Multiplex is a market leader construction company originally from Australia. It is a case of a company built from zero by John Robert in Australia, turned into a multinational with activity in the Australian Continent, Middle East and Europe. Within the property sector, the Multiplex group plays a role in the property investment,construction, development and facilities management sectors.
Wembley Stadium was demolished in 2003 and Wembley National Stadium Limited (WNSL) planned a new stadium, looking for tenders for the construction. Listed on the Australian Stock Exchange in 2003 and always looking for new opportunities to grow, Multiplex saw this project as a chance to grow and affirm its presence in the UK. Multiplex wonthe contract to rebuild the stadium, for a fixed price contract of ₤445 million with a tight completion timetable. Many industry commentators believe Multiplex was keen to do the project, perhaps for an expected low return, to get their ‘foot in the door’ with a major, visible UK project: a loss-leader that would lead to greater future business there. Dreams of a triumphant entry into the UK markethowever turned into a nightmare. Multiplex’s reputation in the UK was shattered by cost blowouts and by late completion of the project by at least a year. It was the biggest loss on a construction job in British history.
What went wrong?
* From a solely construction company, Multiplex expanded its activity portfolio to also include property investment and investment management,development and facilities management. The success over the years and the belief of understanding the market requirements and risks made the management and board of the company undermine the challenges brought by geographical and activity expansion. Diversification and development were given attention at expense of basic activities. This was a very big project, not easy to manage and requiring focus, whichmight have led to neglecting other businesses of the company. In the UK, the company had even earned itself a reputation for arrogance.
* The board of directors dominated by the Robertson family - Although the senior management had significant experience, this was a family business: John C Roberts AO, the founder of Multiplex, was actively involved in the Group through his role as executivechairman and Andrew Roberts was the CEO. As family members, there wasn’t a proper separation between Chairman and CEO. The Chairman, and as being the founder of the company, had a lot of influence and power. In addition, there seemed to exist conflicts between the two, regarding the UK situation: rumours suggested that John Roberts wanted to exit the UK, but his son Andrew resisted.
Ifmanagers wanted to bring the company onto the capital market, subject to market scrutiny, they should have been aware of the creation of an unfamiliar institutional environment of which the family executive directors had limited experience. When listed on the ASX, the company did not comply with the requirement that a majority of directors, including the Chairman, should be independent. Besides beingunfamiliar with the institutional environment, their 25% stake gave them influence over the board. The board’s ability to monitor capital expenditure and allocation of capital to certain projects and to oversee risk was weakened.
* Multiplex also faced communication issues, mainly:
- Dispute between Multiplex and the steel contractor Cleveland Bridge (CBUK), which in 2004 dropped the projectfearing that the company would not get the money deserved. This issue resulted in two court cases, as the two companies sued each other for breaching the contract. Therefore, there was a clear miscommunication between the two players, which ended up blaming each other and had as a consequence a delay in the project and higher costs. CBUK ended up being replaced by Hollandia to complete the...