Ordinarily, when a financial services group is gobbled up by another, the first people to feel the harsh winds of change is the acquired group’s senior executives.
Ordinarily, when a financial services group is gobbled up by another, the first people to feel the harsh winds of change is the acquired group’s senior executives. But incoming Royal & SunAlliance Australia managing director Mike Wilkins is no ordinary executive, as Stuart Engel found out.
When Mike Wilkins received a late night phone call from former De-loittes colleague Rob Hunwick offering him a job as finance director at Tyndall Australia, there were many doomsayers in the broking com-munity and the media predicting the demise of his new employer.
The year was 1989 and Tyndall was quickly gaining a reputation as what Wilkins calls a “basket case”.
“We had very few friends in those days. Most people were writing us off,” Wilkins says.
One lone voice in the wilderness was managing editor of Money Manage-ment and radio commentator, David Koch. After a number of meetings with the management team at Tyndall and a look at the balance sheet, Koch was sold on the management vision and potential for a major turnaround for a group.
It was no easy vision to sell. Tyndall in 1989 was on the ropes and needed major surgery before it could return to its halcyon days of the mid 1980s when Clayton Robard, as it was known then, has been one of the star performers on the Australian funds management landscape. But by 1989, the funds management operation was bleeding.
“What I used to tell stock brokers at briefings was that Clayton Ro-bard was one of the go go fund managers of the 1980s. But when the 1987 crash came, it was stop stop,” Wilkins says.
The group’s $2.5 billion under management had been reduced to $1 bil-lion in the space of two years by a combination of poor performance and clients pulling their money from the funds. Cash flow was begin-ning to emerge as an issue. Tyndall was struggling to meet redemption requests of disgruntled investors while at the same time keeping the banks at bay.
Just one year into the job as finance director, Wilkins had the dif-ficult task of announcing what was at the time one of the largest losses by an Australian company, $78 million, as he undertook a major restructure of the balance sheet.
“We were going to let the world know that perhaps the emperor did not have so many clothes,” he says.
As if this was not enough, Tyndall Australia’s parent, UK-based Tyn-dall Holdings, was making noises it wanted to unload its Australian business.
“We became the unloved child of our British parent,” Wilkins says.
This was probably the lowest ebb for Tyndall, but even then Wilkins believed the management team had the strategy in place to rebuild the group. So much so that he and fellow directors Mike Siddle, Garnet Harrison and Rob Hunwick took a controlling stake in the company a year later. Mind you, the controlling interest cost them one pound.
By the time the team had the controlling interest, the building blocks were in place for the diversified financial services company which netted shareholders $738 million when it was sold to Royal & SunAlliance back in February. Not bad considering it was valued at $7 million when the Supreme Court approved the capital restructure of the company on Christmas Eve, 1991.
The two cornerstones of the recovery strategy were to diversify from simply being a funds management group and to bolster investment per-formance.
To diversify, Tyndall had to make up some pretty serious lost ground in the risk insurance market which had been neglected in the Clayton Robard structure. Wilkins describes Clayton Robard at the time as “a funds management group with a life office stuck in the corner”. Di-versifying into life insurance would give Tyndall access to a growing market and provided a safety blanket for the company in the event that October 1997 repeated itself.
That strategy paid off almost immediately. Revenue from risk products grew by about 40 per cent a year and flowed straight through to the group’s bottom line. By 1994, more than 100 per cent of the group’s profit came from risk products. By 1998, 50 per cent of the group’s revenue came from its risk products, two years earlier than the date targeted.
By that time, Tyndall had also diversified into superannuation ad-ministration and trustee services, mainly through acquisitions. It had also diversified geographically by gaining a strong foothold on the New Zealand financial services market.
Apart from diversification, the other linchpin for the group’s suc-cess was to rebuild its shattered funds management business. In 1991, Tyndall’s funds management operations “went into hibernation”, ac-cording to Wilkins. It closed its funds to new investors while the investment team put some runs on the board.
Under the guidance of Peter Pedley, Tyndall opted for the comparative analysis investment style used by its controlling shareholder Guin-ness Peat Group’s UK funds management business. By 1994, when Pedley retired to be replaced by Doug Little, Tyndall’s funds were among the top performers, a trend that continued until about the middle of last year.
Wilkins may have come to Tyndall as a beancounter, but he has ended up playing a pivotal role in mapping out a direction for a company that many had written off.
Firstly, with the support of what he describes as a “courageous board”, took the painful steps in restructuring the groups balance sheets and steadying the cash flow difficulties. Then as managing di-rector, Wilkins survived the fallout from a major board room stoush that saw two friends and fellow Tyndall pioneers depart the company. He has capitalised on the group’s balance sheet strength through a number of key acquisitions and building on alliances forged with in-dependent financial advisers.
Now he considers himself more of a player in the financial services industry than an accountant. In fact, the former Deloittes executive says he is now “dangerous near a balance sheet”.
“The past ten years have been the best of my career working with a great bunch of people,” he says when asked if all the upheaval has payed off on a personal basis.
But ten years on, his master now is not the bankers who were circling the struggling company of ten years ago or the shareholders watching their share price multiply five fold in the past eight years. Wilkins now reports to Royal & Sun’s regional managing director Eward Kulk with the brief to build its Australian personal financial services business.
“I’m still an MD with training wheels. But so far I can appreciate the synergies between the two groups and believe the two cultures will complement each other.”
