:growing too fast
The failure of Mainzeal, a reputable
force in the construction industry
provides invaluable lessons for any
business... no matter the size
The trap of
GROWING
too fast
How Mainzeal began…
Mainzeal was New Zealand's third largest
construction firm before it went into
receivership on Waitangi Day this year. The
receivers for Mainzeal are PriceWaterhouse
Coopers partn ers Colin McCloy and David
Bridgman.
Founded in 1968, it was brought in 1996
by China-based company Richina. Richina
was owned by Richard Yan who became the
director of Mainzeal. He first focused on
Asia for business and was said to be chasing
contracts worth more than $150 million.
Richina Pacific owned Mainzeal up until 2009
before the company staged a buy-back and
went private splitting the original company
into four. Richard Yan remained the largest
shareholder.
In 2012 Mainzeal changed its business
structure in an effort to survive in the
difficult business environment. They
changed their company name from Mainzeal
Operations to Mainzeal Group with four
subsidiary companies underneath it; Mainzeal
Ltd, Mainzeal Construction, Mainzeal
Construction SI and MPC NZ Ltd. They
did this to spread overheads to a broader
base of business and ensure operations to be
42 | www.h e rma gaz i n e . c o. n z
regionally focused.
Overall they were a well-recognised brand
in the construction sector, with ex-prime
minister Dame Jenny Shipley being on the
board of directors.
What went wrong…
Not only was the business structure of
Mainzeal complex but so were all the reasons
as to what went wrong. Specific factors have
been identified as: impact of legacy issues
around leaky buildings, large contract with
disputed payments and a Chinese supply
chain scheduling and delivery challenge.
Over 2000 creditor claims were made against
them. Yan said the company's collapse was
due to a "series of adverse events" and blamed
external circumstances such as
bad weather and the global financial crisis for
their failure.
Major projects still under construction that
Mainzeal couldn't finish include:
-$250 million Manukau Institute of
Technology Campus
-$14 million redevelopment of Shed 10 on
Auckland's Princes Wharf
-$67 million Hub project at Victoria
University
It appears a combination of a heavy workload
combined with unforeseen circumstances
that led to the failure of this company.
If Mainzeal hadn't taken on so many large
scale projects they may have been able to
work through the issues at hand.
In the end the pressures were too much
resulting in a collapse in business.
