There's an old saying that goes you can't run without a head'. And as administrators pick through the debris of failed reseller group Mercury IT, the events leading to its collapse are starting to emerge.
Sources close to Mercury IT subsidiary Laptop Land NSW have reason to believe that poor investments, a failed IPO bid, the exodus of key management and a general downturn in the economy saw the once high-flying retail operation of the group run up debts into the millions of dollars.
"Laptop Land was the purchasing entity for the subsidiaries, so when it went down, so did the others," explained a source close to the group, who asked not to be named. "All business was processed through the Laptop Land trading account, so when the receiver stepped in the subsidiaries ended up with creditors that hadn't been paid."
However, a reprieve for creditors such as Compaq, which is owed $2.5 million, appears to be in the wings with an anonymous buyer stepping in last week. Receiver and manager Greg Hall from PricewaterhouseCoopers, who was appointed by Compaq, confirmed to ARN the business has been sold for an undisclosed sum.
The news will be small consolation for the remaining subsidiaries of the Mercury Group, which continue to operate under administration.
Ron Dean Wilcox has been appointed administrator of Mercury IT in NSW and Ian Lock from Sheahan Lock Partners is overseeing the administration of Mercury IT SA.
It is not the first time Derek Merdith's company has run afoul of creditors. Compaq pulled the pin on Laptop Land in 1994 but thanks to lines of credit from other vendors, the company was able to trade out of trouble, according to sources. But costly plans for an IPO that never eventuated, along with the downturn in the economy and the failure of CHA, took their toll on the company.
Key management staff began resigning four months ago -- the general manager was closely followed by chief financial officer Tiernan White, who was brought in to float the company in 2000. They were soon followed by the sales manager and chief operating officer.
"Staff were leaving but none were being replaced," one source said. "Operations were too understaffed to run effectively -- it was a real landslide over the last six months. Certainly the state of the economy was a contributing factor, but the general management of the company was lacking.
"Derek's style was very much jump in and sign a deal, but two weeks later he would be off on another tangent."
Indeed, many staff were not aware the company was in financial difficulties until they were given their marching orders. Steve Miller, who had been single-handedly running the WA operations of Mercury Services, first heard about the redundancies from a colleague in the Melbourne office.
"I contacted the receiver and was told I had been sent a letter in the post. But I never received it. I had to decide whether to look for work, or pick up what had been a reasonably profitable business in Perth and start again," he said.
Miller has now set up an independent Toshiba repair facility in Perth under the banner Griffin Computer Service.
As a casualty of the CHA collapse, he is now relishing his role as an independent. "Maybe it was something I should have done years ago," he said.
There is also talk that John Crabtree, Mercury national service manager and a close friend of Merdith, will head a services centre in Sydney.
Meanwhile, the profitable Laptop Land retail outlets are hoping to find investors or trade out of the current situation.
"This business was standing on its own two feet, but with the fallout from Sydney we have been trading under the banner of receivers," said David Horley from Laptop Land in Brisbane. "Time will tell whether or not we are successful. We are trying to keep the business running and we have had very good supplier support."