We're running out of cash, why don't we see if someone will buy the business?"
These are often heard comments from our advisors and turnaround team from partnerships. Sometimes partners think that someone will buy the business out and the problems will be quickly solved. In our experience that's simply not the case.
So you are running out of cash, pressure is mounting and creditors becoming aggressive. Trade sale may seem to be an option. These are some of the reasons why a quick trade sale, when the partnership is insolvent, doesn't happen very often!
- Buyers will want to know all about the cashflow problems, assets liabilities, markets, order book, customers, debtors & creditors, staff, management and the plans for the business
- This is called due diligence, most buyers walk away because due diligence fails to satisfy the requirements to avoid RISK.
- Buyers don't want to take on the debt from the banks and unsecured debt
- Most sellers have far too high a value in mind for their business
- Many sellers wont give warranties and guarantees to the buyer because of RISK
- There are outstanding legal actions = RISK
- Banks may worry about loss of control and directors procrastination, they may take action to place the partnership into administration to avoid that RISK
- TUPE is a problem, if you buy a business you get all of the good and bad people issues with it.
- Finally all of the above due diligence processes can take several months to complete. You may run out of cash and time by then.
If you still feel a trade sale is a good option then call us now on 08009700539
Worried about poor cashflow? Covid-19?, How to pay wages on pay day? For expert advice on a range of issues download our free Ultimate Guide For Worried Directors today. Or just call us on 0800 9700539
Please note that the guide was mostly written pre Covid-19 and there have been some changes to insolvency legislation that limits creditors actions and relaxes rules regarding wrongful trading. A new 20 day moratorium for distressed businesses has also been introduced.