Master of the boardroom
One of Australia’s most high-profile entrepreneurs, Neil Chatfield, shares his experiences in the world of mergers and acquisitions.
Neil Chatfield left school at 18 and never studied full-time again. Yet today he’s one of Australia’s leading businessmen – an expert in the notoriously perilous sphere of mergers and acquisitions, and a steady hand in the boardrooms of some of Australia’s most entrepreneurial companies.
In the next few months, he’ll step down as chairman of Virgin Australia after almost eight years at the helm. His announcement in October last year that he’d be moving on took the media by surprise. He and the chief executive he appointed, former Qantas executive John Borghetti, are considered to have transformed the company in its do-or-die battle of the skies with Qantas.
Why move on now? Because he feels like a new challenge, he says. “We’ve essentially restructured the aviation industry during the nine years I’ve been on the board, and we’ve put the business on a healthy footing with deep relationships with premium international carriers (Air New Zealand, Etihad Airways and Singapore Airlines, the three largest shareholders).
“We’ve made Virgin Australia sustainable long-term and added extra dimensions with the low cost carrier Tiger Airways, and a comprehensive regional Australia network. The business is in a very different shape to what it was a few years ago so it seems a pretty good time to hand over to the next regime.”
Not that Chatfield is retiring. He’ll remain chairman of Seek Ltd, the country’s largest online job site, and retain his place on the boards of two other Australian Stock Exchange-listed companies – Transurban Group, which owns toll roads around Australia and the USA, and Recall Ltd, one of the world’s two largest information storage organisations.
He’s also on the board of the private Costa Group, Australia’s largest fruit and vegetable grower and wholesaler, as well as chairing Homeground Services, a not-for-profit body helping the homeless in Melbourne. (“We’re currently in the process of merging with the Hanover Organisation which will double the size of the current Homeground operation,” he says.)
But Chatfield’s decision to leave Virgin Australia isn’t the first time he’s stunned the financial media. He’d first come to national prominence as a manager, not a director.
In 2007, his peers chose him as Australia’s most outstanding chief financial officer for helping to steer Toll Holdings through a decade of massive expansion when it was transformed from a small regional trucking company into a major international logistics corporation.
During his 10 years at Toll, Chatfield and chief executive Paul Little, successfully negotiated through a corporate minefield of legislation, the high-profile takeover of Patrick Corporation, a forced demerger, and the continuous scrutiny of the Australian Competition and Consumer Commission (ACCC).
The rapport between Little and Chatfield was so close it was lauded as “a textbook example of the modern CEO-CFO relationship, a partnership of equals”.
Yet a year after winning his equivalent of a CFO Oscar, Chatfield quit Toll. Financial journalists reported he was frustrated at not being offered the chief executive’s job when Little extended his contract until 2011.
“By that stage I was in my early 50s and I’d already joined the board at Seek as a non-executive director as well being on the board of Whitehaven Coal which I had helped to float,” he says. “If I’d become chief executive I would have had to give up those directorships.”
Instead he crossed to the other side of the corporate table, leaving the daily hubbub of management for the more strategic confines of the boardroom. It’s been a long journey since Chatfield left Maribyrnong High School in Melbourne’s inner west to begin work as a teenage internal auditor.
Working full-time ever since, he took every opportunity he could to extend his education, enrolling for a relentless series of night classes that lasted, off and on, for 11 years. “I was keen to climb the business ladder and learn new management skills,” he explains.
A Diploma of Business at Footscray Institute of Technology (now Victoria University) was followed by two years at Swinburne Institute of Technology (now Swinburne University of Technology) for a Graduate Diploma in Accounting, and a further two at RMIT for a postgraduate diploma in Information Technology.
However it was the three years Chatfield spent at UTS becoming a Masters of Business: Finance and Accounting, once the family moved to Sydney in 1986, that he credits with spearing the most significant boost to his career progression.
What does he remember about his UTS course? “It broadened my understanding and raised me up to a higher level than anything I’d ever done before.The intensity was greater, and I could apply what I was learning to what I was doing every day.
“That’s the key: relevancy. I was thinking of doing an MBA, but I chose the course I did because it seemed more relevant to the work I was doing involving mergers and acquisitions.”
After living in Sydney for 12 years, the family returned to Melbourne when Chatfield joined Toll, which had been sold in 1986 to a management buy-out team led by Paul Little and chairman Peter Rowsthorn.
“Toll was still a relatively small company when I joined in 1997,” says Chatfield. It had a market capitalisation of around $80 million and revenue of about $400 million. Just after I joined, we acquired some significant Australian assets. My expertise was in valuing assets and building strategies and integrating businesses.”
The most controversial acquisition was the bitter takeover of Patrick Corporation in 2006. Patrick’s chief executive Chris Corrigan had been one of the key figures in the divisive waterfront dispute of 1998 and took a similar take-no-prisoners approach when Toll launched a hostile takeover in August 2005.
The acrimonious campaign lasted nine months and Corrigan seemed to have outflanked the Toll team when the ACCC rejected the $4.6 billion bid in January 2006. But Toll took its case to the Federal Court of Australia, and eventually came to a deal with the ACCC – it could takeover Patrick, provided it sold its 50 per cent share in Pacific National’s rail assets.
“Before the demerger, we had built the company up to a market capitalisation of in excess of $15 billion with a turnover of over $10 billion,” says Chatfield. “The company had become the largest transport corporation in the Australian market.”
He’d also become Virgin Australia’s chairman in June 2007, a year after joining the board.
What does it take to be a good chairman? Chatfield says it’s essential to form “a close relationship with the chief executive, become a mentor to some extent, provide support, encouragement and counsel.”
So what next? “I’ve no plans to do anything in particular, but I’m talking to a few people. I’m still keen to be involved in helping to ensure businesses make a contribution to Australia’s prosperity, help them to be as efficient as possible, and to grow as best they can.“I still wake up every morning and can’t wait to get on with it.”
Story: Steve Meacham