Allomak listed in August 2006, and for a while had great success. By 2008, Allomak had revenues of some $70 million, up from $1.1 million in 2006.
But then the global financial crisis hit. By early 2009, the company verged on bankruptcy. It had $50 million in liabilities, and revenues were down to $44 million a year. The stock debuted at 40 cents in 2006, rose to $1.10 at its high point, before plunging to 3.9 cents after an earnings downgrade at the end of 2008.
“They got the business into some serious strife,” Malone says. “When the GFC hit, you couldn’t rob Peter to pay Paul anymore. Their model didn’t work, and it was all going to implode. It was like headless chooks going around. It was terrible. Everyone was going around with their own agenda. There was no cohesiveness. Everyone was disenfranchised. There was no leadership.”
Malone (and three others) were owed a lot of money – Malone was owed the most.
“I had a fair bit of clout, so I got involved. I could either keep it together or tip it over.
“If I tipped it over, I would have gotten to take back the panel arm, and I could have gone on and been a happy panel-beater. Or I could push to keep it together. And it was very compelling to keep it together.”
Two things tipped Malone towards this view. The first was about tax. “We had a lot of write-downs, and would have been better off tax-wise trying to make a go of it,” he says. The other thing was the businesses Allomak had bought together. “We had some very effective people who had run very good businesses. I had a lot of trust and faith in them.”
Malone, by then a minority shareholder in AMA, called a meeting to oust the board in January 2009. He succeeded, joined the new board himself, and aimed to have a concrete plan to suggest to shareholders six months later in July. This passed, and Malone became CEO of the group.
His first order of business was to remove at least $20 million in liabilities from the balance sheet. A quarter of this was achieved through a debt-for-equity swap with the vendors, with the remainder achieved through loans from the bank and another interest-free loan from the vendors.
“Everyone had to take a haircut – the bank, the vendors, everybody,” Malone says.
“If you were a director of a company and you were trying to get all this stuff done, normally, you wouldn’t be able to. Because you weren’t in there yourself feeling the pain. By me taking a haircut, the other vendors followed suit. When I gave the business an interest-free loan, the others followed suit. It was very important, given the position I was in. It allowed me to do a lot of things.”
For the record, Malone is also thankful to his bank – Westpac.
“We negotiated a deal with the bank that was fantastic. I owe a debt to the people at the bank because they had some trust and faith in us.”
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Myriam Robin is a reporter for SmartCompany and its sister site LeadingCompany. She has degrees in economics, international studies and journalism. She likes writing about businesses taking risks and doing new things.
