Cheswick Capital - Business asset Sale
Case Study
Facing a
massive blow to her small company, our client found her accountants and legal
advisors were unable to suggest any other strategy but close it down and start
again. Given she faced personal guarantees to the company’s lenders, she faced
losing money personally and possibly even her home. In addition she wasn’t happy
with this close down strategy as she felt it would affect the relationships
with her clients.
Our client is
a small marketing and design company, the business lost a major client after
she had worked hard to secure the contracts and spent several years of building
up its value to nearly £200,000 annually. With total sales of £320,000 this was
a massive and potentially fatal blow to the company to lose 60% of its revenues.
The loss was
not foreseen and no plans had been put in place to deal with this loss. On
reflection the director stated she knew she should have acted sooner.
So the
objectives were; hopefully see the business survive, cut employment costs, re-size the business to a more realistic
level and keep a roof over her head personally. Office property was superfluous,
as she now wanted to work from home or a shared office nearby. The 4 employees
were not needed full time; one was to be retained part time.
What was our solution?
Given that
most of the “intellectual property” of the business was really in her head and the business had little
value to any other purchaser, we recommended a structured business asset sale. The 4 employees were made redundant immediately to allow them to claim benefits. Some were very unhappy about this but we helped explain that there was a chance of some recovery of their redundancy and lieu of notice from the Redundancy Payments Office, if and when the company was liquidated. The liquidator was appointed a few weeks later.
The strategy
also required the sale of the business’s servers, customer database, work in
progress, computers and furniture - the next step was to ensure that this was
properly valued and not sold at undervalue. We introduced a Chartered Surveyor to do this work.
Finally, we
prepared the contracts for sale and led the deal structure. We negotiated with
her new company to purchase the assets for a modest sum, but one that did not
trigger concerns on “transactions at an undervalue” (s238 Insolvency Act 1986
requirements).
The customer
base, which is now smaller, modest work in progress and physical assets were sold
to “newco” and the newco now trades quite well.
“Oldco” then collected in its debtor book, without much difficulty as most was owed by the exiting large customer. This process of collection allowed the factoring company to collect its secured debts in full, thereby reducing the personal risk for the director and ensuring a good return for this class of creditor.
A modest amount of cash, from other debtors, was collected, plus the consideration for the assets and this cash
is being used to liquidate the old company, properly. Along with full repayment of the factor, unsecured creditors will receive a small dividend, our view was this whole process got a better result for creditors than moving to liquidation.
Finally, Cheswick Capital introduced a new invoice finance company
to the newco to compliment her own modest loan to newco thus providing the working capital
to trade.
This client approached us through our
website www.cheswickcapital.co.uk and we provided a solution within only 24
hours!
020 7416 6677 or m 07903 097052
Call us now if you wish to avoid insolvency, preserve the BUSINESS and solve problems, we have 6 trained experts across the country including Scotland and Northern Ireland. Advice and meetings are always FREE, written strategy will be provided including costs to be paid.
All options such as liquidation, CVA, Administration and time to pay deals are discussed and considered carefuly during this meeting and in our report.
