I cover many failures in the book. I reviewed the liquidation or over 1000 small businesses to gain a deeper insight into what lead to those failures. I researched in some detail the failure of some of New Zealand's recent large corporate failures. These include South Canterbury Finance, Solid Energy, Pumpkin Patch and Ross Asset Management.
Here is a small taste of what is covered in the book.
Ross Asset Management
South Canterbury Finance
The failure of New Zealand's coal miner.
Solid Energy was being dismantled in the late 1990's as the owner, the government, saw it had no future. The CEO assigned to complete this task, Don Elder, saw a different future for the coal producer and resurrected a business destined to be broken up and sold off. In the decade after this, Solid Energy performed exceptionally well delivering great returns to the government, employment for over 1000 people and supplied coal to many entities within New Zealand and abroad. Unfortunately, in 2012 the business found itself in serious problems ultimately failing. Remaining solely as a miner of coal was always going to limit the future of this business. It borrowed heavily (for the first time in its life) to pursue new , high risk and costly ventures. All went well while the amount of coal the company produced and the price it attracted for that coal remained strong - this was betting on a future that could not be guaranteed. When the price of coal dropped a once highly successful business fell apart. The decisions that led to this outcome were flawed and even with hindsight do not make complete sense.
Death of a Kiwi icon and the risk of growing
Pumpkin Patch was a highly successful business and a much loved brand in New Zealand. It ventured into Australia and successfully listed on the stock exchange. A growth into other countries would seem the next obvious step. At the peak of this growth Pumpkin Patch had over 200 stores in countries across the globe. Much of this growth was funded through debt - little cash remained after the listing on the stock exchange. Sadly such aggressive growth relied on really good sales especially in the USA an the United Kingdom - this did not occur. The growth also failed to see the gaps that existed in the internal operations of the business - such gaps could be managed in a small Australasian market but created serious problems operating a global business on this grand scale. When the problems set in, the cash did not exist to reverse the problems and this once loved business failed.
Ross Asset Management
Fraud, dishonesty and the failure of Ross Asset Management.
Part of Chapter 5
David Ross was jailed for over 10 years for running the largest Ponzi scheme in NZ history. He defrauded over $100million from people, many elderly, many Ross' friends and all who had put trust in a man who over a 20 year period knowingly took their money. Fraud and dishonesty brought Ross and his businesses down. While New Zealand is one of the least corrupt countries in the world, dishonesty is a part of business that can’t be ignored. Sadly, this is because all of us are dishonest - to a point. It’s when such dishonesty is left unchecked that it can have devastating impacts on businesses and peoples lives.
South Canterbury Finance
Failure of the Hubbard empire
South Canterbury Finance (SCF) started in 1926. Allan Hubbard purchased it in the 1950s. Hubbard was highly respected, loved in the South Island, and helped hundreds of businesses. Apart from the great depression SCF had never seen an unprofitable year. Hubbard started the business lending conservatively and mainly to regional New Zealand. Unfortunately Allan Hubbard was not someone who easily let go of the businesses he owned. He surrounded himself with people immensely loyal to him and disliked the processes most large entities took for granted in the running of their businesses. He only hired his first CEO in 2003 - without approval of his board. The new CEO and his management team pursued aggressive growth being spell bound by the potential gains in the property market, like most other finance companies at the time. While the Global Financial Crisis was more severe than any one could have predicted, the cracks within SCF were large. Even after finance companies had collapsed in New Zealand and the USA, SCF continued investing into ever riskier ventures, particularly with the protection or the government’s retail guarantee scheme. The collapse of SCF, the role of the government, the impact of the unsuccessful serious fraud office legal case, the securities commission recommendations for statutory management of other Hubbard businesses, and more, add a further level of intrigue to the largest failure in NZ history.