott, was an unlisted public company that operated agricultural investment schemes, including tree plantations and cattle projects. While the company’s debt and poor cashflow forced it into administration, there were clear issues with management – in correspondence with the company, auditor David Nairn of HLB Mann Judd noted “ambiguous transactions with little documentation” and questioned the timeliness of financial reporting.


EzyDVD
Date: December 2009
Sector: Retail
Lesson: EzyDVD is one of those rare birds – a collapsed company that actually found a new buyer, the Franchise Entertainment Group. Poor management seems to be the big problem here. The company reportedly lost $3 million in its last few years of operation and founder Jim Zavos went through two CEOs in quick succession in 2008. Now that the company’s unprofitable stores, warehouse and headquarters have been shut, the new owner should be able to turn the business around.


Freightlink
Date: November 2008
Sector: Infrastructure
Lesson: The collapse of Freightlink, owners of the Adelaide-to-Darwin railway, surprised no-one in the transport and logistics sector. The sheer cost of building the line meant the company had to take on huge borrowings, but revenue never lived up to the company’s over-inflated expectations. Freightlink was doomed to fail.


GMC
Date: December 2008
Sector: Manufacturing
Lesson: The collapse of power tool maker Global Machinery Company was a shock, but the reason was clear – Bunnings. When the hardware giant took GMC’s products of its shelves in early 2008, GMC’s sales plummeted and its debt load became difficult to manage. The lesson? If you can’t get on the shelves of the dominant retailer in your sector, you are in trouble.


Herringbone
Date: December 2008
Sector: Retail
Lesson: Luxury shirt brand Herringbone revelled in its image as outfitter to the financial services whiz kids of Martin Place and Collins Street. But as the financial crisis swept through the office towers of Australia, Herringbone’s sales fell by 23% in two months. Luxury goods always struggle in a recession, but Herringbone’s position was made all the more precarious by its debt levels.


Kleins
Sector: Retail
Date: June 2008
Lesson: As well as the usual problems of mismanagement and too much debt, low-cost jewellery retailer Kleins was guilty of one of retail’s biggest sins – failing to keep up with its consumers. The arrival of costume jewellery chain Diva should have forced Kleins to freshen its product range and chase a younger consumer, but the company simply didn’t move quickly enough. Sales dried up, stock built up, and eventually the doors closed.


Lift Capital
Date: May 2008
Sector: Financial services
Lesson: It was no coincidence that stockbroker and margin lender Lift Capital collapsed shortly after Opes Prime. While the company was tottering because of market conditions, the ripple effects from Opes caused a run by clients, almost immediately condemning the company to administration. The lesson is clear – when one of your competitors goes down, be prepared to feel referred pain.


MFS (aka Octaviar)
Date: September 2008
Sector: Financial services, property, tourism
Lesson: It took MFS the best part of year to die, but the company’s fate was sealed in a few short weeks at the start of 2008 when a billion dollar pile of debt crushed the company as the credit crisis struck. Debt is bad enough, but when your entire business model is built around the idea of borrowing money to buy over-priced assets, you will almost always hit trouble when the business cycle turns.


Midas
Date: January 2009
Sector: Automotive retail
Lesson: Midas was put in administration early this year by its high-profiled shareholders, including former Coles boss John Fletcher, although the administrator is hopeful of finding a buyer. Midas’s ill-fated move into LPG conversions (which were suddenly less attractive because of falling petrol prices) didn’t help its cause, but its incredibly acrimonious relationships with franchisees was also a constant distraction for management.


Opes Prime
Date: April 2008
Sector: Financial services
Lesson: In hindsight, the collapse of margin lender Opes Prime was the moment the global financial crisis hit Australian investors. While the Opes mess will probably take years to sort out, at the heart of its problems was poor management. When a key client’s debts exploded, the company appears to have been unwilling or unable to act. But in the end, this brought the entire company – and about 1400 clients – down too.


Raptis Group
Date: February 2009
Sector: Property
Lesson: Jim Raptis was all but wiped in the property crash of the late 1980s and early 1990s, but the spectacular boom in Gold Coast property during the last decade allowed him to rebuild. Now, it’s all gone again. Not surprisingly, the problem was the same – Raptis Group was so heavily geared that when the apartment sales dried up, the company was simply unable to pay its financiers and subcontractors.


Storm Financial
Date: January 2009
Sector: Financial services
Lesson: The collapse of financial planning group Storm Financial has been covered in depth, but the key problem was the company’s inability to build a business that could last through a business cycle. The company’s model – and its advice to clients – was based around the bull market, and when financial markets crashed Storm was unable to cut its cost quicker than its revenue was falling. A business must be strong enough to make it through good times and bad.


Strathfield
Date: January 2009
Sector: Retail
Lesson: The management of mobile phone and car audio retailer Strathfield has been a problem for the last few years, with directors, executives and shareholders coming and going at an alarming rate. The revolving management door has not helped the company’s profitability and a disastrous Christmas trading proved to be the final straw. As any good manager knows, stability is crucial to business success.

T-shirt

感谢分享。
基本都是些挣扎好几年的苦主，经济危机一来，就扛不住鸟~

avatar

Lessons Learned: 最好不要去A开头的公司工作，很容易倒，20%倒掉的公司都是A开头的:)

alyssa

Storm Financial
Date: January 2009
Sector: Financial services

在电视台专题节目上看到这个公司了。苦主们，损失多的有些到了几百万。损失少的就是一个寡妇，可能失去自己住的房子。
这帮人胆子太大了， 现在接受教训了。
看坏帐，还是comm 银行抗着。

宁静而致远

Thanks for sharing, good article.

糊里糊涂

LZ是个很强悍的主! 咱什么时候也能混到跟LZ一个程度呢?