KordaMentha Partners were appointed Receivers and Managers of Tassal Limited, the largest producer and distributor of Atlantic salmon in Australia. The turnaround plan executed rectified fundamental issues of the business and in an unprecedented move, the business and assets of Australia's third largest salmon producer were acquired.
The combined businesses were sold for an EBIT multiple of 4.7 times on projected EBIT.
We identified a number of fundamental business and industry weaknesses including:
- A domestic and worldwide over supply of salmon resulting in a dramatic price fall in all of Tassal’s markets.
- Liquidity issues within Tassal which forced the company to become a 'price taker' rather than a 'price maker'.
- An industry characterised by many small competitors with insufficient size and leverage to generate economies of scale.
- Internal 'silo mentality' with no coordinated communication and a lack of information and planning systems within Tassal failed to coordinate the production cycle, leading to inefficient production and lost sales opportunities. Flow on effects from this coupled with environmental issues (such as high water temperature) lead to high stock losses and insufficient stock to meet sales demand therefore putting key customer contracts at risk and as such, the goodwill of the business.
- Overcapitalisation of processing facilities lead to unsustainable levels of debt.
To address these fundamental issues, a three point turnaround plan was immediately executed: stabilise the business, rationalise the industry and exit - identify and execute an exit route.
Our approach was to work closely with the secured creditor to develop a plan and secure funding to execute the plan. This enabled us to rectify internal liquidity issues and allowed Tassal to become a 'price maker' rather than a 'price taker'.
As part of our actions to stabilise the business we implemented a restructuring of senior management, re-negotiated long term supply contracts, developed a financial model to support seasonal financing, established a KPI scorecard to monitor performance, and implemented a production planning tool to balance supply with demand.
In February 2003 and in conjunction with the secured lender, Tassal acquired the business and assets of Nortas Pty Ltd (the third largest salmon producer in Australia with annual revenue of $30 million). This acquisition by a company in Receivership was unprecedented in Australian corporate history and was a key element in the industry rationalisation blueprint.
Following an exhaustive marketing campaign (which involved 80 interested parties) the combined businesses were sold in November 2003 for $43.3 million, representing an EBIT multiple of 4.7 times on projected FY04 EBIT of $9.2 million.