Recession’s rich pickings

rich secrets of a downturnThis might not seem like the best time to start building a fortune, but a surprising number of businesses were born during the early 1990s recession. We’ve found 10 wealthy entrepreneurs who started making a bundle when things looked very bad.

 

It’s not easy for entrepreneurs to stay positive right now. Falling share prices, sagging consumer confidence, recession on the horizon – these aren’t exactly the best conditions for deal making.

Yet canny investors shouldn’t drop their heads. Recessions have often thrown up some wonderful opportunities as asset prices fall– and weakened competitors fall over. To prove this point, we’ve found 10 wealthy entrepreneurs who pulled off spectacular deals in the last big recession of the early 1990s.

 

Kerry Packer

 

Kerry Packer made one of the most famous recession deals in 1990 when he bought the Nine Network from Alan Bond for $250 million, just three years after selling it to Bond for just over $1 billion. “You only get one Alan Bond in your lifetime, and I’ve had mine,” Packer famously said of the incident.

 

Maha Sinnathamby

 

Malaysian-born property developer Maha Sinnathamby is the brains behind the giant Springfield development, a 2860-heactare city that is now home to more than 15,000 people. Sinnathamby, who is worth around $550 million, bought the land on which Springfield sits in the 1990s for just $7.9 million.

John Symond

 

John Symond almost went broke in 1991. His company, Mortgage Acceptance Corporation, had been operating in partnership with the State Bank of South Australia, which collapsed in 1991 at the peak of that recession, taking Symonds down too.

 

But in February 1992, Symonds launched his comeback by starting Aussie Home Loans and taking on the banks with low home-loan rates and an army of mobile lenders. It was a bold move given the state of the economy, but today Aussie John’s fortune is valued at around $450 million.

Angus and Richard Grinham

 

The early 1990s wasn’t the best time to launch a hedge fund, but this didn’t stop Sydney brothers Angus and Richard Grinham from establishing Boronia Capital (previously known as Grinham Managed Funds) in 1993, with about $1 million in capital.

 

While the fund didn’t really gain momentum until 1996, when a number of US investors came on board, the pair now manage more than $2 billion. They were valued at $368 million in September last year, although the financial market slump may have bought them back to the pack.

 

Andrew Abercrombie

 

Andrew Abercrombie was the driving force behind the growth of leasing and finance company FlexiGroup, and remains the company’s largest shareholder with a stake worth $24 million (his total fortune is worth about $150 million, despite a recent slump in the FlexiGroup share price).

 

The business was born out of the last recession. Abercrombie, who worked as a lawyer for rock bands including INXS during the 1980s, completed an MBA in Switzerland in the late 1980s and got a job on Wall Street in 1989, only to be retrenched a month after he started.

 

Abercrombie returned to Australia and stumbled across a group of technically insolvent companies with some property assets. One of those was FlexiGroup. By 1991, Abercrombie had taken control of the company.

 

Bob Ell

 

Wealthy entrepreneurs who have watched the share price of their main investment vehicles crash in the last year could take a lead from veteran property developer Bob Ell.

 

As the property sector crashed in early 1990s, Ell made the decision to privatise his listed property group Leda in 1991, just four years after listing on the Australian Stock Exchange. Going private has been very good for Ell’s bank balance – in the last 20 years his wealth has more than tripled to around $1.1 billion.

 

John Longhurst

 

Queensland developer John Longhurst – perhaps most famous as the developer of the Dreamworld theme park on the Gold Coast – timed his run to perfection during the last recession.

 

He sold Dreamworld for a profit of $160 million in 1989, then a year later spent $200 million to acquire the Logan Hyperdome shopping centre. He sold a half share to Queensland Investment Corporation, and kept half himself.

 

That half share is now worth at least $280 million and Longhurst’s wealth has more than doubled in the last decade.

 

Bill and Imelda Roche

 

Investors and property developers Bill and Imelda Roche started the Australian arm of cosmetics firm Nutrimetics in 1968. After building the business in Australia and Asia over the next 25 years, the pair swooped on the entire global Nutrimetics business in 1991.

 

Just six years later, the Roches sold the global company to the US-based Sara Lee Corporation for about $150 million. Canny property investments have seen their fortune soar from around $200 million to over $650 million in the last 10 years.

 

Thomas Tiong and Kar Wai Chan

 

Malaysian-born Thomas Tiong and Singaporean Kar Wai Chan were removed from BRW’s Rich 200 list a few years ago, as they are now based overseas. But their recession deal-making should not be forgotten. In 1992, they bought the Brisbane Myer Centre out of receivership for $200 million and sold it six years later for $371 million.

 

Paul Stoddart

 

Paul Stoddart is best known in Australia as the former owner of the Minardi Formula 1 team and the failed business airline Oz-Jet. But the deal that really set Stoddard up was made in 1989, when the global economy was on the brink of a major downturn.

 

Stoddard bought five redundant aircraft from the Royal Australian Air Force, which also threw in a few spare parts – 41 shipping containers full, to be precise.

 

Stoddard seized this slice of good luck and established one of the world’s biggest airline spare parts operations, making an estimated profit of 900% on the 41 containers. He is now worth about $230 million.

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