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Succession planning: a success story

When an out-of-the-blue call came for the Mackenzie family, a whole host of succession issues came to the fore.  Someone wanted to buy them—were they ready to sell and on whose terms? 

Maurice McKenzie is a man of many words and even more action, who relies on ‘golden gut’ feelings to weigh up a situation.  “There are opportunities galore out there and the only way to go is headlong into them and make things happen.” 

Maurice knows his way around wire, fencing, steel and sleeve-rolling-up, as well as what it takes to make a sale and gain margins.  He left the farmlands for a position at Fletcher Challenge subsidiary Wiremakers some decades back and his common sense approach—when given the nod as export manager—provided huge dividends for the company.  He knew next to nothing about exporting so taught himself the ins and outs, and doubled the exports in two years. 

The Rural News once reported how the head of a tertiary institute marketing course called him to help write a course on international marketing. “It’s no use asking me,” said McKenzie whose modus operandi is simply to fly to a target market and start selling,  “I don’t have a degree.”  Replied the academic:  “That’s ok, I can get plenty of people with degrees, but I want to know how it’s done.”

Then a reshuffling at Wiremakers saw the replacement of respected colleagues. It took one cappuccino and a few moments quiet thought for Maurice to phone his wife to say that he was going out on his own.

He created what is now Euro Corporation—a 100% New Zealand owned manufacturer and distributor of trade quality steel and wire products for use in the rural and construction sectors.    It was a family affair.  His wife Fran did the accounts, and the objective was always to have his two sons also part of the business, with one clear caveat. 

“There’re too many stories about families that don’t talk to each other anymore because of business.  Businesses break up families and relationships.  Yes, my plan was to have them work with me but always for us all to remain friends.  I made it very clear that if fire ever broke out in our relationships that would be the end of it.”

Son Randal, who is now managing director, was considering university and asked his father what path he should pursue.  “I said become an accountant.  Whether you remain one is academic but whatever you do—be it a sheep farmer, mechanic or running your own operation—you’ll have to understand numbers.   He took my advice and got a great position at one of the Big 5 firms.” 

Second son Greg is sales director and shares with his father a love of people and sales.  After a stint at Coca Cola he accepted his father’s invitation to join the business.

A disagreement became the launching pad for success.    

“We started off selling pneumatic builders’ guns.  We found that getting paid was a challenge and various merchants we approached didn’t really want to know us so our foundation looked shaky.  Out of frustration one night Greg said to me ‘this company is never going to work so why don’t you just give the guns away and let’s forget it?’ This was the last thing I wanted to hear so just walked away.  However, next morning in the shower, it dawned on me that this was a great idea.  If we do give these nail guns away, people will need consumables which we can sell them.” 

Maurice went directly to a pallet company to test his ‘eureka’ moment breakthrough.  The first person wanted 20 of them—which was, as Maurice says, ‘potentially $20,000 down the Swanee’.  The sales proposition he crafted—“if I gave you the nail guns and you had to buy the nails off me, providing I kept you reasonably competitive, would you be in?”—proved a resounding success.  From that day the company grew and diversified. 

In 2004 Euro Corp established a Christchurch company with the capability of making wire and fence components for the agricultural sector.  This operation was able to be ‘bolted’ to the existing business and it became a model for expansion.  As well as holding a strong local presence, Euro Corp became a significant exporter servicing more than twenty countries.

At this stage Euro Corp was a lean, mean operation so when Randal suggested he join the business the initial reaction was lukewarm.

“Facetiously I said ‘look, I don’t need an accountant, I’ve already got one robbing me now so I don’t need you’.  He said he’d be happy to do other things.  As it happened, Greg was keen to do his OE so I told Randal that there was only one job going and that was Greg’s.  I said if he wanted to do the sales job, ‘here’s the keys to his second hand car and get going’.”

Maurice said it was the best thing his son could have done.

“He learned pretty damn quick about how sales work.  As a result he’s probably our best skilled marketing person and really understands the business.”  He became general manager and when Maurice decided to ‘scale down’ his involvement in the business he appointed Randal managing director.

It was around this time that Maui Capital called. A private equity company, they were on the hunt for acquisitions and Euro Corp came up on their radar.  Further enquiries about the business only prompted their enthusiasm.  Initially, says Maurice, the emotion wasn’t returned.

“My reaction was a straight out ‘no’ but then I realised the decision wasn’t solely mine as the rest of the family had shareholding, and also a possible opinion on what was the best way to proceed.  I went home and told my wife who said it shouldn’t necessarily be about the money but more about what I wanted my involvement to be.  Also what our sons wanted out of business and life.” 

Out of nowhere, critical succession planning issues came to the fore with the opportunity to potentially craft an agreement that could be a win: win for all parties. 

Ultimately, says Maurice, what his sons wanted would dictate his own decision.

“If they had said ‘no we want to keep the business and not have any other involvement’ I would have respected that and that would be the end of the dialogue.  It turned out they wanted to remain and grow the operation but anything that could ease their situation with mortgages and a young family was worth considering.  We were also all pragmatic enough to realise that while our collective shareholding would be smaller, with the backing and growth plans being brought to the table by an investor, our actual return in the future could be considerably larger. So these sentiments dictated the discussions with Maui.” 

In November 2010 the deal was done and Maui acquired a 67% stake in Euro Corp.  Rather than change the culture and direction of the business, the new shareholders instead made Maurice and his son an integral part of their growth plans.

“I guess they value our opinion.  They often ring me up and of course they use Randal a lot, and ask ‘what do you think of this?’  It may have nothing to do with Euro Corp but just the fact that we’ve done what we’ve done they come and ask our opinion and sometimes they use it, sometimes they don’t.”  

“Because it’s a family business and something we’re passionate about and in our blood, I think for them to keep us involved was a smart thing to do.”

Briefly About the Business: Euro Corporation is a premier manufacturer, distributor and exporter of reinforcing steel, fencing wire and fencing systems and nails, under the brands EuroSteel, XFENCE®, EuroFence, ProFence, and EuroNails.  Head office is Auckland-based with manufacturing plants in both Auckland and Christchurch. 

Succession Strategy: Family may always be the focus, but don’t ignore strangers bearing gifts.  Particularly if their involvement makes your involvement all the more enriching. 

This story originally appeared in Succeed.