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The firm which took Toco's bull by the hornsTHEUNIS KOTZEE spun his unique brand of magic at Group Five in the early 1990s, turning a R50-million market capitalisation into R700-million by the time he left in 1997. Now Kotzee has teamed up with Neill Davies, formerly deputy chairman of Altron and currently non-executive chairman of Concor and Astrapak, to form Capital Partners Turnarounds, which focuses on companies in various stages of financial or operating distress. Capital Partners Turnarounds has taken over the management reins as well as a substantial minority stake in Toco. Kotzee has the full support of the various banks which lost R180-million at Toco and then converted their debt into equity in the hope of rescuing value. Kotzee's rescue philosophy is simply stated: fix the 80% that works and ditch the 20% that does not. In Toco's case, the 20% includes the hydraulic-parking systems which promised much but made huge claims on the balance sheet and management time, and four smaller businesses manufacturing gaskets for the industrial market, a building products subsidiary, a steel-trading company and some properties. "Each of these businesses have been or are being disposed of," says Kotzee. "Either they were making losses or were unable to cover the interest bill on company borrowings." What's left of Toco is five businesses, all operationally and financially sound with room for growth: Premier Paints, distributing paints and consumables to the secondary motor trade; Toco Lifting, a crane parts and distribution company; Sacmech Material Handling and Lasch, two companies involved in the manufacture, installation and maintenance of cranes and hoists; and Toco Lifts, which has the agency for Hyundai and Shorts lifts and hoists. "Four of the businesses are doing well, but Sacmech is responding more slowly, but we are confident it will come right," says Kotzee. A turnaround can take 12 months or more, and typically kicks off with a business rather than an accounting audit: "We spend the first week just walking around and observing," says Kotzee. "We talk to all levels of management and staff to find out what's happening, and very soon a picture emerges. "Some hard decisions have to be made in any turnaround engagement. The next step is to secure the support of the majority shareholder, without which the project is doomed to fail. Inevitably, some heads must roll. The managers responsible for bringing the company into financial or operational difficulty are often resistive to change, and would be better off finding new careers elsewhere." A network of management consultants, auditors and advisers with different specialisations are brought in to investigate all aspects of the business and make recommendations for improvement. Decision Process International has successfully partnered Kotzee on several projects, identifying ways to improve business and manufacturing processes. Kotzee emphasises that Capital Partners Turnarounds is not a consulting service: "We take full responsibility for the turnaround of the company, to the point of taking over management control, implementing the turnaround plan and rebuilding the management team. But we are not there for the long term. Once the company is on its feet again, we leave transition executive control to the ongoing management team. Managers are tired of seeing consultants who make recommendations and walk away. The key part of our service is implementation."
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