Pre-pack administration case study - manufacturing companyThis manufacturing company had grown from £3m to £12m in sales in a relatively short time. The company’s management was in a state of change and flux as a result and the company incurred large losses between 2012 and 2013. The business was quite profitable in previous years.
KSA was approached to help with four key aims:
We struggled to get to the actual level of creditors as almost all creditors we spoke with had disputed balances. In addition, customers were complaining vociferously and we met two of the largest clients to try and ascertain what their problems were.
Our regional manager, Gary Weber, was on site for most of the first two weeks and his daily report suggested that the company was out of control. Debtors were not paying because quality of products was so poor, creditors were very aggressive and legal actions were threatened daily.
Trying to control the pressure with the TTP programme was proving impossible so we moved to the CVA process. This would have allowed the business to formally restructure its unsecured debts, take out employment and fixed costs and get the business downsized to a manageable level. We also started working on the introduction of a qualified production director.
Meanwhile we introduced two new funders to the company; the bank and invoice finance funder was replaced within a week of our introduction. This removed the bank pressure and removed a firm of accountants that was seeking an administration appointment.
Leading up to the end of 2013, it was apparent that the business needed new board of directors, stronger management, new equity funding and possibly a new image. The company was placed into administration and then sold to a private equity buyer in late December 2013.
The quality of management in several departments including accounting, administration, production and direction at board level was simply not strong enough to deal with huge growth pressures. Ultimately a rescue was not possible because the cry for help was, possibly, left too long?