|
|
Foreward by Cameron Gunn, Senior Partner
|
Welcome to our latest newsletter, bringing you up to date with recent events at ReSolve.
Summer was a particularly busy period for us, with a number of new assignments being undertaken for a diverse group of clients including a listed investment fund, various asset-based lenders and several owner-operated businesses. We have worked in situations where stakeholders have had, in total, more than £100 million at risk across the UK, Europe and even as far away as Tanzania and Mozambique. Pleasingly, we have also recently been involved in several successful debt restructurings, resulting in clients avoiding the need to have to consider a formal process such as administration.
As anyone that reads a newspaper or watches television knows, we continue to live in uncertain times. Growth across much of the western hemisphere has stalled, inflation and unemployment has increased, there is turmoil across much of the Euro zone, and fears abound of a double-dip recession. Politicians continue to lack the “mettle” to make the tough decisions that are required to restore confidence in the economy.
What does all of this mean for the UK?
The scale of uncertainty that presently exists in the marketplace makes it very difficult to accurately predict the direction in which the UK economy will move. Small-to-medium-sized businesses are continuing to struggle to access capital and make ends meet, growth targets remain difficult to achieve, and businesses are being placed under more pressure than ever from creditors such as HM Revenue and Customs. As a result, the level of enquiries for our services is increasing, and we believe that this trend will continue well into 2012.
At ReSolve, we remain committed to helping our clients deal with many of the large and unprecedented challenges they face on a daily basis. We offer clients access to a wide variety of resources and services, such as capital raisings, accelerated sales processes, interim management services, business reviews, formal administrations, financial restructurings and turnaround finance for special situations.
I’d like to thank all of you for your continued support of our various businesses. Look out for an invitation to the forthcoming round of ReSolve Forum events, due to be emailed shortly. |
| |
News about the ReSolve team
|
|
We are delighted to announce the following promotions:
Simon Harris to Partner
Chris Hilbert to Senior Manager
In addition, we are delighted to welcome the following new additions to the ReSolve team:
Gordon Titley is welcomed as a Partner
Becky Withington is welcomed as an Administrator
Richard O’Hara is welcomed as an Administrator
Rachael Thomas is welcomed as an Administrator
We are always on the lookout for new talent. Should you know anyone that would be interested in a career at ReSolve, please contact Cameron Gunn at cameron.gunn@resolvegroupuk.com.
Congratulations to Lilly Miller, Assistant Manager, for recently passing her ACCA examinations. Well done Lilly! |
| |
Restructuring and Insolvency
|
|
Over the last few months we have been very busy working on over ten new assignments, several of which were trading administrations, across a wide variety of business sectors including automotive, shop-fitting, telecoms and automated industrial bagging and palleting. A good outcome was achieved in all cases, with a significant number of jobs preserved and the best possible outcomes achieved for lenders and creditors. We were also recently appointed as administrators to a pioneering bio-fuel group with extensive farming operations across southern Africa. This was a complex and challenging case, involving a unique product, a diverse range of stakeholders, cross-jurisdictional issues and language barriers to name but a few. The farming operations were sold to investors within a month of appointment, preserving hundreds of African jobs and ensuring ongoing investment into underprivileged
areas. In all, the result was most satisfying. |
| |
ReSolve Capital
|
|
As many of you are aware, we aim to invest in underperforming, stressed and distressed businesses where we can add value wherever possible, providing positive assistance with the turnaround. We call this 'active capital'.
We are continuing to build on the early success of our car leasing business and will shortly be raising further capital to scale up its operations. Keep an ear out for our justcantsayno radio advertisements in the near future!
Over the last three months we have looked at a large number of opportunities across a wide range of sectors. As usual, should you see an opportunity which you believe might be of interest to us, please do not hesitate to contact any of the partner team at ReSolve to discuss. |
| |
ReSolve Risk
|
|
ReSolve has recently completed a number of security and intelligence related engagements in the Caribbean, West Africa and China involving asset tracing, subject tracing and a variety of other information-based services as well as several protective security assignments.
As an example, ReSolve recently performed an asset-tracing exercise for a major UK property developer, which was successful in tracing assets with a value in excess of £2 million. Clients include magic circle law firms, government agencies, large private security companies and investment banks.
Should you wish to learn more about how ReSolve Risk might be of assistance, please contact Charles Brown,
Jonathan Bullock or Rory Blundell. |
| |
Our offices
|
|
As a consequence of the growth in the size of the firm, we are expanding our office space and also taking the opportunity to undertake a complete refurbishment of the London office. We have commenced building a new reception area, new meeting rooms and new work areas for our growing team.
We are excited about this growth, and our new offices, and will welcome all visitors once it is completed.
We look forward to seeing you here sometime soon! |
| |
Pre-packaged administrations – the ReSolve view
|
|
By Simon Harris
No process has generated more debate in the insolvency industry and the wider media than the so- called “pre-pack” administration. Opinion remains divided as to the moral appropriateness of the process. Love them or hate them, however, the pre-pack looks like it is here to stay and we can expect to see a lot more of them in the coming months and years.
Put simply, a pre-pack is a procedure which involves the sale of a company’s business and/or assets by a licensed insolvency practitioner on the same day, or shortly after, the company enters administration. Theoretically, a pre-pack administration could be undertaken in any administration scenario. In practice however they are of most use where the marketing of a company’s business and assets in administration could have a negative impact on the value of the company’s assets, or where it would be impossible to trade the business forward in administration whilst a marketing process is undertaken (because, for example, no funds are available to pay ongoing administration expenditure).
Proponents of pre-packs argue that the process results in a better realisation of assets for creditors than any alternative such as liquidation or closure, it saves jobs as a result of the immediate sale of the business, and it saves businesses that would otherwise fail due to the adverse publicity surrounding administration.
Critics of pre-packs, however, argue that there is no mechanism that ensures that all creditors have a say in the administration strategy (eg as in Australia). There can be a perceived lack of transparency in the sale process. In particular, many creditors remain perturbed by the apparent ease in which directors can re-acquire a business out of pre-pack administration and recommence trading immediately, legally having 'dumped' a load of debt (the moral argument)
Our view
At ReSolve we believe there is a place for pre-packs in the insolvency arena, however they should be used only where the insolvency practitioner is absolutely convinced the company cannot be traded in administration for defined and specific reasons. Any insolvency practitioner considering entering into a pre-pack should strictly comply with the rules and regulations pertaining to such transactions, and should fully disclose the reasons for entering into a pre-pack transaction and the benefit to creditors as a result.
In the last six months we have completed several pre-packs for clients, all of which have resulted in a successful sale of the business and assets to a third party or to existing management. In each case we clearly formed the view that there was no better alternative for creditors, and that a pre-pack would result in better realisations and the ongoing employment of company staff. In all instances, and where possible, the views of secured and large unsecured creditors were canvassed prior to completing the transaction, and independent advice was sought on the value of all underlying assets. Our reasons for entering into these transactions were fully disclosed to all creditors.
In summary
We remain of the view that a pre-pack should only be considered as a last resort and more conventional insolvency options should firstly be explored – such as the potential to enter into a Company Voluntary Arrangement or, if possible, run a trading administration involving an extensive marketing process of the business and/or its assets. |
| |
And finally… An interview with Andrew Pepper of Hilco
|
|
The slow recovery has brought with it not only significant challenges, but also solid opportunities for those that are willing to invest and provide cash support to viable (but struggling) businesses.
Hilco and it's private equity business Valco Capital Partners is one such willing specialist investor. Hilco invests in many types of businesses, including retailers, manufacturers, engineering firms and many different types of servicing companies.
Cameron Gunn recently spoke to Andrew Pepper, one of the owners and CEO's of the European Group, in order to try and understand an investor’s mindset in today’s uncertain marketplace, to gain an insight into what is now required to be successful in business.
CG: Would you please tell us a little about your background?
AP: After studying Economics at Manchester University, I became a Chartered Accountant as a good foundation path into business. Along the way I became interested in restructuring because it was real-time and exciting. Accountants sometimes get bogged down in the figures and lose sight of the overview, whereas in restructuring we have the ability to make things happen, and can act in a very pragmatic and commercial way.
I became a restructuring partner when I was 30 and spent many happy years carving a niche for my ideas. Having worked for the likes of KPMG, PWC, BDO and Kroll I felt I had a very rounded view of the restructuring market. However, four years ago at aged 39 I decided that it was time for a change and I teamed up with Paul McGowan, a practical and gifted businessman... well it was either that or buy a Harley Davidson.
When did you first realise you liked/enjoyed business?
The Tuck Shop at Grammar School was handed over to me as a hopeless loss-making venture. Securing a discounted bulk order of Hedgehog flavour crisps put us back in the black within a couple of weeks. This taught me the joys of being a monopolistic supplier to a captive market.
Did I mention I got the headmaster to restrict outside catering?
What are you presently doing?
I am one of the two CEO’s in our European business. We have two key brands, Hilco, and Valco. Hilco deals with distressed businesses and Valco deals with better, but still stressed, businesses. I am very proud that over the last few years we have developed many very successful companies. Very often we can use an MBO model which usually works very well. The assumption of our detractors is that we offer only short term solutions, but in reality a good number of our investments are alive and still growing 3+ years on.
How would you describe your business philosophy?
I always enjoy finding the 'angles' that nobody else has seen. It gives me enormous pleasure to kickstart a business that others may have blacklisted for one reason or another. Narrow-mindedness is the cancer of the restructuring world and I suppose my approach is the opposite, or even the antidote!
Given that our business is a flow business of many deals, if I can find seven angles on a deal, and my competitor can find only four, we should on average win the deal. This is one of the reasons we have been so successful over recent years. What’s more we can deliver what we promise thanks to our major investment in our team of 70 people. They are exceptional and quite simply brilliant, which is why I can sleep at night!
I like today’s flavour for recycling – it stimulates hope. Of course, one has to know when enough is enough, but if a business or bank consults me early there is usually something that can be done that’s not too drastic. I once saw Gordon Ramsey criticise a chef for letting food go off. He opened the fridge and said “That’s all money going off in there!”. It’s vital to act before the assets 'go off'. It’s subtle, but 'Today' we can fix things more easily because we are still talking about making a profit, whereas 'Tomorrow' we might be talking about cutting a loss. If you have the courage to face the situation today we can help you do something about it. Tomorrow is sometimes just too late.
Where do you see your business in five years’ time?
Our team is expanding and new blood is being encouraged to take leadership roles. There is always a place for talent with us - for example a new recruit is helping run two new investments within three months of joining.
Hilco’s footprint is becoming more global, with reporting offices in Germany, Spain, Ireland, Canada and South Africa alongside our sister offices in Australia and the USA.
Deal sizes are becoming bigger. We regularly look at businesses with turnovers in excess of £500M, but our midmarket touch is still second to none. Our model works well at all levels, and we are very practical with our investing. Business size doesn’t really matter because we are profit focussed.
Given your experience with retail, what threats do you see for the High Street?
It’s all to do with working capital… and sometimes even the weather! Recently we have had minus 20 predicted. Unfortunately this does apply to both 'like for likes' and the weather.
A phenomenon we are seeing more and more is the troubled fashion retailer who can earn margins up to 70%. Even these guys are facing huge problems at the moment.
Retailers are struggling to get access to Bank funding. The promise of asset based lending taking over in retail has been long speculated, but is not coming into fruition. I think most Banks view retail as difficult to comprehend and even harder to bank in the current economic climate.
In addition, a tightening of the Governments approach to VAT and PAYE arrears will cause major disruption to already burdened retailers.
And, the ability to manage Chinese and other foreign suppliers will be critical for many retailers. Long gone are the times when Chinese suppliers accepted extended payment terms. Unfortunately also gone are the days when China provided cheap products. With China's wage inflation at 8-10% the UK retailers won't get the deals they used to, and nor will they find many alternatives. This coupled with a low growth UK economy and the lack of consumer confidence will lead to a difficult 12 months.
...Conversely, do you see opportunities for retailers?
When certain big names don’t hit their targets, it is very disconcerting for the smaller or vulnerable retailer. Nevertheless there are retailers who are growing and making money in a difficult economy.
Why?
I think it is down to very shrewd management and the complete understanding of their product, pricing and customer base.
What or who has been the greatest influence on your life?
Aside from personal relationships one of the greatest influences has been the desire to win. I loved strategic games as a child playing chess at a reasonable level, as well as Risk and Monopoly. The idea of playing a game that is won or lost many moves in advance was very influential. I guess this is how we now succeed on complex deals played out with multiple stakeholders with multiple options.
And finally what do you believe makes a successful businessman?
To be successful you need the 3C’s of the business world:
Comprehension (of the deal), Contacts & Cash! |
| |
|
