Veterinary Manufacturing Firm Invested in Wrong Products

The Challenge

A manufacturer of veterinary and medical lighting in the southeast of England faced a critical financial situation. After years of a stagnant product line, the owners decided to invest heavily in new products. However, the plan went awry. Sales fell faster than expected, profitability vanished, and losses mounted. The development of the new products also took longer than planned, putting the business in a precarious position. The company’s struggles were so severe that the parent group invested over £300,000 to keep it afloat, but this ultimately put pressure on another group company, leading to the insolvency of both entities. The business had two factories, but its new, streamlined manufacturing process meant it only needed one, yet it was burdened with the costs of both.

The Solution

KSA was brought in to structure two rescue deals, with a Company Voluntary Arrangement (CVA) serving as the central framework. KSA’s Keith Steven met with the bank and other finance houses to reassure them of the recovery plans. A key component of the CVA was the plan to consolidate operations into a single factory, which would cut significant overhead. The CVA proposal was prepared and presented to creditors, including the landlord of the two factories. The landlord was notified and invited to the creditors’ meeting. After the CVA was approved, KSA advised the company to formally exit the unwanted unit, an action made possible by the legal protections of the CVA. This involved formally handing back the leases and offering to pay for the bricking up of the mutual access between the two buildings, which was an innovative and effective way to ensure a smooth transition.

The Results

The CVA was a resounding success, with an overwhelming 98.7% of creditors approving the proposal. The landlord did not attend the meeting, which was a favorable outcome for the company. The decision to exit the second factory proved to be a major turning point, as it eliminated a substantial financial burden of **£36,000 in rent** and **£11,000 in rates**. The company is now profitable and prospering. The new product ranges are performing well, with sales now exceeding budgets after an initial slow start. This case demonstrates the power of a CVA to address difficult and ongoing obligations like property leases. The innovative approach of using the CVA to legally exit an unwanted premises enabled the company to shed a major cost and return to financial health, saving the business.