Those who teach business administration courses at our universities might like to consider including a new case study: that of former Billabong boss, Matthew Perrin.
Perrin, of course, was the ambitious Gold Coast lawyer turned businessman who enjoyed extraordinary success early in his career. At only 31 years of age, he had $100 million cash in his pocket after selling his stake in the surf wear sensation, Billabong.
But in March 2009, Perrin walked into the Brisbane office of accounting firm PA Lucas & Co to file for bankruptcy. The former Rich List regular scrawled out a list of his worldly possessions: a $100 laptop, a $200 watch, $1,400 in Wesfarmers shares, $3,000 of clothing, $16,000 in superannuation and $30,000 in cash.
Earlier this week the Commonwealth Bank failed in its attempt to recover $13.5 million it lent to Perrin after the Queensland Supreme Court ruled that Perrin had forged his wife’s signature to obtain the loan. The ruling by Justice Philip McMurdo means that the bank cannot enforce its mortgage over the couple’s Gold Coast mansion, or enforce personal guarantees against Perrin’s former wife, Nicole.
The full story of Perrin’s extraordinary downfall remains shrouded in mystery. What is clear is that many of his financial woes stem from his decision in 2005 to invest heavily in Global Mart – an ambitious project that aimed to buy up a string of supermarkets in provincial China.
And Perrin’s experience is an absolute case study of the perils of investing in a country without a strong understanding of the business culture.
On the face of it, Global Mart’s strategy was compelling. In provincial Chinese cities, supermarkets are generally badly-run and poorly-stocked. Global Mart saw an opportunity to make hefty profits by buying up several Chinese supermarket chains. It would introduce superior, Western-style management and upgrade the range and quality of the goods it stocked.
As a result, Global Mart would be able to take advantage of China’s swelling middle classes, which were spending more money on food, and were demanding high quality, fresh produce. The dream was to float the business in 2009, rewarding investors with windfall profits.
Of course, Perrin wasn’t the only one seduced by the dream of the riches that could be made by tapping into the growing wealth of the Chinese middle classes. Global Mart also got backing from the now-collapsed Australian investment banking high-flyer Babcock & Brown, the Chinese financial giant Citic and billionaire, John Gokongwei, who controls one of the largest conglomerates in the Philippines.
But the Global Mart venture appeared to be plagued with ill-fortune.
On one occasion, Global Mart finally completed the purchase of a supermarket chain, only to discover that the vendor had secretly sold the business to another consortium.
In an email he sent to two Global Mart investors in April 2008, Perrin acknowledged how steep his learning curve had been.
“I will admit that doing business in China has been an education for me – a challenge, but also with huge potential rewards.” He added somewhat cryptically, “we have had issues with culture and understanding, and have had setbacks in some respects.”
But, overall, he appeared optimistic about Global Mart’s future. “We are now making progress with operations, and have solid momentum with staff, business and external relationships. We are positioned for growth.”
Perrin’s optimism was never vindicated. Instead, he has left behind a cautionary tale of the folly of embarking on forays into markets where the risks and the business culture are poorly understood.
This article first appeared on Business Spectator.
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