<TABLE id=msgUN cellSpacing=3 cellPadding=0 width="100%" border=0><TBODY><TR><TD id=msgUNsubj vAlign=top>
Coffeeshop Chit Chat - ABC:Wheres Temasek's Due Diligence?</TD><TD id=msgunetc noWrap align=right>
Subscribe </TD></TR></TBODY></TABLE><TABLE class=msgtable cellSpacing=0 cellPadding=0 width="96%"><TBODY><TR><TD class=msg vAlign=top><TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR class=msghead><TD class=msgbfr1 width="1%"> </TD><TD><TABLE cellSpacing=0 cellPadding=0 border=0><TBODY><TR class=msghead><TD class=msgF noWrap align=right width="1%">From: </TD><TD class=msgFname noWrap width="68%">Lola (Langusta) <NOBR></NOBR> </TD><TD class=msgDate noWrap align=right width="30%">9:24 am </TD></TR><TR class=msghead><TD class=msgT noWrap align=right width="1%" height=20>To: </TD><TD class=msgTname noWrap width="68%">ALL <NOBR></NOBR></TD><TD class=msgNum noWrap align=right> (1 of 3) </TD></TR></TBODY></TABLE></TD></TR><TR><TD class=msgleft width="1%" rowSpan=4> </TD><TD class=wintiny noWrap align=right>2649.1 </TD></TR><TR><TD height=8></TD></TR><TR><TD class=msgtxt>Question for Lau Lee: DID YOUR DAUGHTER IN LAW, HOLE JINX DUMP MORE THAN $400MIL OF OUR MONEY INTO THIS OUTFIT WITH HER EYES OPEN TOO?
http://www.brisbanetimes.com.au/news/queensland/how-everyone-missed-the-obvious-on-eddy-groves/2008/11/17/1226770335897.html
<HR><!--<headline>-->How everyone missed the obvious on Eddy Groves <!--</headline>-->
<!--<byline>-->Ian Verrender<!--</byline>--> | <!--<date>-->November 17, 2008 - 2:23PM<!--</date>-->
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Eddy Groves.
For his 40th birthday a couple of years back, Eddy Groves took 24 or so of his closest friends on a round-the-world jaunt in a jet chartered for the event. His Cessna Citation jet, which seated just 16, was not big enough.
Details of the itinerary are sketchy. There were suggestions they assembled in Las Vegas for a spot of gambling.
Variously described as reclusive and shy during his rapid rise, his largesse, and where exactly all that money came from, is a touchy subject for Groves these days.
He says the Citation, his helicopter, the Ferrari, the 26-metre yacht moored at the Versace marina and the various waterfront and Gold Coast hinterland properties are all gone.
That could well be true. Strangely, however, a few weeks ago - just after Groves trousered an $800,000 payout when he jumped from the soon-to-collapse child-care group ABC Learning Centres - he was spotted on the Gold Coast highway in a new silver Mercedes with the number plate BULLETS.
That probably was not his either. More than likely it is owned by the collapsed Brisbane basketball team Groves owned.
Taxpayers have tipped in $22 million as a lifeline to keep the child-care centres open until Christmas while the collapsed group's receivers began begging the banking syndicate this week to extend extra cash to prevent the entire network shutting down.
Put aside the accounting irregularities now emerging from the collapsed company. Ignore the allegations of conflicts of interest that allegedly enriched various family members on construction and maintenance contracts.
The scandal of the rise of and fall of Eddy Groves is how anyone was seduced into his fantasy tale in the first place.
Australia's biggest banks believed him. They are owed $1.1 billion between them. Even more amazing, the Singapore Government's investment arm Temasek tipped in a lazy $400 million.
Despite sophisticated investment models and analytical tools employed by our big banks and investment houses, it shows a sucker is born every minute.
Despite all the high-powered negotiations and due diligence, they missed the bleeding obvious - that small family-run suburban child-care centres will always be more efficient than small corporate-run ones.
It is the same ethos that has ruled the economics of rural production in this country. Corporate farming has never overtaken family-run operations because a family will run their business on a much tighter budget and will endure leaner returns than any corporation just to ensure their survival.
corporation will only be more efficient than a family business if it can amalgamate small disparate holdings, achieve economies of scale in purchasing power or marketing power, and lower the cost of production.
It works in retailing, and that is the reason large retailers can offer lower prices than corner shops.
That model was never adopted by ABC Learning because it could never be implemented. Child care is labour intensive. It requires skilled labour by individuals devoted to the task, not just paid employees.
Groves and ABC could not lower the cost base of a family-run operation. His business merely added to costs because of the enormous amount of administration required to maintain the compliance demands of a stockmarket-listed public company.
Did anyone in the investment world or our big banks realise that it simply was not possible for Groves to shut down 10 suburban centres and amalgamate them into a "super preschool"? Did they ever twig that there were no economies of scale, just extra costs?
Every boom throws up these types of "entrepreneurs". Just as Christopher Skase, the Brisbane property and media mogul of the 1980s, kept borrowing and expanding, so too did Groves.
It is a neat strategy because no one can ever compare the performance with the previous year. There are always one-off costs associated with the last big acquisition. The idea is to keep juggling those balls so no one can ever really count how many you have in the air.
When Groves ran out of child-care centres to buy in Australia he turned his attention overseas. Almost three years ago to the day he spent $218 million buying the third-biggest child-care group in America.
The banks were happy because their job is to lend money and they picked up handsome fees on the transactions. Groves was happy because the bigger the company, the more he could pay himself. And the investors (ie. Hole Jinx's Temasek) swallowed the whole silly tale hook, line and sinker that they were part of an expanding international empire.
Groves has gone to ground. He may only be worth a fraction of his previous fictitious wealth, but at least he has it in cash and he has more than most families would ever be able to amass.
Like those who have gone before, Groves absolved himself of blame. It was short sellers who brought him undone, working in tandem with nasty stockbrokers. And then, of course, there were those he left in charge of the Australian operations who let him down.
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http://www.brisbanetimes.com.au/news/queensland/how-everyone-missed-the-obvious-on-eddy-groves/2008/11/17/1226770335897.html
<HR><!--<headline>-->How everyone missed the obvious on Eddy Groves <!--</headline>-->
<!--<byline>-->Ian Verrender<!--</byline>--> | <!--<date>-->November 17, 2008 - 2:23PM<!--</date>-->
<!--articleDetails--><!--<bod>-->
Eddy Groves.
For his 40th birthday a couple of years back, Eddy Groves took 24 or so of his closest friends on a round-the-world jaunt in a jet chartered for the event. His Cessna Citation jet, which seated just 16, was not big enough.
Details of the itinerary are sketchy. There were suggestions they assembled in Las Vegas for a spot of gambling.
Variously described as reclusive and shy during his rapid rise, his largesse, and where exactly all that money came from, is a touchy subject for Groves these days.
He says the Citation, his helicopter, the Ferrari, the 26-metre yacht moored at the Versace marina and the various waterfront and Gold Coast hinterland properties are all gone.
That could well be true. Strangely, however, a few weeks ago - just after Groves trousered an $800,000 payout when he jumped from the soon-to-collapse child-care group ABC Learning Centres - he was spotted on the Gold Coast highway in a new silver Mercedes with the number plate BULLETS.
That probably was not his either. More than likely it is owned by the collapsed Brisbane basketball team Groves owned.
Taxpayers have tipped in $22 million as a lifeline to keep the child-care centres open until Christmas while the collapsed group's receivers began begging the banking syndicate this week to extend extra cash to prevent the entire network shutting down.
Put aside the accounting irregularities now emerging from the collapsed company. Ignore the allegations of conflicts of interest that allegedly enriched various family members on construction and maintenance contracts.
The scandal of the rise of and fall of Eddy Groves is how anyone was seduced into his fantasy tale in the first place.
Australia's biggest banks believed him. They are owed $1.1 billion between them. Even more amazing, the Singapore Government's investment arm Temasek tipped in a lazy $400 million.
Despite sophisticated investment models and analytical tools employed by our big banks and investment houses, it shows a sucker is born every minute.
Despite all the high-powered negotiations and due diligence, they missed the bleeding obvious - that small family-run suburban child-care centres will always be more efficient than small corporate-run ones.
It is the same ethos that has ruled the economics of rural production in this country. Corporate farming has never overtaken family-run operations because a family will run their business on a much tighter budget and will endure leaner returns than any corporation just to ensure their survival.
corporation will only be more efficient than a family business if it can amalgamate small disparate holdings, achieve economies of scale in purchasing power or marketing power, and lower the cost of production.
It works in retailing, and that is the reason large retailers can offer lower prices than corner shops.
That model was never adopted by ABC Learning because it could never be implemented. Child care is labour intensive. It requires skilled labour by individuals devoted to the task, not just paid employees.
Groves and ABC could not lower the cost base of a family-run operation. His business merely added to costs because of the enormous amount of administration required to maintain the compliance demands of a stockmarket-listed public company.
Did anyone in the investment world or our big banks realise that it simply was not possible for Groves to shut down 10 suburban centres and amalgamate them into a "super preschool"? Did they ever twig that there were no economies of scale, just extra costs?
Every boom throws up these types of "entrepreneurs". Just as Christopher Skase, the Brisbane property and media mogul of the 1980s, kept borrowing and expanding, so too did Groves.
It is a neat strategy because no one can ever compare the performance with the previous year. There are always one-off costs associated with the last big acquisition. The idea is to keep juggling those balls so no one can ever really count how many you have in the air.
When Groves ran out of child-care centres to buy in Australia he turned his attention overseas. Almost three years ago to the day he spent $218 million buying the third-biggest child-care group in America.
The banks were happy because their job is to lend money and they picked up handsome fees on the transactions. Groves was happy because the bigger the company, the more he could pay himself. And the investors (ie. Hole Jinx's Temasek) swallowed the whole silly tale hook, line and sinker that they were part of an expanding international empire.
Groves has gone to ground. He may only be worth a fraction of his previous fictitious wealth, but at least he has it in cash and he has more than most families would ever be able to amass.
Like those who have gone before, Groves absolved himself of blame. It was short sellers who brought him undone, working in tandem with nasty stockbrokers. And then, of course, there were those he left in charge of the Australian operations who let him down.
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