Pre-pack administrations – vital rescue tool or creditor scam?

Posted by David Filmer Feb 21st, 2012, in Mergers and Acquisitions

With more and more businesses feeling the pinch in tricky economic times, companies are increasingly looking at ways of restructuring. One of the more controversial options in recent years has been so-called pre-packaged administrations, or ‘pre-packs’.

A pre-pack effectively entails a company being put into administration, and then its business or assets being sold very shortly thereafter pursuant to a pre-arranged deal. Recent examples include well known high street names such as Bonmarche, Blacks and La Senza

Benefits of pre-pack administrations

- Pre-packs are a quick, and relatively painless, way of rescuing an insolvent company. This in turn keeps insolvency costs to a minimum.

- Continuity of business – the operation of the business usually continues without much, if any, interruption, helping to preserve any goodwill and value in the business. (more…)

Let’s be positive to get deals done

Posted by David Filmer Jan 27th, 2012, in HD comment, Mergers and Acquisitions

We’re not out of January yet and already it would seem all those New Year’s resolutions we made to be more optimistic and positive have been broken.

January 16 was officially labelled Blue Monday (supposedly the most miserable day of the year) and it certainly felt like that as two leading economic forecasters, the Item Club and Centre for Economics and Business Research, gave downbeat predictions for economic growth. What’s the point?

The former went as far to say as it believed we were already in a ‘technical recession’ with GDP shrinking in the final quarter of 2011 and likely to contract again in the first three months of this year. Well thanks for ruining the mood.

While these organisations are well within their right to analyse the data, part of me can’t help wishing they would hold off giving their opinions until the official figures are released and we know the real picture. (more…)

Protecting your intellectual property

Posted by David Filmer Nov 23rd, 2011, in Business Protection

The ownership and right to use intellectual property is an increasingly important consideration as businesses seek to gain a competitive edge.

Where a product is protected by intellectual property, this can assist when trying to take it to market and to exploit it commercially.

However, where value is involved, disputes can all too often occur as to who actually owns the intellectual property in any such item, and without clear documentation put in place in advance, it is all too easy to end up in costly litigation to try to determine the rightful owner.

Many such problems can occur around the area of copyright. Copyright is a right which occurs automatically when anybody creates something, whether that is a book, a work of art, a piece of music, or computer software. Once an idea is set down and crystallised, copyright arises, and it is this automatic nature which can lead to dispute. (more…)

Could heads of terms provide a roadmap for your business deal?

Posted by David Filmer Sep 12th, 2011, in Mergers and Acquisitions

A heads of terms document is used towards the start of a commercial transaction, and is used to set out the principle terms of agreement between the parties before substantive drafting takes place.

While, save in certain circumstances, heads of terms are non-binding, they may prove useful in bringing matters to a swift conclusion. Some of the main benefits of using heads of terms are considered below.

Giving a useful summary for all parties

Following negotiations between the principles involved in a deal, heads of terms may prove useful in summarising the key points of the deal to other members of the company. These can also be passed to your third party advisors, such as your solicitors and accountants, to assist in instructing them. (more…)

Could ‘deferred consideration’ help you get that deal done?

Posted by David Filmer Aug 5th, 2011, in Mergers and Acquisitions

With funding for acquisitions still being hard to come by, buyers are increasingly looking for ways to spread the cost.

Historically it was the norm for the full amount of consideration to be paid on completion of the deal, but it is now more usual to see a percentage paid up front, with further amounts being paid at a later stage.

The benefits of such arrangements are clear from a buyer’s perspective – it spreads the cost, which assists with cash flow, and may allow you to make a purchase which you otherwise would have passed on. However, for a seller, what incentive is there to agree to let a buyer delay payment? While not ideal, in a depressed economy this may be the only way that you can agree a deal. (more…)

Five common mistakes with joint ventures

Posted by David Filmer May 31st, 2011, in Mergers and Acquisitions

Working together with someone to bring something new to market is an exciting time for any business. However, in the rush it is easy to slip up and miss things which may come back to haunt you once the dust has settled. If you are thinking of entering into a joint venture, make sure that you don’t fall foul of any of these:

Documentation

As with any business situation, proper legal documentation is essential. Lawyers may sound like a broken record in this regard, but getting the legals right at the outset will save you time and money in the event that things don’t go to plan. Bear in mind that this potentially deprives the lawyers out of work and fees in the long run, so it must be good advice!

Ownership

Most joint ventures are conducted through a newly incorporated company or similar corporate entity. To that end, all of the assets, rights and property needed to make the JV work will need to be either transferred to the JV company, or the JV company must be given the right to use such assets in advance. Careful checks will need to be included to ensure that such ownership or usage is properly regulated on incorporation, during the life of the JV, and on dissolution. (more…)

Buying the assets of an insolvent company

Posted by David Filmer May 12th, 2011, in Mergers and Acquisitions

While the first few months of 2011 have provided some encouragement in terms of economic recovery, unfortunately there are still some businesses which have not been able to survive the recession, and have become insolvent.

For those more buoyant businesses, this may provide opportunities to snap up a bargain. There are, however, certain things to bear in mind when buying an insolvent company.

The Administrator

Usually where an insolvent company is available for sale, it will have gone into some form of administration, and as such it will be the administrator, and not the directors, who will be running the company. A prudent buyer should therefore take steps to ensure the administrator has been properly and validly appointed, either under the terms of the court order, or the security documentation. (more…)

The five golden rules of management buyouts

Posted by David Filmer Apr 20th, 2011, in Mergers and Acquisitions

Management buyouts (MBOs) are a good way to plan for succession when owners of a business are looking to take a step back, giving greater continuity to the business. For business owners in that position, here are some key issues to consider before, during, and after an MBO.

Preparation, preparation, preparation

MBOs can cause significant upheaval to a business, and anything which can be done to streamline the process is a bonus. Ideally, owners should be grooming their management team leading up to an MBO, from any time up to five years in advance. This would involve identifying relevant people with appropriate skills to take on the business, integrating them into the management of the business, and giving them significant exposure to the key contacts of the business, to ensure a smooth handover.

Financial Planning

The key to a clean MBO is getting the financials right. The exiting owners should consider what value they want to extract from the business, and how they want to get it, for example, a lump sum, an earn-out period, or other staged payments. (more…)

Why shareholder agreements are vital in family businesses

Posted by David Filmer Mar 22nd, 2011, in Business Protection, Dispute Resolution

In any business, when shareholder disputes arise, it‘s always a difficult time. However, when the owners of a business are also members of the same family, then things can turn especially nasty.

The benefits of relying on family members in business affairs are evident in the hallmarks of greater trust and stronger commitment to the success of the business. However, when problems at home spill over into the office, there is rarely a happy outcome.

The Patak’s family business dispute

This was highlighted in a high-profile case surrounding the family-owned Indian food business Patak’s. This business was developed from a small family enterprise making curry sauces, into a multi-million pound business, but things turned sour when the patriarch of the company died, and the shares in the business were being distributed between the siblings. In the end, a protracted case in the High Court led to two of the siblings being awarded multi-million pound settlements in 2006, but at the expense of family unity. (more…)

How to make succession planning work for your business

Posted by David Filmer Feb 8th, 2011, in Mergers and Acquisitions

Succession planning is vital if your business is to maintain its value when you decide to take a back seat or step aside completely.

Entrepreneurs often put their own stamp on a business to such an extent that performance dips without them at the helm. Think about what happened at Apple when CEO Steve Jobs announced he was taking an indefinite period of medical leave – the company’s share price opened six per cent lower on the day the news broke – or when Sir Terry Leahy announced in 2010 he was to retire from Tesco, knocking a reported £750million off Tesco’s value.

This is a problem that is compounded if the new managers are (or perceived by customers to be) unprepared or inexperienced.

Why you need to act now

This means succession planning must be factored in long before the owner takes his or her foot off the pedal. A time-frame of 12 months to three years is recommended.

This enables any issues to be resolved well in advance so that the business will stand up to the close scrutiny of potential purchasers (more…)