All Together Now ...

The RANms Story

Regional and Northern Maintenance Services (RANms) started in Darwin in 2001 as a cluster of ten local businesses. RANms brought the ten companies together, enabling them to market their combined skills and pitch for larger defence, resources and infrastructure projects.

RANms' chief executive officer, Paul Mahoney, says: "Initially RANms was formed to target an Australian Navy contract. Each of the businesses felt they needed to have a single front to really play a role."

RANms did not win that navy tender but was eventually subcontracted to do much of the work. In 2005, RANms won a building maintenance contract for the energy company ConocoPhillips. Mahoney says: "This was a good example of how RANms worked well. We did an enormous amount of work for ConocoPhillips but we also managed another 60 contractors on the job." The contract has been extended until 2011.

Mahoney had spent 15 years in Darwin heading up a large IT company and later working in consulting before relocating to Adelaide in 2002. He says: "I was familiar with RANms from my time in Darwin so when the opportunity arose to take on the new role as CEO I grabbed it. I could see that Darwin was about to really boom."

The Challenge

Managing the transition from a small business consortium to a large service company.

The Solution

RANms proved to be very successful as a small business consortium of independent companies. But in 2007 Mahoney felt RANms had outgrown its original structure. RANms had acted as the centre of a cluster of small businesses in order to bid for large projects but each of the businesses involved continued to run independently as well. Mahoney says: "We were at the stage where we were starting to compete with our shareholders. As we grew, we aimed to become prime contractors, not just subcontractors. Ten shareholding companies didn't give the clout we wanted."

In July 2007, RANms purchased five of the founding companies on an equity shares deal, transforming RANms into a larger, single-point-of-contact operation. Mahoney says: "RANms is one of the few, if not the only cluster, to have progressed along this path."

RANms made an offer to the owners of all ten shareholding companies; seven accepted the invitation and KPMG was then appointed to undertake an external due diligence process. Prices were negotiated with the seven companies and five accepted RANms' offer. Mahoney says: "With some of our shareholding company managers nearing retirement this gave better exit strategies and addressed succession planning issues."

The evolution from small business cluster to a larger corporate model was quite an adjustment. Mahoney says: "When you are a small business owner, you make all the decisions about what work you go after, your staff, everything. Some found it liberating not to have to worry about finances and tenders; others felt like they had lost some control."

Mahoney's approach to bringing the five companies under one corporate umbrella was to take things slowly, avoiding the shock and potential disruption of a Big Bang change. He says: "We were basically conducting six mergers simultaneously; one big bang would never have worked."

In the first 90 days after the aggregation, only the phone systems and signage changed. By day 120 all staff were in the RANms uniforms and had switched over to the new accounting system. At the 12-month mark RANms had moved further away from the original structure by having defined trade, technical and project divisions.

Constant communication was important throughout the transition process. Mahoney says: "We made sure the organisation's management structure was circular and took out the pointy bit at the top, so the transition period was very team-based. Communication was important but it was also important to remember the big picture; everyone came into RANms to make more money."

The buyout has provided an excellent opportunity to develop and cross-skill staff. Mahoney says: "It's been particularly good for those that were second-in-charge in smaller companies who didn't have opportunities to move up. We now have a second level of management with some of these guys running groups worth $5-6 million a year."

The Result

Since RANms formed in 2001 the company has grown well beyond the initial services offered by its member companies. Mahoney estimates that turnover for each of the shareholding companies has increased by 50-100%. During Mahoney's tenure, RANms revenue has grown from $1.5 million to more than $25 million in 2007-08.

Using the same formula used to value the individual companies at the time of the buyout, shareholder value has doubled in the 15 months since RANms bought five of the companies. Mahoney says: "One reason for doing this was to maximise opportunities for business owners; that has been accelerating faster than we ever envisaged." The structural change in 2007 has created 30 new jobs within RANms.

In 2007, RANms was the NT and national winner of the Australian Institute of Project Management (AIPM) award for small project of the year. RANms was also awarded the 2007 national Judges Commendation Award by AIPM, the first Northern Territory company to win. Mahoney was also awarded the 2007 Professional Manager of the Year (Private Sector) Award by the Australian Institute of Management.

Mahoney plans to keep RANms on its fast-track growth plan with expectations of turnover reaching about $50 million by 2012. He says: "We recognise that the Darwin market offers very large opportunities and for us to play in that space we need to be bigger."

Author Credits