Accountancy Firm in London Hit By Market Forces

The Challenge

A group of professional accountancy firms, acquired under a “buy and build” strategy, faced a complex and severe financial crisis. The group, referred to as ASPL for this study, was burdened by trading losses and a rapid increase in HMRC liabilities. A time-to-pay (TTP) plan was secured with HMRC, but the directors failed to implement the necessary structural changes, causing the TTP to fail. To address the situation, a CVA was approved to restructure debts and make 18 redundancies. However, a “hived-up” company within the group (APSL2) still had to service a £1.78 million secured overdraft from Clydesdale Bank. The bank wanted to accelerate the loan repayments, which was unaffordable. By 2023, the pressure became too great, with APSL2 facing a £1.1 million loan to service, HMRC threatening a winding-up petition for £200,000 in tax debts, and a London landlord starting forfeiture proceedings for nine months of rent arrears.

The Solution

In 2021, RMT KSA was brought in to negotiate with the bank, successfully converting the unaffordable overdraft into a long-term loan with manageable repayments, a key step taken outside of a formal insolvency process. When the financial pressure became too great in 2023, and with the business no longer viable, the board appointed KSA’s insolvency practitioners to act as proposed administrators. A pre-pack administration marketing process was undertaken, and after four weeks, a sale of the business to the group was agreed. This was a complex process that involved working with the Pre-Pack Pool and an evaluator to ensure the deal was fair and transparent. The pre-pack administration was the final tool used to save the business and its jobs after other methods had been exhausted.

The Results

The pre-pack administration was a success, saving 38 jobs that were transferred to the parent company. The business’s assets were sold to the parent company, allowing the group to continue trading and ultimately recover. Although the bank and HMRC received a small recovery from the pre-pack administration, the overall outcome was to protect a larger number of jobs and a business that would have otherwise gone into liquidation. This case highlights KSA’s flexible approach to turnaround and restructuring, using a combination of techniques over a four-year period—TTPs, solvent debt restructuring, a CVA, and ultimately a pre-pack administration—to preserve over 250 jobs across the group. It demonstrates the value of exploring all options, from consensual workouts to formal insolvency processes, to save a distressed business.