The famed management consulting firm was told by a former Toll executive that the company was in trouble and that its client shouldn’t buy it.

After about 120 acquisitions, well-meaning efforts to centralise had backfired. No one seemed to be accountable for keeping customers happy. Computer systems could not communicate with each other. The leaders of the transport (one-off deliveries) and logistics (regular deliveries) divisions were entangled in power struggles.
“I told them I wouldn’t touch Toll,” the former executive told me this week, asking to keep his identity secret to protect relations in the industry. “It has poor leadership, is destabilised and the shine has gone out of its profitability. They don’t know how to fix it.”
The discussion could have been a turning point, a moment when Japan Post reconsidered spending $6.5 billion on a company it didn’t really understand in an industry it lacked expertise in.
Generous fees
Momentum was moving against prudence. Japan Post was on an accelerated path to a politically-laden initial public offering the most important IPO in Japan in decades and desperately needed an international growth vehicle.
McKinsey’s Tokyo practice was invested in the deal. In the incestuous world of corporate Japan, McKinsey and Japan Post were tight, and the consulting firm presumably saw generous fees flowing from the newly listed company for a long time.
“They were quite clearly looking to buy Toll,” the former executive said this week. “McKinsey didn’t understand that Toll had outdone its welcome.”
McKinsey didn’t respond to a request for comment. Of course, it isn’t the only consulting firm to suffer from confirmation bias. And it didn’t negotiate an offer 49 per cent above the Toll share price that was a boutique Sydney corporate advisory firm, Gresham Partners.
Japan Post, as the purchaser, has to shoulder most of the blame. One source involved in the transaction said the Japanese did “extensive due diligence” over two months and had access to Toll executives and detailed financial accounts.
The unedifying corporate history has taken on new relevance now because the company, majority-owned by the Japanese government, has reportedly begun the process to sell all or part of the business at a significant loss.
McKinsey advised Japan Post on the purchase of Toll.  
The sale may not be helped by this week’s revelation that executive chairman John Mullen was so worried about Toll’s incoming cash during the pandemic lockdowns that he took advice from potential administrators. Eventually, Japan Post agreed to guarantee about $600 million in extra debt.
Toll was sold for $6.5 billion, of which $4.9 billion was written off within two years. The business now has about $6 billion in debt and lost $685 million this year on revenue of $7.8 billion. This is a fiscally challenged entity.
Cost and value
The media coverage has captured the attention of competitors, potential bidders, and the workforce, which numbers about 40,000. Some have requested emailed copies of articles because they don’t have subscriptions to the newspaper, a reminder that most Toll employees, despite being on modest incomes, are invested in the success of their troubled employer.
“We had a saying at Toll,” says a former human resources manager. “It knew the cost of everything, and the value of nothing.”
A reminder of Toll’s depot-floor struggle against corruption came from two readers, former Toll truck drivers, who described the case of Reginald Roberts, a Toll contractor from Adelaide.
Known as Reggie, the 67-year-old Roberts was last week convicted of participating in South Australia’s largest identified importation of crystal methamphetamine.
Roberts was caught with what he thought was 313kg of ice shipped from China in a crane arm, or jib. The Australian Federal Police and Australian Border Force had intercepted the drugs in Melbourne, which they said had a street value of $270 million.
A Toll spokeswoman says: “Toll immediately ceased using the trucking company when he was charged.
Roberts, who is yet to be sentenced, was part of a Hells Angels gang. Other members sold 23 Ipec-branded trailers (Ipec is a Toll brand) to men who set them on fire in a North Adelaide paddock in 2016 as part of an insurance scam, according to the two truck drivers. Roberts wasn’t involved in that deal.
The first Toll executives knew about the fire was when they saw the burning metal carcasses appeared on the evening news, a huge plume of black smoke billowing into an otherwise clear sky.
Trucking is a tough business, and there is presumably criminality in every industry, blue and white-collar. But Toll’s problems seem unusually prolific. One example: an accountant whistleblower in Dubai imprisoned after being falsely accused of stealing Toll money.
As a former Toll general manager said this week, “your stories really just scratch the surface”.