Facts
Background
A
downturn in the housing and construction sectors had caused difficult trading
conditions and poor order books in two divisions which foreshadowed substantial
trading losses ahead. The third division, consisting of project management for a national government scheme was
profitable.
Problem
Two
heavily loss making divisions were in danger of bringing down the whole
company. The group had decided not to
provide further financial support and the challenge was how to salvage
something out of the profitable division.
Solution
With the
bankers for the group agreement we were appointed administrators and were able
to ring-fence the one viable contract.
The contract in the profitable division could not be transferred to a
third party without Government approval which would have taken months. However, another company in the group was
already approved for this type of work and we negotiated a sale of the business
and assets at a professional discounted cashflow valuation and the sale was effected
through a pre-pack administration.
Difference
We
managed a sensitive situation. The
subsidiary was a thorn in the side of a large successful group. We devised a strategy which minimised further
losses and disruption for the group and at the same time maximised the realisable
value of the profitable division. Most
insolvency professionals would have seen this as a liquidation and close them down but that would have unnecessarily discarded a profitable division able to
contribute £250,000 per annum to the group.