FIVE years after buying private Perth business ComputerCORP and renaming it Synergy Plus, the directors of the listed IT services company have called in the administrators.
FIVE years after buying private Perth business ComputerCORP and renaming it Synergy Plus, the directors of the listed IT services company have called in the administrators.
The failure adds to a string of Western Australian companies that sought to grow through multiple acquisitions, only to hit a brick wall.
Neptune Marine, Coote Industrial, VDM Group, Paladio Group and RCR Tomlinson all pursued growth by acquisition, and all to varying degrees have been forced into a major restructuring.
Invariably they found that integrating disparate businesses was harder than originally anticipated, with planned synergies proving elusive.
Synergy Plus has gone one step further than the other under-performing businesses, with the directors placing the company into voluntary administration last Thursday.
They appointed Hall Chadwick’s Richard Albarran, David Ingram and David Ross as administrators of the parent company, Synergy Plus Ltd, and its four subsidiaries.
The directors said they were seeking to implement a speedy restructuring of the business that would focus on its Air Data subsidiary and its services business.
However, the trigger for the appointment was a demand by major funder GE Capital for repayment of its finance facility.
That, in turn, followed a deal that would have led to investment group Pacific Alliance Asia Opportunities Fund providing Synergy Plus with up to $30 million by way of convertible bonds.
The first drawdown was due last Thursday, the same day GE issued its payment demand.
GE subsequently appointed Taylor Woodings’ Michael Ryan, Andrew Swarz and Quentin Olde as receivers and managers of the group’s main operating subsidiary Synergy Plus Operations Pty Ltd.
It all seemed very different in March 2006, when Mr Martino led the purchase of 18-year-old ComputerCORP through a cash and scrip deal valued at $8.6 million.
ComputerCORP said at the time it was on track for annual sales of $150 million though its accounts showed modest profits.
That pattern continued for the next five years, despite multiple acquisitions and restructuring measures.
In a sign of things to come, Mr Martino told WA Business News in mid 2007 that the new owners were surprised by the challenges they confronted when they took control of the business.
“It’s been harder than we first thought it would be,” he said.
As well as making multiple acquisitions, and cancelling some before they proceeded, Mr Martino also recruited well-regarded chief executive Garry Henley, who had previously run Alphawest.
Despite all this, Synergy Plus failed to deliver consistent or adequate profits. Its most recent results for the half-year to December 2010 were a loss of $5.9 million on revenue of $65.8 million.
In the previous corresponding period, it recorded a profit of $800,000 on revenue of $76.8 million.
The many changes at the company included the appointment last November of Frank Stranges as executive chairman, with Mr Martino stepping down to a non-executive director role.
