Recognising the need to take advantage of growth opportunities was the driving force behind three significant private transactions collectively worth more than $120 million last week; yet that is where the similarity ends.
Recognising the need to take advantage of growth opportunities was the driving force behind three significant private transactions collectively worth more than $120 million last week; yet that is where the similarity ends.
TCC Group, DJ & MB MacCormick, and Advanced Well Technologies Pty Ltd all took markedly different steps to achieving this, culminating in three very different sales.
The Iannello family sold its TCC Group in its entirety to the UK’s Cape plc, taking $65 million in cash and $20 million in scrip, as well the opportunity to earn a further $12.5 million.
The MacCormick family chose to sell its 33-year-old civil engineering division, a notable tunnelling specialist, to Sydney-based listed group Walter Diversified Services Ltd for $35 million to concentrate on property development. It also retained a business that hires shoring equipment for excavation.
Advanced Well Technologies was different again. It sold a 30 per cent stake in its 11-year-old business, for an undisclosed sum, to east coast private equity group Propel Investments, to fund growth and acquisitions.
TCC Group managing director Terry Iannello, a founder of the business, said the Kwinana-based mining and industrial processing services company had outgrown its private ownership.
Mr Iannello said there were significant opportunities to grow the business outside Western Australia, beyond a foothold it had established in Victoria.
“We need to grow over east and get bigger and have the capacity to take on bigger projects,” he said.
This course of action was limited before last week’s sale because the three owners of the 700-employee business (Mr Iannello, general manager Tony Iannello and projects manager Sam Cinalli) had to provide the various assurances and guarantees required by big project proponents.
Mr Iannello said that, while he and the rest of the management would continue on with the company, there was also a point when owners had to enjoy the fruits of their labour.
“All the money we have earned has gone back into the company,” he said.
“You have to get some reward for it, you work pretty hard.”
About 30 kilometres north-east in Maddington, the MacCormick family has also seen the growth opportunities and decided to divest what was once its core civil engineering business to concentrate on property development.
That means downsizing from 116 staff to just seven, including family members.
“Civil used to be the biggest part of the business, but the property side of the business has grown over the past three to four years,” Malcolm MacCormick told WA Business News.
“That is the rationale for letting the civil side go.
“It is too much to do all of it.”
Mr MacCormick said there were limitations in a family business, especially on the management side of the equation.
“You can only take it to a certain level, then you have to invest in a lot more management,” he said.
“They [Walter Diversified] have the management in-house and can take it to another level.”
In contrast, property development required fewer resources to run, across the board.
Mr MacCormick said the family had grown the property development division rapidly on the back of high margins earned on its niche trenchless tunnelling business, which had won work throughout Australia and the Middle East, and on property transactions.
“The more [land] you have the easier it is to make the bigger margins,” he said.
“There is less competition for land holdings and buildings you go for; your competitors are really the institutions and bigger groups.”
The divestments by TCC’s owners and the MacCormick family are part of trend in the wider services and consulting sector that Perth-based Advanced Well Technologies managing director Cameron Manifold has noted.
Mr Manifold, a former WA Business News 40under40 Award winner, has raised an undisclosed sum from the former private capital arm of Deutsche Bank to both protect his company and take advantage of the current wave of consolidation.
He said he was looking to add “bulk” to AWT, which works in the development and refurbishment of oil and gas field equipment.
That includes boosting staff from the current level of about 100, especially in Malaysia and India, as well as suitable acquisitions to allow AWT to remain an Australian company with an Asian presence that can match it with the big guns of his sector.
“We are competing in areas of their historic domain, and successfully doing so, but we need more substance and depth to continue to do so on a sustainable basis,” Mr Manifold said.
