Over the last couple of months, stories of mismanagement and bad family business succession planning have been swirling around one of the most prominent groups in Cyprus.
The Joannou & Paraskevaides Group (J&P) — one of the most well-known construction groups in Cyprus, Greece and the Gulf States — is facing mounting pressure because of liquidity issues and substantial damages it has suffered. In fact, Joannou & Paraskevaides (Overseas) Ltd. (J&P Overseas), the group’s biggest company, was recently put under special administration.
If one visits the group’s website, a black banner has been imposingly and ominously placed at the top of the homepage (superseding one’s attention from images below of the famous projects the group has constructed over the years) reading: “Joannou & Paraskevaides (Overseas) Limited t/a J&P or JPO (in administration) (“the Company”). The Company’s affairs, business and property are being managed by the joint administrators, Carl Bowles and Ben Cairns. No other legal entities in the group have been placed into administration.”
Is this the end of an era? And how has such an important and influential regional construction giant met such a dismal fate?
A bright beginning
The business story of J&P began in 1941 when two Cypriot entrepreneurs, Stelios Joannou and George Paraskevaides, formed a partnership in Cyprus.
For almost 20 years, the company undertook most of the infrastructure projects across the island, as well as constructing hotels, housing units and small factories. Come the 1960s the group expanded abroad. Libya was its first point of expansion, and gave rise to the creation of J&P Overseas. The international expansion of the company continued and, in 1969, the group began undertaking construction projects in Saudi Arabia.
The group’s website explains: “As investment poured into the region, J&P became a major participant, building highways, tunnels, bridges and flyovers in Oman, Saudi Arabia and the UAE.”
Last but not least, the group expanded its operations to Greece, creating J&P Avax, a company that also became one of the country’s major construction players.
As bright as its origins were — with J&P consistently appearing in ENR’s list of Top International Building and Civil Engineering Companies — its future would prove inauspicious.
After the death of its founders, their descendants took control. Almost immediately, rifts arose, with the two families effectively separating (and, ultimately, severing) J&P: the Joannou family took responsibility for certain markets and the Paraskevaides family took responsibility for the rest.
J&P Overseas’ financial problems came to surface when a letter from the company’s workers in Saudi Arabia was leaked to the press at the beginning of the year. Around 6,700 employees of the company in Saudi Arabia complained that they hadn’t been paid for months and that they had to live under miserable conditions, being unable to even buy food.
Until recently, the two families controlling the company had avoided entering into pubic confrontation. And, it seems, for good reason. For when each side respectively took it upon themselves to reply to the workers’ complaints, the deep-seated divisions between them came to the surface.
First, the Joannou family revealed that it had taken legal steps against the Paraskevaides family to compel the latter to return $23 million that it — allegedly — owes the group. In the same statement, the Joannou family claimed that only their side poured fresh money into the company during a recent capital increase and that the company’s overall financial problems arose from markets controlled by the Paraskevaides family.
One day later, the Paraskevaides family responded.
It’s important to note here that following George Paraskevaides’ death, the Paraskevaides family itself underwent a schism, splitting into two camps: on the one side was George’s wife, Thelma, his one daughter, Christina and her husband, Andreas Papathoma; on the other side was his other daughter, Leoni, and his son, Euthivoulos.
It was Leoni Paraskevaides who undertook the task of responding, via a letter sent to the group’s employees. Leoni made a point to separate her position from her other family members, stating that as of one year after her father’s passing, she had been prohibited by her mother and other relatives from participating in the everyday running of the business. In her letter to the company’s employees, Leoni directly implied that there were onerous contracts in favor of J&P Avax, in cases where J&P Overseas and J&P Avax were working as a consortium. The Joannou family is the major shareholder of J&P Avax.
Leoni also revealed that J&P Overseas’ results for 2017 presented damages of $750 million and that the company’s liabilities exceeded assets by $500 million.
But the group’s employees seem disinterested in excuses and disinclined to believe either side, instead suggesting that each family should accept its share of responsibility, as opposed to entering into an accusatory ping-pong game. The company’s employees are clear in their belief that both families should, instead, be united in working towards the survival of the company.
Alvarez & Marsal