Univel Ltd was facing cashflow difficulties, and had been invoicing against work in progress and was drawing down against the invoices. A large proportion of the factored ledger was disallowed, significantly diminishing the level of any further drawdowns, which in turn had a critical effect on cashflow.
The position was exacerbated by the loss of three customers in quick succession, a bad debt and a decline in the volume of low margin work. The director sought advice from FRP regarding the options available in light of the serious cashflow pressure.
FRP was engaged to prepare a short form business review to provide options and recommendations for the business. This was carried out in early December.
The work highlighted a peak cash requirement significantly in excess of existing facilities in the run up to Christmas. FRP recommended running an accelerated sales process to try to secure the sale of the business before Christmas, which was essential for its survival. Agents were engaged to prepare a valuation and to assist in running an accelerated sales process.
Following a full marketing campaign four formal offers were received for the business, one of which was accepted. Contracts were issued, negotiated, agreed and signed in the week leading up to Christmas.
The sale of the business ensured that there was a realisation achieved for goodwill, the business continued, and 24 jobs were saved.
One of the freehold properties had been licensed to the purchaser, and a sale of the freehold was negotiated. A second freehold property was sold by the administrators to an unconnected third party. The secured lender was repaid in full, both under the commercial finance arrangement and the business loan, which together totalled approximately £600,000.
The company was subsequently moved to liquidation; preferential creditors were repaid in full, and a dividend of approximately 45p in the £ was paid to unsecured creditors. This represented a substantially better outcome than would have been achieved if the business had not been sold on a going concern basis. The ultimate realisation for the sale of the business was approximately four times valuation.
The sale of the business ensured that the business continued, and 24 jobs were saved