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I believe this is an interesting story to be told about Newlands Systems and its acquisition by its competitor, DME Limited Partnership and Clearspring Capital Partners. What is interesting is that this sale happened in September 2016 and one and a half years later, Brad McQuhae has not been paid for his $30 million dollar company. It has been reported that he has been pushed out by the new owners, that they are miss-managing the assets, and that he has been unable to collect.
The Newlands’ employees I have spoken with have stated many facts and offered many opinions, theories and observation about what is happening and why.
We are working to fact check all of the following details, and appreciate additional facts or omissions.
Brad McQuhae stiffed on sale
- Brad has not been paid in 18 months.
- Brad is suing (arbitration) to get paid.
- Brad has lost control of all aspects of his company.
- Brad is unemployed and has a non-compete agreement.
- The non-compete agreement is valid even though he has not been paid.
- Brad could not regain possession of his company.
- Brad retained legal and financial professionals for the sale.
Apparently, and unbelievably, Brad McQuhae has not been paid for the sale of his company to DME Ltd Partnership. How is this even possible?
He had sole control of Newlands, is now unemployed, and has lawyers trying to get his money. The new management are slowly decimating the company he spent his life building, and there is nothing he can do to stop them.
Apparently Brad signed a non-compete agreement as a part of the sale. He can’t get paid for the sale, and he can’t get paid for his expertise.
The sale was base on audited financial statements. After taking control of the company, DME attacked the audited financial statement, claimed that Newslands’ auditors overstated the value, and used that as an excuse not to pay.
It would be nice to understand how a competitor can takeover a company, fire its management and a large portion of its employees, without paying for it first.
Wouldn’t we all like to get a $30 million dollar, proven, reputable, profitable company for free.
What is DME’s long term goal and intent? Do they hope to flip the combined companies before they have to pay Brad?
Newlands’ current website says “Led by founder Brad McQuhae, we come to bat with a team of in house brewers”, but Brad has been pushed out.
One employee commented in dark humour, “Newlands always had a tight control of receivables, but they ended up delivering the entire company on bad credit.”
Massive drop in sales
- Sales have dropped by 40%.
- The company is losing money.
It has been reported that Newlands has experienced a huge 40% drop in sales since taking control.
Apparently, DME are blaming Brad McQuhae for the slide. This is difficult to understand considering his history and success. Newlands was a huge success, is over 25 years old, and it has grown from about $4 million sales in 2008 (post Global Financial Crisis) to over $30 million at the time of the sale.
So, how could DME mess up so bad that the sales dropped 40%
- Newlands revenue have dropped by a third since the takeover.
- Their current business model appears to be cutting costs, and squeezing profit from current sales, with the risk of longer term damage to the business.
- Clearspring’s business model is to acquire companies, combine them, squeeze profits, and flip the results.
Newlands expected an infusion of cash. This never happened. In fact, they don’t pay their bills and are always on credit hold at their vendors. Rumour has it that DME Ltd Partnership, both locations, are up for sale.
The Newlands’ people I spoke with believe that DME management are focused on showing short-term profits at the expensive of quality, reputation, and growth.
- Newlands is operating without local management.
- Brad McQuhae, Owner, CEO, (International) Brew Master, R&D champion
- Gail McQuhae, CFO, HR
- James Noriega, VP
- Christian Von de Heide, COO
- Brian Bastien, VP Sales
- Robert Bruce, COO — DME
- Matt Splinter, CFO — Newlands/DME
Closing Abbotsford Manufacturing
- DME has reduced Newlands’ staff by a third.
- DME has closed one of Newlands’ large manufacturing plants.
- Further firings and closures are expected.
DME has just shuttered one of the Newlands’ large manufacturing plants, and terminated about 40 employees.
Newlands had grown to 180 employees, and three large large plants in Abbotsford. Newlands worked very hard, and invested a lot time and money to build their workforce with talented people.
DME are not investing in Newlands’ management, and have been attempting to run Newlands remotely from PEI. This is apparently not working across the four time zones, and 6,000 km commute.
This seems to be consistent with plans to close the Abbotsford facilities, but they are apparently having problems transferring the large-scale, high-quality work that built Newlands’ success.
Brilliant Growth and Reputation
- From 2008, after the Global Financial Crisis, to the time of the sale in 2016, Newlands grew by 650% to $30 million.
- Newlands enjoyed a strong positive reputation.
- Newlands’ growth was driven by large, technical, engineering driven sales.
- DME’s business model is selling small, standardized systems and cheaper Chinese tanks.
Race to the bottom
- Newlands are substituting cheaper DME parts into their current orders.
- Production is shifting to DME and they do not have experience for large, engineering driven sales.