The crazy business at Crazy John's

The takeover and downfall of John Ilhan's telco follows a familiar storyline, where corporations with incompetent acquisition strategies rapidly suffocate entrepreneurial zeal.

Will corporates ever learn? You can buy a company but not the chemistry. This week’s announcement from Vodafone that it is to shut down Crazy John’s less than five years after paying $150 million for the bulk of the telco sales company is not so much a surprise but a confirmation.

Vodafone, which was already struggling with two weak brands in the local market – Vodafone and the now defunct ‘3’ brand – seems to have purchased Crazy John's for the simple reason that it could.

But the multinational could not replicate the dynamic which had emerged around the late company founder John Ilhan: An occasionally brilliant, provocative and utterly unpredictable entrepreneur who had blazed a trail in the local mobile phone market with his irreverent upstart brand. (Vodafone had acquired control of Crazy John's through a deal with Ilhan's widow, Patricia.)

Indeed most corporations are incapable of digesting entrepreneurial businesses because the very features that empower corporations – market clout, economies of scale, the security of a bureaucracy – are the very aspects that kill off entrepreneurial zeal.

Those features which had marked Ilhan from the crowd are equally applicable to Bob Oatley, who managed to sell his Rosemount Estate wines group to the Soutchcorp conglomerate for a package ultimately worth more than $1.5 billion. A decade later, the same assets were worth a fraction of that value, having moved through corporate failure at both Southcorp and later at Foster’s Group.

But the story is the virtually same. A great asset led by a unique talent could not be replicated by a major listed corporation, where the outstanding problem appeared to be an inept acquisition strategy. (These days, 85-year-old Bob Oatley is still very much around with his family interests in Oatley wines and Hamilton Island… his Wild Oats yacht recently won the Sydney-Hobart race for the sixth time.)

So too, Dick Smith, who sold his self-named enterprise to Woolworths which – you guessed it – struggled with the company for two decades until late last year, when the electronics retailer was sold for just $20 million to private equity firm Anchorage.

Since the sale, Anchorage chairman Phil Cave has surprised all and sundry – especially Woolworths – by announcing ambitious expansion plans for the enduring brand.

But it’s not all ham-fisted arrogance where inept corporates buy smart small businesses and accidentally wreck them. More recently there has been a trend to leave acquired subsidiaries to run their own show as much as possible. Alternatively a joint venture with an entrepreneur or an entrepreneurial team allows the original dynamic a second life… but it's too late at Crazy John's, where an estimated 40 stores will shut completely and maybe 20 will be rebadged as Vodafone outlets.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles